Question 1: The Braggs & Struttin' Company manufactures an engine for carpet cleaners called the "Snooper." Budgeted cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units.
Sales $1,600,000.
Less: COGS 1,120,000.
Gross margin: $480,000.
Less: Operating expenses 100,000.
Income: $380,000.
Cost of goods sold consists of $810,000 of variable costs and $310,000 of fixed costs. Operating expenses consists of $30,000 of variable costs and $70,000 of fixed costs.
Required:
A) Calculate the break-even point in units and sales dollars.
B) Calculate the safety margin (in dollars).
C) Braggs & Struttin' received an order for 6,000 units at a price of $25.00. There will be no increase in fixed costs, but variable costs will be reduced by $0.54 per unit because of cheaper packaging. Determine the projected increase or decrease in profit from the order, assuming there is no opportunity costs.
Question 2: Webster, Inc. began operations at the start of the current year, having a production target of 60,000 units. Actual production totaled 60,000 units, and the company sold 95% of its manufacturing output at $50 per unit. The following costs were incurred:
Manufacturing:
Direct materials used $240,000
Direct labor 480,000
Variable manufacturing overhead 360,000
Fixed manufacturing overhead 600,000
Selling and administrative:
Variable 180,000
Fixed 630,000
Required:
A) Supposing the use of variable costing, compute the cost of Webster's ending finished-goods inventory.
B) Compute the company's contribution margin. Would Webster disclose the contribution margin on a variable-costing income statement or an absorption-costing income statement?
C) Supposing the use of absorption costing, how much fixed selling and administrative cost would Webster include in the ending finished-goods inventory?
D) Compute the company's gross margin.
Question 3: Jackson Corporation uses a standard cost system, applying manufacturing overhead on the basis of machine hours. The company's overhead standards per unit are shown below.
Variable overhead: 4 hours at $9 per hour.
Fixed overhead: 4 hours at $6* per hour.
Based on planned monthly activity of 120,000 machine hours.
Actual data for May were:
Number of units produced: 29,000.
Number of machine hours worked: 125,000.
Variable overhead costs incurred: $1,085,000.
Fixed overhead costs incurred: $755,000.
Required:
A) Compute the spending and efficiency variances for variable overhead.
B) Compute the budget and volume variances for fixed overhead.