Question 1

Nadia inc produces a new product this year and has the following information available

Opening inventory	0
Units produced	24,000
Units sold	21,600
Selling price per unit	$77
Direct materials cost per unit	$16
Direct labour costs per unit	$7
Variable manufacturing overhead cost per unit	$4
Sales commission per unit	$6
Total fixed manufacturing overhead	$408,000
Total fixed marketing and administrative expense	$300,000

Fixed manufacturing overhead is allocated to products based on the units produced

Create the following income statement and determine the value of ending inventory under each of the following costs method

Part a: absorption costing

Part b: variable costing

Part a

From your absorption costing income statement provide the following information

• What is the gross profit for the year
• What is the operating income for the year
• What is the value of the ending inventory for the year

Part b

From your variable costing income statement provide the following information

• What is the contribution margin for the year
• What is the operating income for the year
• What is the value of the ending inventory for the year?

Question 2

Gregory enterprises has identified three cost pool to allocate overhead cost. The following estimates are provided for the coming year

Cost pool	Overhead cost
Supervision of direct labour	$320,000
Machine maintenance	$120,000
Facility rent	$200,000
Total overhead cost	$640,000

Cost driver	Activity level
Direct labour hours	800,000
Machine hours	960,000
Square meters of area	100,000

The accounting record show the Mossman job consumed the following resources

Cost driver	Actual level
Direct labour - hours	200
Machine hours	1,600
Square meters of area	50

If Gregory enterprises uses an abc system then what amount of indirect cost will be allocated to the Mossman job

• $240
• $380
• $160
• $420

Question 3

Alexandra inc produces maple flavored jelly

	Liters	Cost per Litre	Total cost
Direct materials	65.00	$1.15	$74.75

The actual result for the year are:

Units produced	70,000
Direct materials purchased are used (litres)	4,960,000
Direct materials cost per litres	$1.10

Required

Calculate the direct material price and usage (also called efficiency) variances and use your solution to answer the following question

• The amount of direct material price variance is
• Indicate if the direct material price variance is favorable (enter the letter F) or unfavorable (enter the letters UF)
• The amount of the direct material usage variance (also called efficiency variable)
• Indicate if the direct material usage variance is favorable or unfavorable

Question 4

Glen corporation manufactures two products: toaster ovens and bread machines. The following per unit data are available

	Toaster oven	Bread machine
Sale price	$98	$112
Variable cost	$60	$76
Machine hours required for 1 unit	1	2

Total fixed costs are $600,000 and the company can sell a maximum of 25,000 units of each product annually. Machine hour capacity is 30,700 hours per year

How many units of bread machines should the company produce annually to maximize profit?

Hint. you must consider the best product mix (toaster oven vs bread machine) to maximize profit for the company. Note that the question only ask for bread machine, so only input the unit number for bread machine

Question 5

Bemove inc produces adult jackets and children's jackets. Contribution margin income statement data for the most recent year follow

	Total	Adult jackets	Children jacket
Sales revenue	$360,000	$275,000	$85,000
Variable expenses	$207,000	$165,000	$42,000
Contribution margin	$153,000	$110,000	$43,000
Fixed expenses	$102,000	$50,000	$52,000
Operating income (loss)	$51,000	$60,000	($9,000)

The company is considering whether or not to drop the children jacket line. Assume total fixed cost will remain unchanged and the space formerly used to produce children's jackets can be rented for $24,000 per year

1. Indicated whether the company operating income will increase or decrease if it drops the children jacket line
2. How much is the increase/ decrease
3. Should the company drop the children jacket line or not

Question 6

United tire co. provide installation service for the client

The company developed the following standard for installing 4 tires

	Hours	Cost per hour	Total cost
Direct labour	0.75	$90.00	$67.50

The actual results for the year are:

Units produced	6,200
Direct labour hours used this year	4,340
Actual labour rate per hour	$94,00

Calculate the direct labour rate (also called price) and efficiency variance

• The amount of the direct labour rate variance, also called the direct labour price variance is

please explain steps. Thank you