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Exam 6: Variable Costing and Performance Reporting

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Question 51

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A company is currently operating at 75% capacity and producing 3,000 units.Current cost information relating to this production is shown in the table below: $\begin{array} { | l | c | } \hline & \text { Per Urit } \\\hline \text { Sales price } & \$ 43 \\\hline \text { Direct rraterial } & \$ 7 \\\hline \text { Direct labor } & \$ 6 \\\hline \begin{array} { l } \text { Variable } \\\text { overhead }\end{array} & \$ 4 \\\hline \text { Fixed overhead } & \$ 4 \\\hline\end{array}$ The company has been approached by a customer with a request for a 200-unit special.What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

A) Any amount over $43 per unit.
B) Any amount over $17 per unit.
C) Any amount over $21 per unit.
D) Any amount over $13 per unit.
E) Any amount over $22 per unit.

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Question 52

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Given the following data, calculate product cost per unit under variable costing. $\begin{array} { | l | c | } \hline \text { Direct labor } & \$ 7 \text { per urit } \\\hline \text { Direct rmaterials } & \$ 1 \text { per urit } \\\hline \text { Overhead } & \\\hline \text { Total variable overhead } & \$ 20,000 \\\hline \text { Total fixed overhead } & \$ 90,000 \\\hline & \\\hline \text { Expected urits to be produced } & 40,000 \text { urits } \\\hline\end{array}$

A) $8 per unit
B) $8.50 per unit
C) $10.25 per unit
D) $10.75 per unit
E) $12 per unit

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Question 53

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Sea Company reports the following information regarding its production cost: $\begin{array}{ll}\text { Units produced } & 42,000 \text { units } \\\text { Direct labor } & \$ 35 \text { per unit } \\\text { Direct materials } & \$ 28 \text { per unit } \\\text { Variable overhead } & \$ 17 \text { per unit } \\\text { Fixed overhead } & \$ 105,000 \text { in total }\end{array}$ Compute production cost per unit under absorption costing.

Decko Industries reported the following monthly data: $\begin{array}{ll}\text { Units produced } & 52,000 \text { units } \\\text { Sales price } & \$ 33 \text { per unit } \\\text { Direct materials } & \$ 1.50 \text { per unit } \\\text { Direct labor } & \$ 2.50 \text { per unit } \\\text { Variable overhead } & \$ 3.50 \text { per unit } \\\text { Fixed overhead } & \$ 234,000 \text { in total }\end{array}$ What is the company's contribution margin for this month if 50,000 units were sold?

32 Degrees, Inc., a manufacturer of frozen food, began operations on July 1 of the current year.During this time, the company produced 140,000 units and sold 140,000 units at a sales price of $125 per unit.Cost information for this period is shown in the following table: $\begin{array}{ll}\text { Production costs } & \\\text { Direct materials } & \$ 13.00 \text { per unit } \\\text { Direct labor } & \$ 6.00 \text { per unit } \\\text { Variable overhead } & \$ 2,100,000 \text { in total } \\\text { Fixed overhead } & \$ 3,220,000 \text { in total } \\\text { Nonproduction costs } & \\\text { Variable selling and administrative } & \$ 91,000 \text { in total } \\\text { Fixed selling and administrative } & \$ 458,000 \text { in total }\end{array}$ a.Prepare 32 Degree's December 31 income statement for the current year under absorption costing. b.Prepare 32 Degree's December 31 income statement for the current year under variable costing.

Fixed costs change in the short run depending upon management's decision to accept or reject special orders.

Toth, Inc.had net income of $950,000 based on variable costing.Beginning and ending inventories were 60,000 units and 56,000 units, respectively.Assume the fixed overhead cost per unit was $.85 for both the beginning and ending inventory.What is net income under absorption costing?

Heather, Incorporated reports the following annual cost data for its single product: $\begin{array}{ll}\text { Normal production and sales level } & 60,000 \text { units } \\\text { Direct materials } & \$ 9.00 \text { per unit } \\\text { Direct labor } & \$ 6.50 \text { per unit } \\\text { Variable overhead } & \$ 11.00 \text { per unit } \\\text { Fixed overhead } & \$ 720,000 \text { in total }\end{array}$ This product is normally sold for $56 per unit.If Heather increases its production to 80,000 units while sales remain at the current 60,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production.

Assume that the following information was available for Daylight Enterprises, Inc.Which of the following statements is(are) true with regard to contribution margin ratio? $\begin{array} { | l | c | c | r | } \hline & \begin{array} { c } \text { Ceiling } \\\text { Lights }\end{array} & \begin{array} { c } \text { Tabletop } \\\text { Lights }\end{array} & \begin{array} { c } \text { Stardd-Alone } \\\text { Lights }\end{array} \\\hline \text { Sales } & \$ 350,000 & \$ 175,000 & \$ 440,000 \\\hline \text { Variable expenses } & & & \\\hline \text { Variable production } & \$ 70,000 & \$ 19,250 & \$ 90,000 \\\hline \text { Variable advertising } & \$ 10,500 & \$ 3,500 & \$ 22,000 \\\hline \text { Variable shipping } & \$ 12,000 & \$ 14,000 & \$ 28,000 \\\hline\end{array}$

Swisher, Incorporated reports the following annual cost data for its single product: $\begin{array}{ll}\text { Normal production level } & 30,000 \text { units } \\\text { Direct materials } & \$ 6.40 \text { per unit } \\\text { Direct labor } & \$ 3.93 \text { per unit } \\\text { Variable overhead } & \$ 5.80 \text { per unit } \\\text { Fixed overhead } & \$ 150,000 \text { in total }\end{array}$ This product is normally sold for $48 per unit.If Swisher increases its production to 50,000 units, while sales remain at the current 30,000 unit level, by how much would the company's gross margin increase or decrease under variable costing?

Using a traditional costing approach, which of the following manufacturing costs are assigned to products?

A company reports the following information for its first year of operations: $\begin{array}{ll}\text { Units produced this year } & ? \text { units } \\\text { Units sold this year } & 1,500 \text { units } \\\text { Direct materials } & \$ 9 \text { per unit } \\\text { Direct labor } & \$ 5 \text { per unit } \\\text { Variable overhead } & \$ 7 \text { per unit } \\\text { Fixed overhead } & \$ 24,000 \text { in total }\end{array}$ If the company's cost per unit of finished goods using absorption costing is $27, how many units were produced?

Cool Pools, a manufacturer of above ground pools, began operations on January 1 of the current year. During this time, the company produced 45,000 units and sold 44,000 units at a sales price of $60 per unit. Cost information for this year is shown in the following table: $\begin{array}{l}\text { Production costs }\\\begin{array}{ll}\text { Direct materials } & \$ 11.25 \text { per unit } \\\text { Direct labor } & \$ 3.20 \text { per unit } \\\text { Variable overhead } & \$ 315,000 \text { in total } \\\text { Fixed overhead } & \$ 39,600 \text { in total } \\\text { Nonproduction costs } & \\\text { Variable selling and administrative } & \$ 2,000 \text { in total } \\\text { Fixed selling and administrative } & \$ 6,000 \text { in total }\end{array}\end{array}$ -Given the Cool Pools Company data, what is net income using variable costing?

Given Advanced Company's data, and the knowledge that the product is sold for $50 per unit and operating expenses are $200,000, compute the net income under absorption costing.

Romtech Company sold 43,000 units of its product at a price of $300 per unit.Total variable cost per unit is $175, consisting of $168 in variable production cost and $7 in variable selling and administrative cost.Compute the manufacturing margin for the company under variable costing.

What is the formula to compute break-even volume in units?

Lukin Corporation reports the following first year production cost information. $\begin{array}{ll}\text { Units produced } & 62,000 \text { units } \\\text { Units sold } & 59,000 \text { units } \\\text { Direct labor } & \$ 41 \text { per unit } \\\text { Direct materials } & \$ 15 \text { per unit } \\\text { Variable overhead } & \$ 9,300,000 \text { in total } \\\text { Fixed overhead } & \$ 4,340,000 \text { in total }\end{array}$ a.Compute production cost per unit under variable costing. b.Compute production cost per unit under absorption costing. c.Determine the cost of ending inventory using variable costing. d.Determine the cost of ending inventory using absorption costing.

On a contribution margin income statement, expenses are grouped according to _______________.

A per unit cost that is constant at all production levels is a ________________________ cost per unit.

When units produced are less than units sold, income under absorption costing is higher than income under variable costing.