AC 505 Week 7 discution - Q1. Gross Margin is the...

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Q1. Gross Margin is the difference between gross sales and the cost of goods sold. The hard part is figuring out the Cost Of Goods Sold (CGS). We need to figure out two other things before we can figure out CGS. First we have to calculate Direct Materials Used. Direct Materials on hand: $6,000 + Direct Materials Purchased: $7,000 - Ending Direct Materials Inventory: $1,000 = $12,000 Next, we have to figure out the Cost of Goods Manufactured (CGM). Direct Materials Used: $12,000 + Direct Labor: $5,000 + Indirect Labor: $600 + Indirect Materials: $500 + Utilities: $1,900 + Equipment Depreciation: $3,500 + Begin WIP Inventory: $800 - End WIP Inventory: $3,000 = $21,300 Now we can calculate CGS. Beginning Finished Goods Inventory: $4,000 + CGM: $21,300 - Ending Finished Goods Inventory: $5,300 = $20,000 Almost there. Gross Margin is Sales less CGS. Sales: $31,800 - CGS: $20,000 = $11,800 Simple, huh? Now, just for fun, let's plot some satellite orbits. .. ;-) By the way, the accounts payable figures appear to be just noise like we've seen in other examples.
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Question#2 Which costs will change with a decrease in activity within the relevant range? The answer is B and on page 51 of the text gives a good definition of the two items: 'In total variable cost increases and decreases in proportion to changes in activity level.' 'Per unit fixed cost per unit decreases as the activity level rises and increase as the activity level falls.' Question# 3 an increase in the activity level within the relevant range results in a decrease in fixed cost per unit. This is found on page 51 of the text. Managerial Accounting,Garrison,Noreen, Brewer 13th ed. Question # 3 an increase in the activity level within the revevant range results in: D because the more you make the more the cost gets spead out to each unit? Q4 and Q5 : 4. The gross margin of Evans Retail Stores, Inc. for the first quarter is: D. $190,000 Gross Margin = Sales - Cost of Goods Sold GM = $350,000 - $160,000 = $190,000 5. The contribution margin of Evans Retail Stores, Inc. for the first quarter is: B. $140,000 Contribution Margin is the amount remaining from sales after variable expenses are deducted. CM = Sales - Variable Expenses
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This note was uploaded on 04/21/2011 for the course ACC 505 ACC505 taught by Professor Billdillon during the Spring '10 term at Keller Graduate School of Management.

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AC 505 Week 7 discution - Q1. Gross Margin is the...

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