Question 1: The relevant activity base for a cost depends upon which base is most closely associated with the cost and the decision-making needs of management.
Question 2: Because variable costs are assumed to change in constant proportion with changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle.
Question 3: A business operated at 100% of capacity during its first month and incurred the following costs:
Production costs (5,000 units):
Direct materials $70,000
Direct labor 20,000
Variable factory overhead 10,000
Fixed factory overhead 2,000 $102,000
Operating expenses:
Variable operating expenses $17,000
Fixed operating expenses 1,000 18,000
If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what would be the amount of income from operations reported on the absorption costing income statement?
- 50,400
- 50,000
- 52,000
- 70,000
Question 4:
The Martin Company had a finished goods inventory of 55,000 units on January 1. It's projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Martin Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales. What would the budgeted inventory for March 31 be?
- 46,000
- 36,000
- cannot be determined from the data given
- 42,000