Cost Exam 1 ROUGH SOLUTIONS

Cost Exam 1 ROUGH SOLUTIONS - EXAM 1 COST ACCOUNTING NAME:...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

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

Unformatted text preview: EXAM 1 COST ACCOUNTING NAME: 1. Ireland Corporation planned to be in operation for three years. ∙ During the first year, 20x1, it had no sales but incurred $240,000 in variable manufacturing expenses and $80,000 in fixed manufacturing expenses. ∙ In 20x2, it sold half of the finished goods inventory from 20x1 for $200,000 but it had no manufacturing costs. ∙ In 20x3, it sold the remainder of the inventory for $240,000, had no manufacturing expenses and went out of business. ∙ Marketing and administrative expenses were fixed and totaled $40,000 each year. Required: a. Prepare an income statement for each year using absorption costing. b. Prepare an income statement for each year using variable costing. Answer: a. Absorption-costing income statements : 20X1 20X2 20X3 Sales $0 $200,000 $240,000 Cost of goods sold 160,000 160,000 Gross margin 40,000 80,000 Marketing and administrative 40,000 40,000 40,000 Operating income $(40,000) $ 0 $40,000 b. Variable-costing income statements : 20X1 20X2 20X3 Sales $ 0 $200,000 $240,000 Variable expenses 120,000 120,000 Contribution margin 80,000 120,000 Fixed expenses: Manufacturing $80,000 $ 0 $ 0 Marketing and administrative 40,000 40,000 40,000 Total fixed 120,000 40,000 40,000 Operating income $(120,000) $40,000 $80,000 2. Richard's Electronics manufactures TVs and DVDRs. During April, the following activities occurred: TVs DVDRs Budgeted units sold 17,640 66,360 Budgeted contribution margin per unit $45 $78 Actual units sold 20,000 80,000 Actual contribution margin per unit $50 $79 Required: Compute the following variances in terms of the contribution margin. a. Determine the total sales-mix variance. b. Determine the total sales-quantity variance. c. Determine the total sales-volume variance. Answer: a. TVs [(100,000 × 0.20) × $45] = $900,000 [(100,000 × 0.21) × $45] = 945,000 $ 45,000 unfavorable DVDRs [(100,000 × 0.80) × $78] = $6,240,000 (100,000 × 0.79) × $78] = 6,162,000 $ 78,000 favorable Total sales-mix variance = $90,000 unfavorable + $156,000 favorable = $66,000 favorable....
View Full Document

This document was uploaded on 11/03/2011 for the course ACCOUNTING 451 at Rutgers.

Page1 / 7

Cost Exam 1 ROUGH SOLUTIONS - EXAM 1 COST ACCOUNTING NAME:...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online