Chapter 2 Selected Review Problems

Chapter 2 Selected Review Problems - Exercise23(15minutes)...

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Exercise 2-3  (15 minutes) 1. Cups of Coffee Served  in a Week 1,800 1,900 2,000 Fixed cost $1,100 $1,100 $1,100 Variable cost         468             494             520     Total cost $1,568 $1,594 $1,620 Average cost per cup served* $0.871 $0.839 $0.810 * Total cost ÷ cups of coffee served in a week 2. The average cost of a cup of coffee declines as the number of cups of  coffee served increases because the fixed cost is spread over more  cups of coffee. Exercise 2-5  (15 minutes) 1. Traditional income statement Redhawk, Inc. Traditional Income Statement Sales ($15 per unit × 10,000 units). ...................... $150,000 Cost of goods sold  ($12,000 + $90,000 – $22,000). ......................... 80,000 Gross margin. ....................................................... 70,000 Selling and administrative expenses: Selling expenses (($2 per unit × 10,000 units) + $20,000). ......... 40,000 Administrative expenses  (($1 per unit × 10,000 units) + $15,000). .........   25,000       65,000     Net operating income. ........................................... $      5,000     2. Contribution format income statement Redhawk, Inc. Contribution Format Income Statement Sales. .................................................................... $150,000 Variable expenses:
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Cost of goods sold  ($12,000 + $90,000 – $22,000). ...................... $80,000 Selling expenses ($2 per unit × 10,000 units). ... 20,000 Administrative expenses  ($1 per unit × 10,000 units). ............................   10,000
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This note was uploaded on 11/20/2011 for the course ACCOUNTING 2302 taught by Professor Adams during the Spring '11 term at University of Houston.

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Chapter 2 Selected Review Problems - Exercise23(15minutes)...

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