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ACC/561
Exercise 19-17
Question 1
Meriden Company has a unit selling price of $550, variable costs per unit of $330, and fixed costs of
$196,680.
Compute the break-even point in units using the mathematical equation.
The mathematical equation:
$550Q =
$330Q + $196,680 + $0
$220Q =
$196,680
Q=
894 units
X=
X=
$196,680 $220
894 units
Question 2
For Turgo Company, variable costs are 63% of sales, and fixed costs are $179,700. Managements net
income goal is $50,070.
Compute the required sales in dollars needed to achieve managements target net income of $50,070.
If variable costs are 63% of sales, the contribution margin ratio is ($1 $0.63) $1 = 0.37.
Required sales in dollars = ($179,700 + $50,070) 0.37 = $621,000
Question 3
For Kozy Company, actual sales are $1,124,000 and break-even sales are $741,840.
Compute the margin of safety in dollars and the margin of safety ratio.
Margin of safety
Margin of safety ratio
=
=
$1,124,000 $741,840
$382,160 $1,124,000
=
=
$382,160
34%
Question 4
Montana Company produces basketballs. It incurred the following costs during the year.
Direct materials
$14,679
Direct labor
$25,916
$9,759
$31,989
Selling costs
$21,364
What are the total product costs for the company under variable costing?
Direct materials
Direct labor
Variable manufacturing overhead
Total product costs
Variable Costing
$14,679
25,916
31,989
$72,584
Question 5
Polk Company builds custom fishing lures for sporting goods stores. In its first year of operations,
2012, the company incurred the following costs.
Variable Cost per Unit
Direct materials
$8.18
Direct labor
$2.67
$6.27
$4.25
$257,433
$261,709
Polk Company sells the fishing lures for $27.25. During 2012, the company sold 81,100 lures and
produced 95,700 lures.
(a) Assuming the company uses variable costing, calculate Polks manufacturing
cost per unit for 2012.
Unit Cost
Direct materials
Direct labor
Variable manufacturing overhead
Manufacturing cost per unit
$8.18
2.67
6.27
$17.12
Sales
Variable cost of goods sold
Variable selling and administrative expenses
= $2,209,975
= $1,388,432
= $344,675
(C) Assuming the company uses absorption costing, calculate Polks manufacturing cost per unit for
2012.
Unit Cost
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead ($257,433 95,700)
Manufacturing cost per unit
$8.18
2.67
6.27
2.69
$19.81
Sales
Cost of goods sold
Variable selling and administrative expenses
= $2,209,975
= $1,606,591
= $344,675
Question 6
For the quarter ended March 31, 2012, Maris Company accumulates the following sales data for its
product, Garden-Tools: $317,400 budget; $331,000 actual.
Budget
GardenTools
317,400
Actual
$
Difference
$
331,000
(13,600)
Favorable
Question 7
Gundy Company expects to produce 1,295,040 units of Product XX in 2012. Monthly production is
expected to range from 81,160 to 118,460 units. Budgeted variable manufacturing costs per unit are:
direct materials $5, direct labor $8, and overhead $9. Budgeted fixed manufacturing costs per unit for
depreciation are $4 and for supervision are $1.
Prepare a flexible manufacturing budget for the relevant range value using 18,650 unit increments.
(List variable costs before fixed costs.)
GUNDY COMPANY
Monthly Flexible Manufacturing Budget
For the Year 2012
Activity Level
Finished Units
81,160
99,810
118,460
Variable Costs
Direct Materials
405,800
499,050
592,300
Direct Labor
649,280
798,480
947,680
Overhead
730,440
898,290
1,066,140
1,785,520
2,195,820
2,606,120
Depreciation
431,680
431,680
431,680
Supervision
107,920
107,920
107,920
539,600
539,600
539,600
Fixed Costs
Total Costs
Depreciation
$
2,325,120
$4 x 1,295,040 12
$
2,735,420
3,145,720
$431,680
Supervision
$1 x 1,295,040 12
$107,920