Question

Monroe Manufacturing produces and sells a product with a price of $100/unit. The following data has been prepared for its estimated upper and lower levels of activity.

Production Category

Lower Limit

Upper Limit

Units of Production

4,000 units

6,000 units

Direct Materials

$60,000

$90,000

Direct labour

$80,000

$120,000

Manufacturing Overhead:

Indirect materials

$25,000

$37,500

Indirect labour

$40,000

$50,000

Depreciation

$20,000

$20,000

Selling and Admin. Expenses:

Sales salaries

$50,000

$65,000

Office salaries

$30,000

$30,000

Advertising

$45,000

$45,000

Other

$15,000

$20,000

Totals

$365,000

$477,500

The variable expenses for Monroe Manufacturing are

       
all categories of selling and administrative expenses.

       
indirect materials, direct materials, and direct labour

       
indirect materials, indirect labour, direct materials, and direct labour

       
direct materials, direct labour, sales salaries.

Answer 1

Correct Option B i.e. indirect materials, direct materials, and direct labour
Production Category	Lower Limit	Per unit at lower limit	Upper Limit	Per unit at upper limit	Cost Behavoiur
Units of Production	4,000 units		6,000 units
Direct Materials	60,000	15	90,000	15	Variable because per unit similar
Direct labour	80,000	20	120,000	20	Variable because per unit similar
Manufacturing Overhead:
Indirect materials	25,000	6	37,500	6	Variable because per unit similar
Indirect labour	40,000	10	50,000	8	Fixed because per unit decreaing and constant in total
Depreciation	20,000	5	20,000	3	Fixed because per unit decreaing and constant in total
Selling and Admin. Expenses:
Sales salaries	50,000	13	65,000	11	Fixed because per unit decreaing and constant in total
Office salaries	30,000	8	30,000	5	Fixed because per unit decreaing and constant in total
Advertising	45,000	11	45,000	8	Fixed because per unit decreaing and constant in total
Other	15,000	4	20,000	3	Fixed because per unit decreaing and constant in total
Totals	365,000		477,500