Wood Carving Corporation manufactures three products. Because of a recent lack of skillled wood carvers, the corporation has had
a shortage of available labor hours. The following per unit data relates to the three products of the corporation:
Letter Openers Elvis Statues Candle Holders
Sales Price $30 $80 $42
Variable Costs $20 $40 $20
Labor Hours Required 1 6 2
Assume that Wood Carving has 1,800 labor hours available next month. Also assume that Wood Carving can only sell 800 units of each product in a given month. What is the maximum amount of contribution margin that Wood Carving can generate next month given this labor hour shortage?
A. $12,000
B. $19,000
C. $19,600 (Correct Answer)
D. $19,800
E. None of the Above
Letter Openers Elvis Statues Candle Holders
Sales Price $30 $80 $42
Variable Costs $20 $40 $20
Labor Hours Required 1 6 2
Assume that Wood Carving has 1,800 labor hours available next month. Also assume that Wood Carving can only sell 800 units of each product in a given month. What is the maximum amount of contribution margin that Wood Carving can generate next month given this labor hour shortage?
A. $12,000
B. $19,000
C. $19,600 (Correct Answer)
D. $19,800
E. None of the Above
1 answer:
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Answer:
a. Debit to Prepaid Insurance of $10,000
* Option for this question was missing so I have attached a similar question with this answer and answered accordingly.
Explanation:
Insurance purchased for four years was actually prepaid insurance on May 1, Year 2.
The company expensed all amount by positing following entry ( which is a wrong entry)
DR. Insurance Expense $12,000
Cr. Cash $12,000
It should be entered as follow:
DR. Prepaid Insurance $12,000
Cr. Cash $12,000
At the end of the year 2 8 months has been passed for which $2,000 is accrued and it will be recorded, as all the amount is charged to the expense account we will adjusted the remaining amount of $10,000 to correct this mistake.
Now at the end of year 2 the correct entry which will settle the expense and prepaid insurance as well is as follow.
DR. Prepaid Insurance $10,000
Cr. Insurance Expense $10,000
