ACC 220 Study Guide - Midterm Guide: Contribution Margin, Profit Margin, Variable Cost
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The information below representsthe beginning and ending inventory amounts along with theproduction and sales for the month in umbrella units
Beginning Inventory: 0 Umbrellas
Production: 80,000 Umbrellas
Sales: 60,000 Umbrellas
Ending Inventory: 20,000 Umbrellas
The Hampshire Company manufactures umbrellas that sell for$12.50 each. In 2014, the company made and sold 60,000 umbrellas.The company had fixed manufacturing costs of $216,000. It also hadfixed costs for administration of $79,525. The per-unit costs ofeach umbrella are as follows:
Using the information
Prepare a variable costing income statement.
Prepare an absorption costing income statement.
Direct Materials: $3.00
Direct Labor: $1.50
Variable Manufacturing Overhead:$0.40
Variable Selling Expenses: $1.10
Requirement 1 | ||||
Hampshire Company | ||||
Variable Costing IncomeStatement | ||||
Units | $ | |||
Sales | X | $ | $ | |
Variable Cost of Goods Sold: | ||||
Beginning Inventory | $ | |||
Direct Materials | X | $ | $ | |
Direct Labor | X | $ | $ | |
Manufacturing Overhead | X | $ | $ | |
Total Variable Costs | $ | |||
Cost of Good Available for Sale | $ | |||
Deduct Ending Inventory | X | $ | $ | |
Variable Costs of GoodsSold | $ | |||
Variable Selling Costs | X | $ | $ | $ |
Contribution Margin | $ | |||
Fixed Costs: | ||||
Fixed Manufacturing Costs | $ | |||
Fixed Administrative Costs | $ | |||
Operating Income | $ | |||
Requirement 2 | ||||
Hampshire Company | ||||
Absorption Costing IncomeStatement | ||||
Units | $ | |||
Sales | X | $ | $ | |
Variable Cost of Goods Sold: | ||||
Beginning Inventory | $ | |||
Direct Materials | X | $ | $ | |
Direct Labor | X | $ | $ | |
Manufacturing Overhead | X | $ | $ | |
Total Variable Costs | $ | |||
Allocated Fixed Manufacturing Costs | X | $ | $ | |
Cost of Good Available for Sale | $ | |||
Deduct Ending Inventory | X | $ | $ | |
Costs of GoodsSold | $ | |||
Gross Margin | $ | |||
Fixed Costs: | ||||
Variable Selling Costs | X | $ | $ | |
Fixed Administrative Costs | $ | |||
Operating Income | $ |
Chuck Wagon Grills, Inc., makes a single productâa handmade specialty barbecue grill that it sells for $200. Data for last yearâs operations follow:
Units in beginning inventory | 0 | |
Units produced | 10,000 | |
Units sold | 8,800 | |
Units in ending inventory | 1,200 | |
Variable costs per unit: | ||
Direct materials | $ | 60 |
Direct labor | 40 | |
Variable manufacturing overhead | 10 | |
Variable selling and administrative | 30 | |
Total variable cost per unit | $ | 140 |
Fixed costs: | ||
Fixed manufacturing overhead | $ | 180,000 |
Fixed selling and administrative | 330,000 | |
Total fixed costs | $ | 510,000 |
Required:
1. Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill.
Unit product cost____________
2. Assume that the company uses variable costing. Prepare a contribution format income statement for the year.
Chuck Wagon Grills, Inc. | ||
Variable Costing Income Statement | ||
Variable expenses: | ||
0 | ||
0 | ||
Fixed expenses: | ||
0 |
13 A manufacturing company that produces a single product hasprovided the following data concerning its most recent month ofoperations: |
Selling price | $149 |
Units in beginning inventory | 0 |
Units produced | 2,770 |
Units sold | 2,520 |
Units in ending inventory | 250 |
Variable costs per unit: | |
Direct materials | $51 |
Direct labor | $20 |
Variable manufacturing overhead | $10 |
Variable selling and administrative | $12 |
Fixed costs: | |
Fixed manufacturing overhead | $96,950 |
Fixed selling and administrative expenses | $35,280 |
The total gross margin for the month under absorption costingis: |
$83,160
$17,640
$130,320
$141,120
14 A manufacturing company that produces a single product hasprovided the following data concerning its most recent month ofoperations: |
Units in beginning inventory | 0 |
Units produced | 4,750 |
Units sold | 4,650 |
Units in ending inventory | 100 |
Variable costs per unit:
Direct materials | $ | 56 |
Direct labor | $ | 58 |
Variable manufacturing overhead | $ | 21 |
Variable selling and administrative | $ | 19 |
Fixed costs:
Fixed manufacturing overhead | $ | 99,750 |
Fixed selling and administrative | $ | 46,500 |
What is the variable costing unit product cost for the month?
$154 per unit
$175 per unit
$135 per unit
$141 per unit
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15 Bartelt Inc., which produces a single product, has providedthe following data for its most recent month of operations: |
Number of units produced | 4,600 |
Variable costs per unit: | |
Direct materials | $108 |
Direct labor | $105 |
Variable manufacturing overhead | $5 |
Variable selling and administrative expense | $12 |
Fixed costs: | |
Fixed manufacturing overhead | $184,000 |
Fixed selling and administrative expense | $322,000 |
There were no beginning or ending inventories. The absorptioncosting unit product cost was: |
$213 per unit
$258 per unit
$218 per unit
$340 per unit
16 Rehmer Corporation is working on its direct labor budget forthe next two months. Each unit of output requires 0.09 directlabor-hours. The direct labor rate is $8.50 per direct labor-hour.The production budget calls for producing 5,600 units in June and6,100 units in July. |
Required: | ||||||||||||||||||
Construct the direct labor budget for the next two months,assuming that the direct labor work force is fully adjusted to thetotal direct labor-hours needed each month. (Round youranswers to 2 decimal places.)
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