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1. Assume the following information: Direct materials $ 70,000 Direct labor $ 48,000 Variable manufacturing overhead $ 13,000 Fixed manufacturing overhead 25,000 Total manufacturing overhead

1. Assume the following information:

Direct materials $ 70,000
Direct labor $ 48,000
Variable manufacturing overhead $ 13,000
Fixed manufacturing overhead 25,000
Total manufacturing overhead $ 38,000
Variable selling expense $ 15,000
Fixed selling expense 20,000
Total selling expense $ 35,000
Variable administrative expense $ 8,000
Fixed administrative expense 12,000
Total administrative expense $ 20,000

What is the total variable manufacturing cost?

Multiple Choice

  • $118,000

  • $146,000

  • $131,000

  • $36,000

2. Assume that a manufacturing company incurred the following costs:

Direct labor $ 90,000
Advertising $ 40,000
Factory supervision $ 35,000
Sales commissions $ 15,000
Depreciation, office equipment $ 4,000
Indirect materials $ 5,000
Depreciation, factory building $ 20,000
Administrative office salaries $ 1,000
Utilities, factory equipment $ 2,500
Direct materials $ 105,000
Insurance, factory $ 6,000
Property taxes, factory $ 7,000

What is the total variable cost pertaining to the units produced and sold?

Multiple Choice

  • $215,000

  • $212,500

  • $217,500

  • $202,500

3. Assume that a manufacturing company incurred the following costs:

Direct labor $ 90,000
Advertising $ 40,000
Factory supervision $ 35,000
Sales commissions $ 15,000
Depreciation, office equipment $ 4,000
Indirect materials $ 5,000
Depreciation, factory building $ 20,000
Administrative office salaries $ 1,000
Utilities, factory $ 2,500
Direct materials $ 105,000
Insurance, factory $ 6,000
Property taxes, factory $ 7,000

If the information above pertains to 1,000 units of production, what is its average manufacturing cost per unit?

Multiple Choice

  • $268.00

  • $274.50

  • $285.50

  • $270.50

4. A merchandiser plans to sell 15,000 units next month at a selling price of $110 per unit. It also gathered the following cost estimates for next month:

Cost Cost Formula
Cost of goods sold $60 per unit sold
Advertising expense $150,000 per month
Depreciation expense $70,000 per month
Shipping expense $100,000 per month + $10 per unit sold
Administrative salaries $50,000 per month
Sales commissions 5% of sales
Insurance expense $15,000 per month

What is the estimated net operating income for next month?

Multiple Choice

  • $517,500

  • $750,000

  • $162,500

  • $132,500

5. Assume that a supermarket is considering replacing all of its frozen food freezers. The new freezers use less energy to operate than the existing freezers. Two costs that have been discussed by various employees with respect to this decision include (1) the utility cost (or energy cost) that would continue to be incurred if the company decides to keep its existing freezers, and (2) the price that would be paid for the new freezers. Which of the following choices properly classifies each of these costs as being relevant or irrelevant in the decision to "keep or replace" the freezers?

Cost: Utility Cost Cost:
Associated with Keeping the Existing Price That Would be Paid
Freezers for the New Freezers
Relevant Irrelevant Relevant Irrelevant
A) No Yes No Yes
B) Yes No No Yes
C) Yes No Yes No
D) No Yes Yes No

Multiple Choice

  • Choice A

  • Choice B

  • Choice C

  • Choice D

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