4 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: Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead $ 153,000 110,500 204,000 255,000 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 labour is a variable cost. The contribution margin per unit was: (a) (b) (c) (d) $25.70 $27.30 $32.50 None of the above. 5 Which of the following is true regarding the contribution margin ratio of a single product company? (a) (b) As fixed expenses decrease, the contribution margin ratio increases. The contribution margin ratio multiplied by the variable expense per unit equals the contribution margin per unit. If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio by the dollar increase in sales. The contribution margin ratio increases as the number of units sold increases. (c) (d) 6 The margin of safety is equal to: (a) (b) Sales - Net operating income Sales - (Variable expenses / Contribution margin) Sales - (Fixed expenses / Contribution margin ratio) Sales (Variable expenses + Fixed expenses) 7 Lakes Corporation has provided the following data from its activity-based costing system: Activity Cost Pools Designing products Setting up batches Assembly products Total Cost $1,909,928 $5,440 $116,100 Total Activity 9,896 product design hours 170 batch set-ups 6,450 assembly hours Data concerning Product ABC appear below: Activity Cost Pools Activity Product design hours 260 Batch set-ups 5 Assembly hours 100 The overhead cost that would be assigned to Product ABC using the company's activity-based costing system: (a) (b) (c) (d) $52,140 $58,200 $61,280 None of the above. 8. A partial listing of costs incurred at Peggs during September appears below: Direct materials Utilities, factory Administrative salaries Indirect labour Sales commissions Depreciation of production equipment Depreciation of administrative equipment Direct labour Advertising $ 199,000 11,000 83,000 29,000 37,000 31,000 44,000 81,000 154,000 The total of the manufacturing overhead costs listed above for September is: (a) $71,000 (b) $115,000 (c) $152,000 (d) None of the above. 9. Fenestre Corporation's contribution margin ratio is 25%. The company's breakeven is 80,000 units and the selling price of its only product is $4.00 a unit. What are the company's fixed expenses? (b) (c) $20,000 $80,000 $120,000 None of the above. 10. Assuming that the unit sales are unchanged, the total contribution margin will decrease if: (a) fixed expenses increase. (b) fixed expenses decrease. (c) variable expense per unit increases. (d) variable expense per unit decreases