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3 years ago

Exercise 7-9 Variable and Absorption Costing Unit Product Costs and Income Statements [LO7-1, LO7-2, LO7-3]

Business

1 answer:

Reil [10]3 years ago

6 0

Answer:

1 a. Year 1 unit product cost = 45

Year 2 unit product cost = 45

Notes: Unit product cost = Direct materials + direct labor + Variable manufacturing overhead = 25 + 15 + 5 = 45 units

1 b. Income statement

Year 1 Year 2

Sales 2,400,000 3,000,000

(40000*60); (50000*60)

Less:

Variable cost of goods sold 1,800,000 2,250,000

Variable selling and adm. 80,000 100,000

Contribution margin 520,000 650,000

Less:

Fixed manufacturing overhead 250,000 250,000

Fixed selling & adm expense 80,000 80,000

Net income $190,000 $320,000

2 a. Notes

Year 1 Year 2

Direct materials 25 25

Direct labor 15 15

Variable manufacturing overhead 5 5

Fixed manufacturing overhead 5 6.25

(250,000/50,000); (250,000/40000)

Unit product cost 50 51.25

b. Income statement

Year 1 Year 2

Sales 2400000 3000000

Less: cost of goods sold 2000000 2550000

Gross margin 400,000 450,000

Less: Selling and 160,000 180,000

administrative expense

Net income 240,000 270,000

Workings

Cost of goods sold for year 2 = (10,000* 50) + (40000 * 51.25)

= 500,000 + 2,050,000

= 25,500,000

3. Reconciliation Year 1 Year 2

Variable costing net operating 190,000 320,000

income (loss)

Add: Deferred fixed overhead 50,000

in ending inventory (10000*5)

Less: Fixed overhead realized -50,000

in beginning inventory(10000*5)

Absorption costing net operating $240,000 270,000

income (loss)

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The fact that corporate travelers are less price sensitive than most leisure travelers because the corporation pays for the trav

Readme [11.4K]

Answer:

The correct answer is D. shared cost effect

Explanation:

The shared cost effect refers to the reduction in price sensitivity of a customer created through the perception that part of the purchase price is paid for by a third party of the firm itself.

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3 years ago

High Flying takes tourists on helicopter tours of Hawaii. Each tourist buys a $190 ticket; the variable costs average $57 per pe

Dennis_Churaev [7]

Answer:

a. 450 tours per month

b. $850 per month

c. CM Ratio = 0.7

1. Increase

2. Decrease

3. No Effect

Explanation:

The questions are:

a. Compute the average number of tours the company must conduct per month to break even

b. Compute the average sales revenue needed per month to produce a target average profit of $53,200

c. Calculate the contribution margin ratio. (Round your answer to 2 decimal places.)

d. Determine whether the actions that follow will increase, decrease, or not affect the company's break-even point.

1. A decrease in tour prices.

2. The termination of a salaried clerk (no replacement is planned).

3. A decrease in the number of tours sold.

Solution:

Selling Price = 190

VC = 57

Unit Contribution Margin = $133

Fixed Cost = 718,200 yearly, so monthly is:

718,200/12 = 59,850

Break even occurs when by selling tours they will cover monthly fixed cost of 59,850 [each tour will get 133], thus:

59,850/133 = 450 tours per month

718,200 FC yearly, means, monthly:

718,200/12 = $59,850

Profit needed 53,200, so we would need to cover:

53200+59850 = $113,050

Each tour gives Unit CM to be $133, so we would need revenue of:

Rev = 113,050/133 = $850

Contribution margin ratio is the quotient of difference in sales and var expenses to sales.

So,

CM Ratio = (Sales - Var Exp) / Sales

CM Ratio = (190 - 57) / 190 = 0.7

If the tour prices, decrease, there will be less revenue coming in so the break even point would go higher.

So, break even point will increase

If a salaried clerk is terminated, it will decrease the salary costs of the company. This is decrease the fixed costs of the company (annual wages and salaries), thus it will be easier to cover the new, lower, fixed costs. Thus, the break even point will decrease

A decrease in number of tours sold would proportionally change the variables and other costs and revenues associated. If you look at the calculation above, you will see that "number of tours" won't affect the Break Even Point. Thus, this action will create "no effect".

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3 years ago

In this module, we say a "good" money burn means you have spent money wisely. A "bad" money burn means you have spent money you

LekaFEV [45]

Answer:

D. You shop around and buy a pair of the exact same designer jeans at a thrift shop, and they cost virtually nothing.

Explanation:

Good money burn refers to the effective use of money, rather than just spending it on some useless stuff.

Here in the given instance the following is the explanation for the given instance:

Option A states that the jeans is just bought for completing the desire, it does not have any difference in the product even if the product can be bought on sale after some days.

Option B is still better than the first day.

Further in option c buying the jeans without any label might not be a good decision as it might have poor quality.

Option D is the best as it is the same jeans but at the least possible cost.

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3 years ago

Shawn Company had 130 units in beginning inventory at a total cost of $13,650. The company purchased 260 units at a total cost o

Katarina [22]

Answer:

FIFO

cost of the ending inventory = $15,680

cost of goods sold = $39,570

LIFO

cost of the ending inventory = $10,290

cost of goods sold = $44,960

Average Cost Method

cost of the ending inventory = $13,883.37

cost of goods sold = $41,336.76

Explanation:

The cost of the ending inventory and the cost of goods sold under FIFO, LIFO, and average-cost are calculated as follows :

Step 1 : Determine the Number of units sold

Number of units sold = Total units available for sale - Ending units

= 390 units - 98 units

= 292 units

Step 2 : Determine the Number of units in inventory

Number of units in inventory = 98 units (given)

Step 3 : Use the appropriate principles to calculate required values

FIFO

cost of the ending inventory = 98 x $160 = $15,680

cost of goods sold = 130 units x $105 + 162 units x $160 = $39,570

LIFO

cost of the ending inventory = 98 x $105 = $10,290

cost of goods sold = 260 units x $160 + 32 units x $105 = $44,960

Average Cost Method

Unit Cost = ($13,650 + $41,600) ÷ 390 units = $141.667

therefore,

cost of the ending inventory = 98 x $141.667 = $13,883.37

cost of goods sold = 292 units x $141.667 = $41,336.76

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2 years ago

Adriana has borrowed $30,000 from her IRA in order to fund her startup costs. How long does she have to replace the money withou

nordsb [41]

Answer:

it is NOT 30 days

Explanation:

7 0

3 years ago

Read 2 more answers