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Unformatted text preview: 2-24(10 min.)Variable costs and fixed costs behaviour.Choice (b)Since indirect fixed manufacturing costs will not increase, and marketing and other period costs will remain the same with the special order, only the revenue and the variable manufacturing costs will be affected by the special order. If the revenue from the special order is greater than the variable costs of the special order, then the operating income will increase and the special order should be undertaken. The increase in operating income is calculated as:Revenue ($13.20/unit 20,000 units)$264,000Variable manufacturing costs ($9.90/unit unit 20,000 units)198,000Increase in operating income$ 66,0002-29(30 min.)Comprehensive problem on unit costs, product costs.1.If 2 kilograms of direct materials are used to make each unit of finished product, 100,000 units 2 kg, or 200,000 kg, were used at $0.70 per kilogram of direct materials ($140,000 200,000 kg). (The direct material costs of $140,000 are direct materials used, not purchased.) Therefore, the ending inventory of direct materials is2,000 kg $0.70 = $1,4002.Manufacturing Costs for 100,000 unitsVariableFixedTotalDirect materials costs$140,000$ $140,000Direct manufacturing labour costs30,00030,000Plant energy costs5,0005,000Indirect manufacturing labour costs10,00016,00026,000Other indirect manufacturing costs8,00024,00032,000Cost of goods manufactured$193,000$40,000$233,000Average unit manufacturing cost:$233,000 100,000 units= $2.33 per unitFinished goods inventory in units:...
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This note was uploaded on 01/14/2011 for the course ACCT 3333 taught by Professor J.d during the Spring '08 term at Saint Mary's University Texas.
- Spring '08