Question
15-2: At a production level of 100 units, the per unit cost under Absorption Costing is $8, which consists of $2 of direct materials, $2
15-2: At a production level of 100 units, the per unit cost under Absorption Costing is $8,
which consists of $2 of direct materials, $2 of direct labor, $2 of variable manufacturing
overhead, and $2 of fixed manufacturing overhead. Calculate the Absorption Costing per
unit cost assuming the production level is increased to 200 units?
15-3: Hanks Hot Dog Factory manufactures hot dogs. The factorys cost structure is as
follows: fixed manufacturing costs per month are $8,000. Variable manufacturing costs
are $0.40 per hot dog. Fixed non-manufacturing costs are $7,000 per month. Variable
non-manufacturing costs consist of a $0.20 sales commission for every hot dog sold. The
sales price per hot dog is $2.20.
Required: If the company begins the month with zero inventory, makes 10,000 hot dogs,
and sells 7,000 hot dogs, what is the total cost of inventory on the Balance Sheet at the
end of the month under Variable Costing? What is income (loss) for the month under
Variable Costing?
15-8: John Smith owned a flour mill. He started 1803 with no inventory, produced 50
tons of flour, and ended the year with five tons of flour. Sales were $22,500. He had no
variable manufacturing overhead. His only direct cost was grain, for which he paid
$8,000. Non-manufacturing variable costs were $5,000, non-manufacturing fixed costs
were $4,000, and manufacturing fixed costs were $6,000.
A) What was Smiths contribution margin for 1803?
(A) $9,500
(B) $10,300
(C) $10,800
(D) The answer depends on whether Smith uses Absorption Costing or
Variable Costing
B) What was operating income for 1803 under Variable Costing?
(A) Loss of $500
(B) Income of $800
(C) Income of $900
(D) Income of $300
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