Question

Question 5

Treble Inc. planned and manufactured 259,000 units of its single product in 2019, its first year of operations. Variable manufacturing costs were $48 per unit of production. Planned and actual fixed manufacturing costs were $618,000. Marketing and administrative costs (all fixed) were $309,000 in 2019. Treble Inc. sold 209,000 units of product in 2019 at $78 per unit.

Variable costing operating income for 2019 is calculated to be: (Do not round intermediate calculations. Round your final answers to whole dollar amounts.)

Multiple Choice

• $4,191,000.

• $4,400,000.

• $5,343,000.

• $5,461,490.

• $6,286,000.

Sand and Sea Resorts owns and operates two resorts in a coastal town. Both resorts are located on a barrier island that is connected to the mainland by a high bridge. One resort is located on the beach and is called the Crystal Coast Resort. The other resort is located on the inland waterway which passes between the town and the mainland; it is called the Harborview Resort. Some key information about the two resorts for the current year is shown below.

	Harborview				Crystal Coast					Total
Revenue (000s)	$	3,500				$	6,500			$	10,000
Square feet		75,000					225,000				300,000
Rooms		60					140				200
Assets (000s)	$	148,000				$	592,000			$	740,000

The nontraceable operating costs of the resort amount to $4,000,000. By careful study, the management accountant at Sand and Sea has determined that, while the costs are not directly traceable, the total of $4 million could be fairly allocated to the four cost drivers as follows.

Cost Driver	Amount Allocated
Revenue	$	215,000
Square feet		140,000
Rooms		600,000
Assets (000s)		3,045,000

Using the information regarding the allocation of the $4 million to the four cost drivers, determine the amount of cost to be allocated to the Harborview Resort.

Multiple Choice

• $1,055,000.

• $899,250.

• $1,507,000.

• $718,000.

• $1,688,000.

Answer 1

Answer to Question Part 1:

Given,

Units Sold = 2,09,000

Units Produced = 2,59,000

Particulars	Amount($)
a)Sales(2,09,000 units * $78)	1,63,02,000
b)Less: Variable Cost(2,09,000 units * $48)	1,00,32,000
Contribution Margin(a-b)	62,70,000
Less: Fixed Manufacturing Cost	(6,18,000)
Marketing & Administrative Cost	(3,09,000)
Variable Costing Operating Income---	$53,43,000

Under Variable Costing,

Variable Costs are product costs and Fixed Cost are period cost & income statement is computed on the basis of units sold.

................................................................................................................................................................................

Answer to Question Part 2:

Given , Non Traceable Operating Cost = $4 Million

Such cost is to be apportioned on the basis of four cost drivers specified.

Amount of cost allocated to HarbourView Resort

Cost Driver	Amount($)	Calculations	Amount Allocated($)
Revenue	2,15,000	[2,15,000 * 3500/10,000]	75,250
Square foot	1,40,000	[1,40,000 * 75,000/3,00,000]	35,000
Rooms	6,00,000	[6,00,000 * 60/200]	1,80,000
Assets	30,45,000	[30,45,000 * 1,48,000/7,40,000]	6,09,000
Total	40,00,000		8,99,250

Total Amount of Cost allocated to Harbour View = $8,99,250