Question

QUESTION 25

1. Jilly Boel Co. produces pillows. In the first half of 2020, it had the following overhead costs.

   	Units Produced	Total Overhead Cost
   January	5,200	50,000
   February	7,000	57,000
   March	6,000	55,000
   April	4,000	51,000
   May	5,500	49,300
   June	6,200	54,000

   Use the high-low method to estimate the cost function for Jilly Boel’s overhead costs.

   What is the estimated fixed overhead costs per month for Jilly Boel Co.?

   	A.	$43,000
   	B.	$32,000
   	C.	$21,067
   	D.	$36,750

8.71 points   

QUESTION 26

1. Zed Leppelin Co. is planning to add a new line of guitars to its product line. The following data applies to the new guitar line.

   Budgeted Sales	10,000 guitars per year
   Sales Price	$500 per guitar
   Variable Costs	$340 per guitar
   Fixed Costs	$900,000

   The margin of safety for the guitar product line is:

   	A.	5,625 units
   	B.	2,647 units
   	C.	4,375 units
   	D.	10,000 units

8.72 points   

QUESTION 27

1. Rock Company produces a variety of pieces of clothing. The following information describes the activity and costs for the pants department. All production workers are paid hourly and move between departments (labor costs are avoidable).

   	2,000 pairs of pants	2,500 pairs of pants
   Fabric	$ 6,300	$  7,875
   Direct Labor	$  10,000	$ 12,500
   Rent on the equipment	$   3,500	$  3,500
   Total Product Costs	$ 19,800	$ 23,875

   What is the variable cost per pair of pants?

   	A.	$9.90
   	B.	$3.15
   	C.	$8.15
   	D.	$9.55

Answer 1

25)

High low method

Variable cost per unit

= (Highest activity cost - Lowest activity cost)/Highest activity - Lowest activity

= (57,000 - 51,000)/(7,000 - 4,000)

= 6,000/3,000

= $2 per unit

Fixed cost = Highest activity cost - (Variable cost*Highest activity)

= 57,000 - (2*7,000)

= 57,000 - 14,000

= $43,000

Therefore the correct option is A

26)

Contribution margin = Selling price - Variable cost

= 500 - 340

= $160

Fixed cost = $900,000

Breakeven = Fixed cost/ contribution margin

= 900,000/160

= 5,625 units.

Margin of safety sales = Total sales - Breakeven sales

= 10,000 - 5,625

= 4,375 units.

Therefore the correct option is C

27)

Variable cost

Fabric = (7,875 - 6,300)/(2,500 - 2,000)

= $3.15

Direct labour = ( 12,500 - 10,000)/(2,500 - 2,000)

= 2,500/500

= $5

Rent on equipment is a fixed cost as the cost is not changing as change in department.

Therefore total variable cost

= 5 + 3.15

= $8.15

So the correct option is C

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