Question 1: The Nelson Company experienced the following costs in 2007:
Direct materials $2.25/unit
Direct labor $4.10/unit
Variable manufacturing overhead $0.75/unit
Variable selling $3.00/unit
Fixed manufacturing overhead $60,000
Fixed selling $35,000
Fixed administrative $20,000
During 2007 the company manufactured 120,000 units and sold 145,000 units. Assume the same unit costs in all years. Total variable costs on the company’s 2007 contribution income statement will be:
A $1,464,500
B $1,029,500
C $1,102,000
D $1,537,000
Question 2: During the past year the Carver Company manufactured 25,000 units and sold 20,000 units. Production costs during the year were as follows:
Fixed manufacturing overhead $550,000
Variable manufacturing overhead $380,000
Direct labor $278,000
Direct materials $214,000
Sales totaled $1,270,000, variable selling and administrative costs totaled $110,000, and fixed selling and administrative costs totaled $170,000. There were no units in beginning inventory.
The contribution margin per unit is:
A $6.62
B $23.12
C $28.62
D $24.22
Question 3: Three costs incurred by Jolie Company are summarized below:
1,000 units 2,000 units
Cost A $10,000 $15,000
Cost B $21,000 $21,000
Cost C $16,000 $32,000
Which of these costs are variable?
A. A, B, and C.
B. A and C.
C. A only.
D. C only.
Question 4: Earth Company makes 2 products, Wind and Fire. Wind has a Contribution Margin per unit of $6.00 and Fire has a contribution margin per unit of $11.00. Earth Company has annual fixed costs of $290,000.
Assume that products Wind and Fire are sold in a 3:1 mix (3 units of Wind are sold for each unit of Fire). How many units of each must be sold to break even?
A 30,000 Wind; 10,000 Fire
B 7,500 Wind; 2,500 Fire
C 18,913 Wind; 6,304 Fire
D 40,000 Wind; 0 Fire
Question 5: During 2007, Bonzai Corporation reported total revenues of $891,640 and profit of $91,486. Fixed costs were $332,043, and 44,582 units were sold. If costs and prices are expected to stay the same in 2008, and Bonzai expects to sell 50,000 units, what will be the company’s budgeted profit?
A $142,957
B $525,000
C $667,957
D $475,000
Question 6: Comstat’s contribution income statement utilizing variable costing appears below:
Comstat Company
Income Statement
For the Year ended December 31,2007
Sales ($28/unit) $840,000
Less variable costs
COGS 420,000
Selling & Admin 72,000
Contribution margin 348,000
Fixed overhead 80,000
Fixed selling & Admin 90,000
net income $178,000
Comstat Company produced 40,000 units during the year. Variable and fixed production costs have remained constant the entire year. There were no beginning inventories.
The dollar value of the ending inventory using full costing will be:
A $160,000
B $186,500
C $140,000
D $164,000