costacctg13_sm_ch11

95 variablesga 100000 060120000 080 totalvariablecosts

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: m the outside vendor. 11­28 11­37 (60 min.) Multiple choice, comprehensive problem on relevant costs. You may wish to assign only so me of the parts. Per Unit Fixed Manufacturing costs: Direct materials Direct manufacturing labor Variable manufac. indirect costs Fixed manufac. indirect costs Marketing costs: Variable Fixed Total $1.00 1.20 0.80 0.50 $1.50 0.90 Variable $3.50 $0.50 $3.00 2.40 $5.90 0.90 $1.40 1.50 $4.50 1. (b) $3.50 Manufacturing Costs Variable $3.00 Fixed 0.50 Total $3.50 2. (e) None of the above. Decrease in operating inco me is $16,800. Old 240,000 ´ $6.00 240,000 ´ $3.00 240,000 ´ $1.50 Differential $1,440,000 + $ 91,200* 720,000 + 72,000 360,000 + 36,000 1,080,000 + 108,000 360,000 – 16,800 120,000 216,000 336,000 $ 24,000 –– –– –– – $ 16,800 New 264,000 ´ $5.80 $1,531,200 264,000 ´ $3.00 264,000 ´ $1.50 792,000 396,000 1,188,000 343,200 120,000 216,000 336,000 $ 7,200 Revenues Variable costs Manufacturing Marketing and other Variable costs Contribution margin Fixed costs Manufacturing Marketing and other Fixed costs Operating income *Incremental revenue: $5.80 ´ 24,000 Deduct price reduction $0.20 ´ 240,000 $0.50 ´ 20,000 ´ 12 mos. = $0.90 ´ 240,000 $139,200 48,000 $ 91,200 11­29 3. (c) $3,500 If this order were not landed, fixed manufacturing overhead would be underallocated by $2,500, $0.50 per unit ´ 5,000 units. Therefore, taking the order increases operating inco me by $1,000 plus $2,500, or $3,500. Another way to present the same idea fo llows: Revenues will increase by (5,000 ´ $3.50 = $17,500) + $1,000 Costs will increase by 5,000 ´ $3.00 Fixed overhead will not change Change in operating inco me $18,500 (15,000) – $ 3,500 Note that this answer to (3) assumes that variable market ing costs are not influenced by this contract. These 5,000 units do not displace any regular sales. 4. (a) $4,000 less ($7,500 – $3,500) Government Contract As above $3,500 Regular Channels Sales, 5,000 ´ $6.00 Increase in costs: Variable costs only: Manufacturing, 5,000 ´ $3.00 $15,000 Marketing, 5,000 ´ $1.50 7,500 F...
View Full Document

This note was uploaded on 10/11/2010 for the course ACCT 321 taught by Professor Cole during the Spring '10 term at University of Miami.

Ask a homework question - tutors are online