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Problem 4 - 2 0 ( 4 5 minutes ) 1 . a . The unit product cost under absorption costing is: Direct materials $

Problem 4-20(45 minutes)
1. a. The unit product cost under absorption costing is:
Direct materials $20
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
($100,000-: 10,000 units)10
Absorption costing unit product cost $___
b. The absorption costing income statement is:
Sales (8,000 units \times $75 per unit) $600,000
Cost of goods sold (8,000 units \times $40 per unit)_______
Gross margin 280,000
Selling and administrative expenses
[$200,000+(8,000 units \times $6 per unit)]______
Net operating income $_______
2. a. The unit product cost under variable costing is:
Direct materials $20
Direct labor
Variable manufacturing overhead _
Variable costing unit product cost __
b. The variable costing income statement is:
Sales (8,000 units \times $75 per unit) $600,000
Variable expenses:
Variable cost of goods sold
(8,000 units \times $30 per unit) $
Variable selling expenses
(8,000 units \times $6 per unit)__________
Contribution margin
Fixed expenses:
Fixed manufacturing overhead 100,000
Fixed selling and administrative expenses _____________
Net operating income $ ______
Problem 4-20(continued)
3.
Exercise 5-15(30 minutes)
1. First-stage allocations of overhead costs to the activity cost pools:
Distribution of Resource Consumption
Across Activity Cost Pools
Supporting Direct Labor Order Processing Customer Support Other Totals
Wages and salaries
40%30%20%10%100%
Other overhead costs 30%10%20%40%100%
Direct Labor Support Order Processing Customer Support Other Totals
Wages and salaries $
$ 90,000 $ $ 30,000 $300,000
Other overhead costs 30,000____20,00040,000_____
Total cost $________ $100,000 $ _____ $ ______ $_____
Example: 40% of $____ is $______.
2. Computation of activity rates:
Activity Cost Pools (a)
Total Cost (b)
Total Activity (a)-: (b)
Activity Rate
Supporting direct
labor
$150,000
20,000
DLHs
$7.50
per DLH
Order processing $ ___ orders $ per order
Customer support $ ___ customers $ per customer
3. Computation of the overhead costs for the Shenzhen Enterprises order:
Activity Cost Pool (a)
Activity Rate (b)
Activity (a)\times (b)
ABC Cost
Supporting direct labor
$7.50
per DLH 20
DLHs* $150
Order processing $___ per order 1 order
Customer support $___ per customer 1 customer ____
Total $____
*2 DLHs per unit \times __ units =__ DLHs.
4. The customer margin for Shenzhen Enterprises is computed as follows:
Customer MarginABC Analysis
Sales (10 units \times $300 per unit) $3,000
Costs:
Direct materials ($180 per unit \times 10 units) $1,800
Direct labor ($50 per unit \times 10 units)500
Support direct labor overhead (see part 3 above)
Order processing overhead (see part 3 above)
Customer support overhead (see part 3 above)_______
Customer margin $ (___)

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