Accounting Exam 2

Which method is required by GAAP for external financial statements?

Absorption costing

Using a JIT system, to record the amount incurred for direct labor and overhead, the debit entry would be to __________.

Conversion Costs

Which statement is true about just-in-time costing?

It is also sometimes called backflush costing because it works backwards.

Which of the following is true for a service company?

Will follow the same four steps as a merchandising company when using activity-based costing in a service company

The method that is most relevant for setting long run prices is:

absorption costing because the sales price must cover full cost in the long run, including fixed costs

Inspections on a product at various stages of production are an example of __________.

an appraisal cost

ABC Company found a defect in a chair before being sold to a customer. This is an example of __________.

an internal failure cost

A company can use activity-based management in making decisions on all of the following EXCEPT:

quality control

The target cost is __________.

the maximum cost to develop, produce, and deliver the product or service and earn the desired profit

Which statement is TRUE? An absorption costing income statement calculates gross profit; a variable costing income statement calculates contribution margin. A variable costing income statement calculates gross profit; an absorption costing income statement calculates contribution margin. Both variable costing and absorption costing income statements calculate gross profit. Both variable costing and absorption costing income statements calculate contribution margin.

An absorption costing income statement calculates gross profit; a variable costing income statement calculates contribution margin.

What management behavior or actions might the use of absorption costing for performance review encourage?

Building up on ending finished goods inventory.

Activity-based management __________.

uses activity-based costs to make decisions that increase profits while meeting customer needs

Which is a benefit of a JIT (just-in-time) system?

All listed are benefits. Lower inventory costs Ability to respond quickly to changes in customer needs More space available for production

Absorption costing income statements are prepared primarily for __________. all listed creditors government investors

all listed

Value engineering is __________.

reevaluating activities to reduce costs while satisfying customer needs

Smith Furniture Manufacture makes the Venza model chair with a target selling price of $300. Smith Furniture wants a desired net profit of 40%. What is the target cost per chair?

$180 The target cost would be calculated by $300 - ($300 * .40) = $180.

Using a JIT system, to record the purchase of raw materials on account, the debit entry would be to __________.

Raw and In-Process Inventory

Which of the following statements are correct regarding the relevant range?

Total fixed costs can differ from one relevant range to another. It is a range of volume where the fixed cost per unit remains constant. To estimate costs, managers need to know the relevant range assumption.

Assumes Tiger Company had 60 units in beginning Finished Goods Inventory and sold 1,200 units. Additional data includes: Units produced 1,300 units Direct materials $13 per unit Direct labor 9 per unit Variable manufacturing overhead 3 per unit Fixed manufacturing overhead 8 per unit Using variable costing, what is the dollar amount of ending Finished Goods Inventory?

4000 First, calculate the cost per unit for variable costing. Variable costing for the cost of one unit = direct materials + direct labor + variable manufacturing overhead = $13 + $9 + $3 = $25 Next, calculate the number of units in Finished Goods Inventory. Finished Goods Inventory = beginning finished goods + units produced - units sold = 60 + 1,300 - 1,200 = 160 units Last, take $25 cost per unit x 160 units in ending finished goods = $4,000 in ending Finished Goods Inventory. Note: Fixed manufacturing overhead is only included in the absorption costing method.

Which of the following would you find on an income statement prepared under absorption costing rules?

Net Sales Revenue Cost of Goods Sold Gross Profit

Variable costing is appropriate for which of the following?

One time opportunity to accept a customer at a discounted price. Pricing when fixed costs are irrelevant.

Select examples of prevention costs.

The cost of training employees to perform direct labor. The cost to maintain equipment of a set schedule to avoid break-downs and defects.

Monthly rent on a factory building is a ________.

fixed cost

Basic Company uses activity-based costing. Assume the predetermined overhead allocation rates are $0.90 per machine hour for mixing department and $2.20 per test for sampling department. Assume that each unit requires 3 machine hours and 2 tests. What is the mixing and sampling cost assigned to one unit?

$2.70 for mixing; $4.40 for sampling It would cost a $2.70 for mixing ($0.90 per machine hour * 3 machine hours) and $4.40 for sampling (2 tests * $2.20 per test).

When analyzing the profitability of various product offerings, which of the following statements would be the proper reason for utilizing a particular costing approach?

Variable costing should be used to determine the product lines with the highest contribution margins.

Wages of production workers would be considered a ________.

variable cost

Select those costs that are period costs under absorption costing.

Variable selling costs Variable administrative costs Fixed selling costs

An identifiable part of the company for which financial information is available is called __________.

a business segment

Jones Company has fixed costs totaling $48,000 per month, the variable cost per unit is $60, and selling price per unit is $100. Current sales are 1,500 units. What is the margin of safety in units?

300 units Fixed costs / Contribution margin per unit. In this case, $48,000 / ($100 - $60) = 1,200 units. Then take current sales of 1,500 - 1,200 units for breakeven = 300 units margin of safety.

Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 3,000 What is operating income using absorption costing if 80 units were sold for $150 each?

4840 Absorption Costing Sales (80 units x $150) $12,000 Cost of Goods Sold (80 units x $48**) 3,840 Gross Profit 8,160 Selling and Administrative Costs: Variable S&A Costs (80 units x $4) $320 Fixed S&A Costs 3,000 3,320 Operating Income $4,840 **Cost of Goods Sold = direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead = $10 + $15 + $3 + $20 = $48 Fixed manufacturing overhead of $20 per unit = total fixed manufacturing overhead / total units = $2,000 / 100 = $20

What is the primary difference when calculating the cost per unit between the variable costing and absorption costing?

Absorption costing includes fixed manufacturing overhead as a product cost.

Which cost calculation method is most accurate?

Activity-based costing

Smith Taxi Service had the following information for the 160 customers served this month: Sales Revenue $13,000 Variable Costs 7,000 Contribution Margin $6,000 What is the variable cost per customer (to the nearest cent)?

$43.75 To calculate variable cost per customer, divide total variable costs of $7,000 by 160 customers, giving you $43.75 variable cost per customer.

Jones Company sells an average of 200 chairs per week, of which 30% are regular chairs and 70% are executive chairs. Regular chairs sell for $100 each and incur variable costs of $62. Executive chairs sell for $170 each and incur variable costs of $125. The contribution margin per unit and total contribution margin for regular chairs is:

$38 per unit and $2,280 total To calculate contribution margin per chair take $100 selling price - $62 variable cost per chair = $38 contribution margin per chair. Next get the number of regular chairs sold by 200 units sold x 30% = 60 regular chairs sold. For total contribution margin take 60 regular chairs sold x $38 contribution margin per chair = $2,280 contribution margin. previous

Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $ 10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 8,000 What is the unit product cost using variable costing?

28 Unit product cost- variable costing = direct materials + direct labor + variable manufacturing overhead = $10 + $15 + $3 = $28

Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $ 10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 8,000 What is the unit product cost using variable costing?

28 Variable costing for the cost of one unit = direct materials + direct labor + variable manufacturing overhead = $10 + $15 + $3 = $28

Tampa Company has the following information: Total estimated manufacturing overhead costs $300,000 Total estimated direct labor costs 900,000 Actual direct labor costs 60,000 Actual manufacturing overhead costs 310,000 What is the predetermined overhead allocation rate based on direct labor costs as a single plantwide rate?

33.3% Predetermined overhead allocation rate = Total estimated overhead costs/ Total estimated quantity of the overhead allocation base In this case we used estimated direct labor costs as the overhead allocation base = $300,000/$900,000 = .333 or 33.3%

Smith Company sells hot tub covers. The price of a cover is $200. Variable product costs are $120 per unit and commissions are $10 per unit. Fixed overhead is $20,000. 2,000 units were produced and sold. Smith Company's contribution margin ratio is:

35% Variable costs are $120 for variable product cost + $10 in sales commissions = $130. The contribution margin ratio is ($200 selling price - $130 total variable costs) / $200 selling price = 35%. The fixed manufacturing overhead is a fixed costs and not part of contribution margin or contribution margin ratio.

Jones Company has fixed costs totaling $60,000 per month, the variable cost per unit is $80, and the selling price per unit is $120. How much revenue must Jones Company generate to earn $96,000 in target profit?

468,000 To calculate revenue needed to get desired target profit, first calculate number of units to sell for desired operating income. Required sales in units = Fixed costs + Target profit/ Contribution margin per unit = $60,000 + 96,000/$120 - $80 = 3,900 Then take 3,900 units x $120 selling price per unit = $468,000 needed in sales revenue.

Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 8,000 What is the unit product cost using absorption costing?

48 Absorption costing for the cost of one unit = direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead per unit = $10 + $15 + $3 + ($2,000 / 100 chairs) = $48

Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $ 10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 8,000 What is the unit product cost using absorption costing?

48 unit product cost - absorption costing = direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead per unit = $10 + $15 + $3 + ($2,000 / 100 chairs) = $48

ABC Company sells high quality furniture. The factory supervisor earns $5,000 per month plus $10 for each piece of furniture that is produced defect free. What is the amount paid to the factory supervisor if 200 pieces of furniture are produced this month defect free?

7,000 This is an example of a mixed cost as it has both a fixed amount of $5,000 and a variable amount of $10 per piece. In this case the total paid to the supervisor is $5,000 + (200 pieces * $10 per piece) = $7,000.

Smith Taxi Service had the following information for the 160 customers served this month: Sales Revenue $13,000 Variable Costs 7,000 Contribution Margin $6,000 What is the average amount charged to each customer (to nearest cent)?

81.25 To calculate the average sales per customer, divide sales of $13,000 by 160 customers, giving you $81.25 average revenue per customer.

Which of the following is a false statement regarding the effect of changes in sales price and costs?

An increase in total fixed costs decreases the contribution margin per unit and increases the break-even point.

Consider the following assumptions. Units produced 3,000 unitsSales price $600 per unitManufacturing costs: Direct materials $160 per unitDirect labor $80 per unitVariable manufacturing overhead $25 per unitFixed manufacturing overhead $112,000 per yearSelling and administrative costs: Variable selling and administrative costs $72.50 per unitFixed selling and administrative costs $120,000 per year What is the operating income under variable costing?

$550,500 Net Sales Revenue $1,800,000 Variable Costs: Variable manufacturing costs 795,000 Variable selling and administrative costs 217,000 Contribution margin 787,500 Fixed Costs: Fixed manufacturing costs 112,000 Fixed S&A costs 120,000 Operating income $555,500

Assume that sales are $200,000, variable costs are $50,000, and fixed costs are $20,000. What is the degree of operating leverage?

1.15 Degree of operating leverage = Contribution margin/ Operating income = $200,000 in sales - $50,000 in variable costs/ contribution margin of $150,000 - $20,000 fixed costs = $150,000/$130,000 = 1.15

Simons Taxi Services allocates overhead based on $5 per trip plus $1.20 per mile. During the past week, Simons provided taxi service for 21 customers with average driving distance of 11 miles each. What is the amount of overhead allocated for the week?

382.20 To calculate the overhead take (21 customers * $5 trip fee) + (11 miles * $1.20 per mile * 21 customers) = $382.20

CDX Consulting has two clients: A1 Inc. and Zero D LLC. Below are revenues earned by CDX and expenses incurred by CDX over the last year while working with these clients. A1 Zero D Totals Revenue earned $101,000 $200,000 $300,000 Variable expenses incurred $45,450 $76,000 $121,000 Fixed costs incurred $62,000 CDX also allocated fixed costs to clients based on relative revenues. What is the contribution margin ratio for A1 (round to the nearest whole number)?

55% The contribution margin ratio is found by dividing the contribution margin by the revenue. The contribution margin ratio for A1 is 55%. A1 contribution margin = $101,000 - $45,450 = $55,550. A1 contribution margin ratio = $55,550/$101,000 = 55% The fixed costs are not considered when calculating the contribution margin and therefore do not affect the contribution margin ratio.

Abby Cleaning Service had the following information for the 200 customers served this month: Sales Revenue $20,000 Variable Costs 8,000 What is the contribution margin ratio?

60% Calculate contribution margin ratio by calculating the contribution margin (the difference between sales and variable costs) and dividing it by sales. ($20,000 in sales - $8,000 in variable costs) / $20,000 in sales = 60% contribution margin ratio.

Jones Company has fixed costs totaling $280,000 per month, the variable cost per unit is $90, and the selling price per unit is $160. How many units must Jones Company sell to earn $140,000 in operating income?

6000 units To calculate units to sell for desired operating income take (Fixed costs + Desired operating income) / Contribution margin per unit. In this case, ($280,000 + 140,000) / ($160 - $90) = 6,000 units.

Which of the following is false with regards to changes in sales price and costs and the effect on the contribution margin or break-even point?

A unit sales price per unit increase has no impact on contribution margin but does result in a decrease of the break-event point in units.

Which of the following costs are most likely to be controllable at the production suoervisor level?

Direct labor Direct materials Variable manufacturing overhead

Under absorption costing, which costs are included in product costs?

Direct materials costs Direct Labor costs Variable manufacturing overhead costs Fixed manufacturing overhead costs

________ is a "what if" technique that estimates profit or loss results if sales price, costs, volume, or underlying assumptions change.

Sensitivity analysis

On a CVP graph, where the total cost line intersects the total revenue line is the ________.

breakeven point

Variable costing is an alternative costing method that:

considers only variable manufacturing costs when determining product costs.

The ________ is the amount that contributes to covering the fixed costs and then to providing operating income.

contribution margin

Assumes ABC Company had 50 units in beginning Finished Goods Inventory and sold 1,213 units. Additional data includes: Units produced 1,200 units Direct materials $12 per unit Direct labor 8 per unit Variable manufacturing overhead 2 per unit Fixed manufacturing overhead 7 per unit Using absorption costing, what is the dollar amount of ending Finished Goods Inventory?

$1,073 First, calculate the cost per unit for absorption costing. Absorption costing for the cost of one unit = direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead per unit = $12 + $8 + $2 + $7 = $29 per unit Next, calculate the number of units in Finished Goods Inventory. Finished Goods Inventory = beginning finished goods + units produced - units sold = 50 + 1,200 - 1,213 = 37 units Last, take $29 cost per unit x 37 units in ending finished goods = $1,073 in ending Finished Goods Inventory.

Jones Company has the following information: Total estimated manufacturing overhead costs $200,000 Total estimated machine hours 100,000 hours Actual machine hours for month 5,000 hours Actual manufacturing overhead costs $210,000 What is the allocated manufacturing overhead costs for the month based on machine hours as a single plantwide rate?

$10,000 Predetermined overhead allocation rate = Total estimated overhead costs/ Total estimated quantity of the overhead allocation base = $200,000/100,000 est. machine hours = $2.00 per machine hour Second, calculate the allocated manufacturing overhead costs: Allocated manufacturing overhead costs = Predetermined overhead allocation rate * Actual quantity of the allocation base = $2.00 * 5,000 machine hours = $10,000

REVIEWING 24 OF 36 Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 3,000 What is the ending balance in Finished Goods Inventory using absorption costing if 80 units are sold (assume no beginning inventory in Finished Goods Inventory)?

$960 First, calculate the cost per unit. Cost of one unit using absorption costing = direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead per unit = $10 + $15 + $3 + ($2,000 / 100 chairs) = $48 There are 20 units left in ending inventory (100 units produced - 80 units sold). In this case, 20 units * $48 cost per unit = $960 in Finished Goods Inventory.

Assume fixed costs total $180,000 per month, the variable cost per unit is $70, and each unit sells for $160. What is the contribution margin per unit?

90/ unit Contribution margin per unit is calculated by Sales price per unit - Variable cost per unit. In this case, $160 - $70 = $90 per unit.

Jones Company sells an average of 200 chairs per week, of which 30% are regular chairs and 70% are executive chairs. Management is exploring strategies that could shift the current sales mix. Regular chairs sell for $100 each and incur variable costs of $62. Executive chairs sell for $170 each and incur variable costs of $125. Which type of chair should Jones Company promote to maximize profits?

Executive chair because it contributes the highest contribution margin.

Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $ 10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 3,000 What is operating income using variable costing if 90 units were sold for $150 each?

$5,620 Sales (90 units x $150) $ 13,500 Variable Costs: Variable Cost of Goods Sold (90 units x $28**) $ 2,520 Variable S&A Costs (90 units x $4) 360 2,880 Contribution Margin 10,620 Fixed Costs: Fixed Manufacturing Overhead $ 2,000 Fixed S&A Costs 3,000 5,000 Operating Income $ 5,620 **Cost of Goods Sold = direct materials + direct labor +variable manufacturing overhead = $10 + $15 + $3 = $28

Assume fixed costs total $180,000 per month, the variable cost per unit is $70, and each unit sells for $160. What is the contribution margin ratio (rounded)? 56% 44% 25% 65%

56% Contribution margin ratio is calculated by Contribution margin per unit / Sales price per unit. In this case, ($160 - $70) / $160 = 56%

Assumes ABC Company had 50 units in beginning Finished Goods Inventory and sold 1,213 units. Additional data includes: Units produced 1,200 units Direct materials $12 per unit Direct labor 8 per unit Variable manufacturing overhead 2 per unit Fixed manufacturing overhead 7 per unit Using variable costing, what is the dollar amount of ending Finished Goods Inventory?

$814 First, calculate the cost per unit for variable costing. Variable costing for the cost of one unit = direct materials + direct labor + variable manufacturing overhead = $12 + $8 + $2 = $22 Next, calculate the number of units in Finished Goods Inventory. Finished Goods Inventory = beginning finished goods + units produced - units sold = 50 + 1,200 - 1,213 = 37 units Last, take $22 cost per unit x 37 units in ending finished goods = $814 in ending Finished Goods Inventory. Note: Fixed manufacturing overhead is only included in the absorption costing method.

Consider the following total costs and the units produced: Time period Units Produced Total Costs1st Quarter 300 $1,5002nd Quarter 360 $1,7003rd Quarter 420 $1,900 4th Quarter 500 $2,000 Using the High-Low method, what is the estimated variable cost per unit?

$2.50 per unit Under the high-low method, we must identify the time periods with the highest and lowest production. Then you you must calculate the change in total cost and divide that by the change in volume of activity using the data for the highest activity and the lowest activity. ($2,000 - $1,500)/(500 - 300) = $500/200 = $2.50 variable cost per unit

Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 3,000 What is operating income using variable costing if 90 units were sold for $150 each?

$5,620 Variable Costing Sales (90 units x $150) $13,500 Variable Costs: Variable Cost of Goods Sold (90 units x $28**) $2,520 Variable S&A Costs (90 units x $4) 360 2,880 Contribution Margin 10,620 Fixed Costs: Fixed Manufacturing Overhead $2,000 Fixed S&A Costs 3,000 5,000 Operating Income $5,620 **Cost of Goods Sold = direct materials + direct labor + variablemanufacturing overhead = $10 + $15 + $3 = $28

Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 3,000 What is the ending balance in Finished Goods Inventory using variable costing if 75 units are sold (assume no beginning inventory in Finished Goods Inventory)?

$700 First, calculate the cost per unit for variable costing. Cost of one unit using variable costing = direct materials + direct labor + variable manufacturing overhead = $10 + $15 + $3 = $28 There are 25 units left in ending inventory (100 units produced - 75 units sold). In this case, 25 units * $28 cost per unit = $700 in Finished Goods Inventory.

Consider the following costs and activity levels. Units Produced Total Cost1st Quarter 200 $1,500 2nd Quarter 360 $1,7003rd Quarter 420 $1,900 4th Quarter 600 $2,000 Using the high-low method, what is the estimated fixed cost each quarter?

1,250 Using the high-low method, you must identify the quarters with the highest and lowest production. First calculate the variable cost per unit, which in this case is $1.25 per unit found as follows as the change in costs (using the cost of the highest activity and the lowest activity) divided by the change in activity (high versus low): ($2,000 - $1,500)/(600 - 200) = $500/400 = $1.25 variable cost per unit To calculate the estimated fixed cost: $2,000 - (600 x $1.25) = $2,000 - $750 = $1,250 of fixed cost

Assume that sales are $100,000, variable costs are $40,000, and fixed costs are $10,000. What is the degree of operating leverage?

1.20 Degree of operating leverage = Contribution margin/ Operating income = $100,000 in sales - $40,000 in variable costs/ contribution margin of $60,000 - $10,000 fixed costs = $60,000/$50,000 = 1.20

ABC Company has the following data for mixed costs: Total units produced 2,000 units Total costs $30,000 The variable portion of the mixed cost has been calculated at $8.00 per unit. What is the total fixed cost?

14,000 Total fixed cost = Total mixed cost - (Variable cost per unit x Number of units). In this case, $30,000 - ($8.00 x 2,000) = $14,000 fixed cost.

ABC Company has the following data for mixed costs: High month: Total units produced 2,000 units Total costs $10,000 Low month: Total units produced 500 units Total costs $7,000 Using the high-low method, what is the variable cost per unit?

2.00 To solve this problem, you can use the high-low method. Variable cost per unit = (Highest cost ∙ Lowest cost) / (Highest volume ∙ Lowest volume). In this case, ($10,000 - $7,000) / (2,000 - 500) = $2.00 per unit.

Consider the following assumptions. Units produced 3,000 unitsSales price $500 per unitManufacturing costs: Direct materials $120 per unitDirect labor $80 per unitVariable manufacturing overhead $20 per unitFixed manufacturing overhead $111,000 per yearSelling and administrative costs: Variable selling and administrative costs $72.00 per unitFixed selling and administrative costs $120,000 per year What is the cost per unit under absorption costing?

257 Direct materials $120.00 Direct Labor 80.00 Variable manufacturing overhead 20.00 Fixed manufacturing overhead 37.00 Total unit product cost $257.00

Jones Company has fixed costs totaling $240,000 per month, the variable cost per unit is $100, and the selling price per unit is $160. What is the breakeven point in units?

4,000 Breakeven in units is calculated by Fixed costs / Contribution margin per unit. In this case, $240,000 / ($160 - $100) = 4,000 units.

Assume fixed costs total $280,000 per month, the variable cost per unit is $80, and each unit sells for $150. What is the contribution margin ratio (rounded)? 47% 56% 25% 65%

47% Contribution margin ratio is calculated by Contribution margin per unit / Sales price per unit. In this case, ($150 - $80) / $150 = 47%

CDX Consulting has two clients: A1 Inc. and Zero D LLC. Below are revenues earned by CDX and expenses incurred by CDX over the last year while working with these clients. A1 Zero D Totals Revenue earned $101,000 $200,000 $300,000 Variable expenses incurred $45,450 $76,000 $121,000 Fixed costs incurred $70,000 CDX also allocated fixed costs to clients based on relative revenues. What is the contribution margin ratio for Zero D?

62% The contribution margin ratio is found by dividing the contribution margin by the revenue. The contribution margin ratio for Zero D is 62%. Zero D contribution margin = $200,000 - $76,000 = $124,000 Zero D contribution margin ratio = $124,000/$200,000 = 62% The fixed costs are not considered when calculating the contribution margin and therefore do not affect the contribution margin ratio.

Abby Cleaning Services planned to provide cleaning services to 50 customers for $30 per hour during the month. Each job was expected to take 4 hours. The company actually served 5 less customers than expected and spent an average on each job of 4.5 hours. What is Abby Cleaning Services Revenue for the month?

$75 more in revenues than expected Planned revenues for month were 50 customers x $30 per hour x 4 hours average per job = $6,000. Actual revenues were 45 customers x $30 per hour x 4.5 hours average per job = $6,075. Therefore, the company made $75 more than expected ($6,075 actual - $6,000 expected).

If a company decreases its sales price per unit, the new breakeven point will ________.

increase

Jones Company has the following information: Direct materials cost per unit $10.00 Direct labor cost per unit $12.00 Total manufacturing overhead $50,000 Number of units produced 10,000 units What is the total cost per unit?

27.00 Manufacturing overhead per unit is $50,000 / 10,000 units = $5.00 per unit. Add direct materials cost per unit + direct labor cost per unit + manufacturing overhead per unit = total cost per unit. In this case, $10.00 + $12.00 + $5.00 = $27.00 per unit.

Jones Company incurred the following costs while producing 100 chairs: Units produced 100 chairs Direct materials $ 10 per unit Direct labor 15 per unit Variable manufacturing overhead 3 per unit Total fixed manufacturing overhead 2,000 Variable selling and administrative 4 per unit Fixed selling and administrative 3,000 What is operating income using absorption costing if 80 units were sold for $150 each?

4840 Absorption Costing Sales (80 units x $150) $ 12,000 Cost of Goods Sold (80 units x $48**) 3,840 Gross Profit 8,160 Selling and Administrative Costs: Variable S&A Costs (80 units x $4) $ 320 Fixed S&A Costs 3,000 3,320 Operating Income $ 4,840 *Cost of Goods Sold = direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead = $10 + $15 + $3 + $20 = $48 Fixed manufacturing overhead = total fixed manufacturing overhead / total unitsof $20 per unit = $2,000 / 100 =$20

Dawson Company incurred the following costs while producing 200 chairs: Units produced 200 chairs Direct materials $20 per unit Direct labor 25 per unit Variable manufacturing overhead 4 per unit Total fixed manufacturing overhead 3,000 Variable selling and administrative 5 per unit Fixed selling and administrative 4,000 What is the ending balance in Finished Goods Inventory using variable costing if 170 units are sold (assume no beginning inventory in Finished Goods Inventory)?

1,470 First, calculate the cost per unit for variable costing. Cost of one unit using variable costing = direct materials + direct labor + variable manufacturing overhead = $20 + $25 + $4 = $49 There are 30 units left in ending inventory (200 units produced - 170 units sold). In this case, 30 units * $49 cost per unit = $1,470 in Finished Goods Inventory.

The First Time Ever Corporation sells two products with a sales mix of 4:1 respectively for product A and B. What is the break-even point in sales considering this additional information? Product A Product B Sales price per unit $50 $100 Variable cost per unit $20 $40 Total fixed cost = $36,000

Sales of $40,000 for A, $20,000 for B Contribution margin per unit $30 $60 Sales mix x 4 x 1 Contribution margin $120 $60 Total contribution margin of "package"$180 Weighted-average contribution margin = Total contribution margin/total units = $180/5 = $42 Step 2: Calculate the break-even point in units for the "package" of products. Fixed costs/Weighted-average contribution margin per unit = $36,000/$36 = 1,000 total units Step 3: Calculate the break-even point for each product in the mix Break-even point for product A (1,000 units x 4/5 = 800 Break-even point for product B (1,000 units x 1/5) = 200 Step 4: Multiply the units by their selling price. Product A 800 units x $50 = $40,000 Product B 200 units x $100 = $20,000

Burk Company uses activity-based costing. Two of Burk Company's production activities are spinning and molding. Assume the company estimates manufacturing overhead costs to be $20,000 per month for spinning and $35,000 per month for molding. Burk Company allocates spinning costs based on the number of machine hours used. Molding costs are allocated based on number of batches. Suppose Burk Company estimates it will use 50,000 machine hours and have 60,000 batches. What is the predetermined overhead allocation rate for spinning?

$0.40 per machine hour Predetermined overhead allocation rate = Total estimated overhead costs/ Total estimated quantity of the overhead allocation base In this case it is for spinning based on machine hours: = $20,000/50,000 machine hours = $0.40 per machine hour

How variable costing would most likely be used in a service business?

Evaluate the profitability of a client Understand the profitability of related projects completed. Perform contribution margins on all segments of the business, Offering a fee to a client that is substantially less than the firm's standard billing fees.