Question

Clinton's Engine Company manufactures part AT168 used in several of its engine models. Monthly unit production costs for 1,000 units are as follows:

Direct materials	$ 40
Direct labor	10
Variable overhead costs	30
Fixed overhead costs	20
Total	$100

It is estimated that 10% of the fixed overhead costs assigned to AT168 will no longer be incurred if the company purchases AT168 from the outside supplier. Clinton's Engine Company has the option of purchasing the part from an outside supplier at $85 per unit.

If Clinton's Engine Company purchases 1,000 AT168 parts from the outside supplier per month, then its monthly operating income will

Group of answer choices

increase by $2,000

decrease by $85,000

decrease by $3,000

increase by $80,000

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Question 251 pts

ABC company uses a standard costing system. In April 2019, $1,000 of unfavorable price variance and $2,000 of favorable efficiency variance for direct labor were recorded. In addition, the company recorded $2,500 of unfavorable variable overhead flexible budget variance and $3,000 of favorable fixed overhead variance. The company makes year-end adjustments to close all variances into the cost of goods sold account. Which of the following journal entries would have been recorded for April?

Group of answer choices

Debit cost of goods sold for $1,500

Credit direct labor efficiency variance for $2,000

Debit cost of goods sold for $8,500

Credit cost of goods sold for $1,500

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Question 261 pts

Haier Corporation incurred fixed manufacturing costs of $6,000 during 2019. Other information for 2019 includes:

            The budgeted denominator level is 1,000 units.

            Units produced total 750 units.

            Units sold total 600 units.

            Beginning inventory was zero.

The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold.

Operating income using absorption costing will be ________ than operating income if using variable costing

Group of answer choices

$3,600 lower

$900 higher

$2,400 lower

$2,400 higher

Answer 1

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Clinton's Engine Company
Particulars	Amount $	Remarks	Remarks
Direct materials	40.00	Relevant	It is a unit level cost so relevant.
Direct Labor	10.00	Relevant	It is a unit level cost so relevant.
Variable Manufacturing overhead	30.00	Relevant	It is a unit level cost so relevant.
Fixed Manufacturing overhead	2.00	Relevant	10% of $ 20 i.e. $ 2 is avoidable so $ 2 is relevant
Relevant cost per unit	82.00
Less: Price quoted by vendor	85.00
Loss per unit	(3.00)	A
Number of units	1,000.00	B
Decrease in operating income by	3,000.00	C=A*B

ABC Company
Credit cost of goods sold for $1,500.
Haier Corporation	Amount $
Fixed Manufacturing costs	6,000.00
Budgeted denominator level	1,000.00
Overhead absorption rate	6.00
Units produced	750.00
Units sold	600.00
Ending inventory Units	150.00
Fixed Manufacturing costs charged to Ending inventory	900.00

So, Operating income using absorption costing will be $ 900 higher than operating income if using variable costing.