Question

1.

Andrew Clark's shoe company has the following information:

Selling price per pair of shoes: $100

Direct materials per pair of shoes: $30

Direct labor per pair of shoes: $20

Variable Selling expense per pair of shoes: $5

Variable overhead per pair of shoes: $10

Fixed overhead per month: $10,000

Fixed Selling expenses per month: $20,000 I

n January, 2,000 pairs of shoes were produced and 1,800 pairs of shoes were sold.

Using variable contribution margin costing, what is the contribution margin for January?

Group of answer choices

$81,000

$63,000

$70,000

$72,000

Using absorption costing, what is the gross margin for January?

Group of answer choices

$63,000

$62,010

$54,000

$36,000

2.

Brat Pack books has the following financial information for the month of October:

Direct labor per book: $3

Direct material per book: $2

Manufacturing overhead per book: $1

Variable selling expense per book: $0.50

Fixed Manufacturing overhead: $5,000

Fixed selling expenses: $2,000

If there were 4,000 books produced and sold in October, what is the variable cost per book using the contribution margin method?

Group of answer choices

$5.00

$7.25

$6.00

$6.50

If there were 4,000 books produced and sold in October, what is the cost of goods sold per book using the absorption costing method?

Group of answer choices

$6.25

$5.00

$6.50

$7.25

3.

Reynolds Corp has the following information:

Selling price: $15 per unit

Direct labor: $4 per unit

Direct materials: $2 per unit

Fixed Manufacturing Expense: $50,000

What is their breakeven point?

Group of answer choices

8,334 Units

3,334 Units

5,000 Units

5,556 Units

Answer 1

1)
a)	Using variable contribution margin costing, what is the contribution margin for January?
	Direct Material Cost per unit				$   30.00
	Direct Labor cost per unit				$   20.00
	Variable manu. OH cost per unit				$   10.00
	Variable selling expense per unit				$      5.00
					$   65.00
	Contribution Margin
	($ 100 - $ 65) x 1800 =		$ 63,000.00
b)	Using absorption costing, what is the gross margin for January?
	Direct Material Cost per unit				$   30.00
	Direct Labor cost per unit				$   20.00
	Variable manu. OH cost per unit				$   10.00
	Fixed manu. OH cost per unit				$      5.00	($ 10000 / 2000)
					$   65.00
	Gross Margin
	($ 100 - $ 65) x 1800 =		$ 63,000.00
2)
a)	If there were 4,000 books produced and sold in October,
	what is the variable cost per book using the contribution margin method?
	Direct Material Cost per unit				$      2.00
	Direct Labor cost per unit				$      3.00
	Variable manu. OH cost per unit				$      1.00
	Variable selling expense per unit				$      0.50
					$      6.50
b)	If there were 4,000 books produced and sold in October,
	what is the cost of goods sold per book using the absorption costing method?
	Direct Material Cost per unit				$      2.00
	Direct Labor cost per unit				$      3.00
	Variable manu. OH cost per unit				$      1.00
	Fixed manu. OH cost per unit				$      1.25	($ 5000 / 4000)
					$      7.25
3)
a)	What is their breakeven point?
	Contribution Margin per unit =			Selling Price - Direct Labor - Direct Material
			=	$ 15 - $ 4 - $ 2
			=	9
	Break even point =			Fixed Manu. Exp / Cont. Margin per unit
			=	$ 50000 / 9
			=	5556	units