Data Selling price per unit $50 Manufacturing costs: Variable per unit produced: Direct materials $11 Direct...

Data
Selling price per unit	$50
Manufacturing costs:
Variable per unit produced:
Direct materials	$11
Direct labor	$6
Variable manufacturing overhead	$3
Fixed manufacturing overhead per year	$120,000
Selling and administrative expenses:
Variable per unit sold	$4
Fixed per year	$70,000

	Year 1	Year 2
Units in beginning inventory	0
Units produced during the year	10,000	6,000
Units sold during the year	8,000	8,000

Enter a formula into each of the cells marked with a ? below
Review Problem 1: Contrasting Variable and Absorption Costing

Compute the Ending Inventory
	Year 1	Year 2
Units in beginning inventory	0	?
Units produced during the year	?	?
Units sold during the year	?	?
Units in ending inventory	?	?

Compute the Absorption Costing Unit Product Cost
	Year 1	Year 2
Direct materials	?	?
Direct labor	?	?
Variable manufacturing overhead	?	?
Fixed manufacturing overhead	?	?
Absorption costing unit product cost	?	?

Construct the Absorption Costing Income Statement
	Year 1	Year 2
Sales	?	?
Cost of goods sold	?	#VALUE!
Gross margin	?	?
Selling and administrative expenses	?	?
Net operating income	?	?

Compute the Variable Costing Unit Product Cost
	Year 1	Year 2
Direct materials	?	?
Direct labor	?	?
Variable manufacturing overhead	?	?
Variable costing unit product cost	?	?

Construct the Variable Costing Income Statement
	Year 1		Year 2
Sales		?		?
Variable expenses:
Variable cost of goods sold	?		?
Variable selling and administrative expenses	?	?	?	?
Contribution margin		?		?
Fixed expenses:
Fixed manufacturing overhead	?		?
Fixed selling and administrative expenses	?	?	?	?
Net operating income		?		?

Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company’s most recent year is given:

					Office
	Total Company				Chicago				Minneapolis
Sales	$	750,000	100.0	%	$	150,000	100	%	$	600,000	100	%
Variable expenses		405,000	54.0	%		45,000	30	%		360,000	60	%
Contribution margin		345,000	46.0	%		105,000	70	%		240,000	40	%
Traceable fixed expenses		168,000	22.4	%		78,000	52	%		90,000	15	%
Office segment margin		177,000	23.6	%	$	27,000	18	%	$	150,000	25	%
Common fixed expenses not traceable to offices		120,000	16.0	%
Net operating income	$	57,000	7.6	%

Exercise 7-16 Part 1

Required:

1-a. Compute the companywide break-even point in dollar sales.

1-b. Compute the break-even point for the Chicago office and for the Minneapolis office.

1-c. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points?

Expert Solution

1c.

The Companys BEP is more than to the sum of the Chicago and Minneapolis break-even points

Hope this helps! In case of any clarifications, kindly use the comment box below

ekkarill92 answered 2 years ago

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