Answers
Solution
5. MSU
- Determination of the operating income for the year using the variable costing:
| Sales | $1,200,000 | ($8 x 150,000) |
| Less: Variable costs | ||
| manufacturing costs | $274,500 | ($1.83 x 150,000) |
| selling and administrative costs | $667,500 | ($4.45 x 150,000) |
| total variable costs | $942,000 | ($6.28 x 150,000) |
| Contribution | $258,000 | ($1.72 x 150,000) |
| Fixed Costs: | ||
| manufacturing costs | $75,000 | |
| selling and administrative costs | $80,000 | |
| total fixed costs | $155,000 | |
| Net operating income | $103,000 | |
The correct option is b. $103,000
- With respect to Sample LLC’s total fixed costs, the statement that holds true is …
Option a. They will remain the same as production levels change within the relevant range.
Explanation:
Fixed costs are costs that do not change with changes in levels of production. These costs remains the same regardless of changes in levels of production.
7.
Determination of operating income using absorption costing:
Net operating income, using absorption costing = $39,300
Computations:
| Sales | $143,000 | ($130 x 1,100) |
| Less: cost of goods sold | ||
| Cost of goods produced | $123,000 | |
| Less: ending inventory | $32,800 | ($82 x 400 units) |
| Cost of goods sold | $90,200 | ($82 xx 1,100 units) |
| Gross Margin | $52,800 | |
| selling and administrative costs | ||
| Variable costs | $5,500 | ($5 x 1,100) |
| Fixed costs | $8,000 | |
| Total selling and administrative costs | $13,500 | |
| Net operating income | $39,300 | |
Unit cost of goods produced:
| Cost of goods sold: | |
| Variable | $62 |
| Fixed | $20 |
| Total | $82 |
Fixed manufacturing cost per unit = $30,000/1,500 units produced = $20 per unit
Units in ending inventory = 1,500 – 1,100 = 400 units
8. determination of the cost of goods sold percent:
Cost of goods sold percent = (cost of goods sold/sales) x 100
Cost of goods sold = $275,000
Sales = $500,000
Cost of goods sold percent = 275,000/500,000 = 55%
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