QUESTION 6

Trendy Inc. produces high-end sweaters and jackets in a single factory. The following information was provided for the coming year.

	Sweaters	Jackets
Sales	$300,000	$420,000
Variable cost of goods sold	180,000	200,000
Direct fixed overhead	25,000	40,000

A sales commission of 5 percent of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $20,000 for the sweater line and $50,000 for the jacket line.

Common fixed overhead for the factory was estimated to be $45,000; common selling and administrative expense was estimated to be $15,000.

Required:

a segmented income statement for Trendy Inc. for the coming year, using variable costing.

	Sweaters	Jackets	Total
(Common fixed overhead/Common selling and administrative/Contribution margin/Direct fixed overhead/Sales)	$____	$____	$____
(Common selling and administrative/Direct selling and administrative/Sales/Segment margin/Variable cost of goods sold)	____	____	____
(Contribution margin/Direct fixed overhead/Direct selling and administrative/Segment margin/Variable selling expense)	____	____	____
(Contribution margin/Sales/Segment margin/Variable cost of goods sold/Variable selling expense)	____	____	____
Less direct fixed expenses:
(Common fixed overhead/Common selling and administrative/Contribution margin/Direct fixed overhead/Segment margin)	____	____	____
(Contribution margin/Direct selling and administrative/Sales/Variable cost of goods sold/Variable selling expense)	____	____	____
(Common fixed overhead/Contribution margin/Direct selling and administrative/Sales/Segment margin)	$____	$____	____
Less common fixed expenses:
(Common fixed overhead/Direct fixed overhead/Direct selling and administrative/Sales/Variable selling expense)			____
(Common selling and administrative/Sales/Segment margin/Variable cost of goods sold/Variable selling expense)			____
(Operating income/Operating loss)			$____

QUESTION 7

Trendy Inc. produces high-end sweaters and jackets in a single factory. The following information was provided for the coming year.

	Sweaters	Jackets
Sales	$262,500	$562,500
Variable cost of goods sold	145,000	196,000
Direct fixed overhead	25,000	47,000

A sales commission of 5% of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $25,000 for the sweater line and $62,500 for the jacket line.

Common fixed overhead for the factory was estimated to be $45,000. Common selling and administrative expense was estimated to be $15,000.

Required:

a segmented income statement for Trendy for the coming year, using variable costing.

	Sweaters	Jackets	Total
(Common fixed overhead/Common selling and administrative/Contribution margin/Direct fixed overhead/Sales)	$_____	$_____	$_____
Less variable expenses:
(Common selling and administrative/Direct selling and administrative/Sales/Segment margin/Variable cost of goods sold)	_____	_____	_____
(Contribution margin/Direct fixed overhead/Direct selling and administrative/Segment margin/Variable selling expense)	_____	_____	_____
(Contribution margin/Sales/Segment margin/Variable cost of goods sold/Variable selling expense)	$_____	$_____	$_____
Less direct fixed expenses:
(Common fixed overhead/Common selling and administrative/Contribution margin/Direct fixed overhead/Segment margin)	_____	_____	_____
(Contribution margin/Direct selling and administrative/Sales/Variable cost of goods sold/Variable selling expense)	_____	_____	_____
(Common fixed overhead/Contribution margin/Direct selling and administrative/Sales/Segment margin)	$_____	$_____	$_____
Less common fixed expenses:
(Common fixed overhead/Direct fixed overhead/Direct selling and administrative/Sales/Variable selling expense)			_____
(Common selling and administrative/Sales/Segment margin/Variable cost of goods sold/Variable selling expense)			_____
(Operating income/Operating loss)			$_____

QUESTION 8:

For the coming year, Archway Computers Inc. expects to produce and sell 200,000 computers. Of these, 80,000 will be consumer (personal) computers and 120,000 will be small business computers. Common fixed overhead is $700,000. Additional information for the coming year is as follows:

	Consumer Computers	Small Business Computers
Price	$780	$2,300
Unit direct materials	500	1,800
Unit direct labour	160	290
Unit variable overhead	40	75
Unit variable selling expense	75	70
Total direct fixed overhead	120,000	200,000

Fixed selling and administrative expense for Archway Computers Inc. is $3,460,000 per year.

Required:

Question Content Area

1. Calculate the unit variable cost under variable costing.

	Total Unit Variable Cost
Consumer Computers	$______
Small Business Computers	$______

Is this cost the same as unit variable product cost? (Yes/No)

Why or why not? _______________________

Question Content Area

2. a segmented variable-costing income statement for next year. The segments correspond to product lines: consumer computers and small business computers.

	Consumer Computers	Small Business Computers	Total
(Contribution margin/Direct fixed overhead/Sales/Segment margin/Variable cost of goods sold)	$_____	$_____	$_____
(Common fixed overhead/Direct fixed overhead/Sales/Segment margin/Variable cost of goods sold)	_____	_____	_____
(Common fixed overhead/Direct fixed overhead/Sales/Segment margin/Variable selling expense)	_____	_____	_____
(Common fixed overhead/Contribution margin/Sales/Segment margin/Variable cost of goods sold)	_____	_____	_____
Less direct fixed expenses:
(Common fixed overhead/Common selling and administrative/Contribution margin/Direct fixed overhead/Segment margin)	_____	_____	_____
(Contribution margin/Direct fixed overhead/Sales/Segment margin/Variable selling expense)	$_____	$_____	_____
Less common fixed expenses:
(Common fixed overhead/Sales/Segment margin/Variable cost of goods sold/Variable selling expense)			_____
(Common selling and administrative/Contribution margin/Direct fixed overhead/Sales/Variable selling expense)			_____
(Operating income/Operating loss)			$_____