Question
The following information is available for the Downtown Furniture Company which produces two types of tables. Oak Cherry Total Sales volume (units) 500 300 800
The following information is available for the Downtown Furniture Company which produces two types of tables.
|
| Oak | Cherry | Total |
| Sales volume (units) | 500 | 300 | 800 |
| Revenue | $80,000 | $78,000 | $158,000 |
| Variable Costs |
|
|
|
| Direct materials | $5,000 | $8,000 | $13,000 |
| Direct labor | $17,000 | $21,000 | $38,000 |
| Contribution Margin | $58,000 | $49,000 | $107,000 |
| Fixed Costs |
|
|
|
| Manufacturing |
|
| $40,000 |
| Administrative |
|
| $33,000 |
| Profit Before Tax |
|
| $34,000 |
Management feels that the fixed manufacturing costs should be allocated based on direct labor costs and fixed administrative costs should be allocated based on units sold. The rate at which fixed manufacturing costs which should be allocated is: (rounded)
| A. | $1.05 per direct labor dollar | |
| B. | $.95 per direct labor dollar | |
| C. | $1.34 per direct labor dollar | |
| D. | $3.08 per direct labor dollar |
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Management and Cost Accounting
Authors: Colin Drury
8th edition
978-1408041802, 1408041804, 978-1408048566, 1408048566, 978-1408093887
