Question 1 Use the following information to answer this question. Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit. Sales volume (units) 4 000 5 000 Cost of sales $338 000 $422 500 Selling and administrative costs $89 600 $106 000 The best estimate of the total contribution margin when 4 300 units are sold is Question 2 Indiana Corporation produces a single product that it sells for $9 per unit. During the first year of operations 100 000 units were produced and 90 000 units were sold. Manufacturing costs and selling and administrative expenses for the year were as follows: Fixed Costs Variable Costs Raw materials $1.75 per unit produced Direct labor $1.25 per unit produced Factory overhead $100 000 $0.50 per unit produced Selling and administrative $70 000 $0.60 per unit sold What was Indiana Corporation’s net operating income for the year using variable costing? Question 3 Green Company’s variable expenses are 75% of sales. At a sales level of $400 000 the company’s degree of operating leverage is 8. At this sales level fixed expenses are Question 4 Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit. Sales volume (units) 4 000 5 000 Cost of sales $338 000 $422 500 Selling and administrative costs $89 600 $106 000 The best estimate of the total variable cost per unit is Question 5 Last year Gransky Corporation’s variable costing net operating income was $52 100 and its ending inventory increased by 400 units. Fixed manufacturing overhead cost was $7 per unit. What was the absorption costing net operating income last year? Question 6 Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system: Activity Cost Pools Activity Rate Size-related $0.94 per guest Complexity-related $31.62 per tier Order-related $55.70 per order The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests the larger the cake. The measure of complexity is the number of tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.) The activity rates include the costs of raw ingredients such as flour sugar eggs and shortening. The activity rates don’t include the costs of purchased decorations such as miniature statues and wedding bells which are accounted for separately. Data concerning two recent orders are listed here: Pyburn Wedding Smith Wedding Number of reception guests 72 189 Number of tiers on the cake 4 5 Cost of purchased decorations for cake $29.92 $68.75 Assuming that the company charges $556.96 for the Smith wedding cake what would be the overall margin on the order? Question 7 Slosh Cleaning Corporation services both residential and commercial customers. Slosh expects the following operating results next year for each type of customer: Operating Results Residential Commercial Sales $60 000 $140 000 Contribution margin ratio 50% 30% Slosh expects to have $18 000 in fixed expenses next year. What would Slosh’s total dollar sales have to be next year to generate a profit of $90 000? Question 8 Daniele Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost Pool Total Activity Fabrication 50 000 machine-hours Order processing 500 orders Other not applicable The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: Cost Data Wages and salaries $280 000 Depreciation $200 000 Occupancy $140 000 Total $620 000 The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Fabrication Order Processing Other Total Wages and salaries 60% 30% 10% 100% Depreciation 20% 35% 45% 100% Occupancy 10% 50% 40% 100% The activity rate for the Fabrication activity cost pool is closest to _______ per machine hour. Question 9 Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit. Sales volume (units) 4 000 5 000 Cost of sales $338 000 $422 500 Selling and administrative costs $89 600 $106 000 The best estimate of the total monthly fixed cost is Question 10 Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system: Activity Cost Pools Activity Rate Size-related $0.94 per guest Complexity-related $31.62 per tier Order-related $55.70 per order The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests the larger the cake. The measure of complexity is the number of tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.) The activity rates include the costs of raw ingredients such as flour sugar eggs and shortening. The activity rates don’t include the costs of purchased decorations such as miniature statues and wedding bells which are accounted for separately. Data concerning two recent orders are listed here: Pyburn Wedding Smith Wedding Number of reception guests 72 189 Number of tiers on the cake 4 5 Cost of purchased decorations for cake $29.92 $68.75 Suppose the company decides that the present activity-based costing system is too complex and that all costs (except for the costs of purchased decorations) should be allocated on the basis of the number of guests. In that event what would you expect to happen to the costs of cakes? Question 11 At a break-even point of 400 units sold variable expenses were $4 000 and fixed expenses were $2 000. What will the 401st unit sold contribute to profit? Question 12 Harris Company produces a single product. Last year Harris manufactured 17 000 units and sold 13 000 units. Production costs for the year were as follows: Production Cost Data Direct materials $153 000 Direct labor $110 500 Variable manufacturing overhead $204 000 Fixed manufacturing overhead $255 000 Sales were $780 000 for the year variable selling and administrative expenses were $88 400 and fixed selling and administrative expenses were $170 000. There was no beginning inventory. Assume that direct labor is a variable cost. Under absorption costing the carrying value on the balance sheet of the ending inventory for the year would be
