mba642takehomeexam1

mba642takehomeexam1 - CHAPTER 12 DISCUSSION QUESTIONS...

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Problem 1 Worth 12 p Covers material from chapters 7 and 8 DATA ABC, Inc. is a newly organized manufacturing business this year. The following company's costs and expenses are: Sales price per unit $75 Manufacturing costs: Fixed Costs Variable Costs Direct materials $8 Direct labor 10 Variable Manufacturing overhead 5 Fixed Manufacturing overhead $120,000 Period expenses: Variable Selling and administrative expenses 6 Fixed Selling and Administrative expenses 10,000 Totals $130,000 $29 Units produced 6,000 units Units sold 5,700 units Required: Use the information in the DATA field above using cell referencing to answer the following requirements. 1. Calculate the unit cost for variable costing. Review Exhibit 8-2 on page 328. 2. Calculate the unit cost for absorption costing. Review Exhibit 8-2 on page 328. 3. Prepare an absorption-costing income statement. Review Exhibit 8-3 on page 329. 4. Prepare a variable-costing income statement. Review Exhibit 8-3 on page 329. 5. Reconcile the differences in income that you calculated in #3 and #4 using exhibit 8-4 on page 330 as your guide or use the shortcut reconciliation on page 330-331. 6. Calculate the breakeven point in units. Reference page 279. 7. Calculate the breakeven point in sales dollars. 8. Calculate the safety margin. 9. What does the margin of safety mean? Reference page 285. 10. Calculate the operating leverage . Reference page 296 11. What if sales volume increases by 5% how much will income increase in percentage terms? Make sure you have read over the DOL discussion and understand the multiplier impact of changes in sales volume that occurs based on DOL. You should only have to change the direct labor in the data area and actually all your answers should be updated. Please put the direct labor cost back to the original number once you have answered the question? Solution: 1. Variable Costing 2. Absorption Costing Manufacturing cost per unit Budgeted Annual Fixed OH $120,000 $20 Direct Material $8 Planned Annual Production 6,000 Direct Labor 10 Variable Manufacturing OH 5 Total Absorption Costing Per Unit $43 Total Variable Cost Per Unit $23 3. ABC Company Inc. Absorption Costing Income statement Sales revenue $427,500 Less: Cost of goods sold $245,100 Gross Margin $182,400 Less: Selling and administrative expenses Variable 34,200 Fixed 10,000 Net income $138,200 4. ABC Company Inc. Variable Costing Income statement Sales Revenue $427,500 Less: Variable Expenses: Variable manufacturing costs $131,100 Variable Selling and administrative costs $34,200 Contribution margin $262,200 Less: Fixed Expenses: Fixed manufacturing overhead $120,000 Fixed selling and Administrative expenses $10,000 Net income $132,200 5. I am using a modification of the short cut method on page 331 as my model. Change in inventory:
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mba642takehomeexam1 - CHAPTER 12 DISCUSSION QUESTIONS...

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