Question

An income statement for Iyekqv603 Corp. for the first quarter of the year is presented below:

Iyekqv603 Corp.
Income Statement
For Quarter Ended March 31
Sales			$	910,000
Cost of goods sold				645,000
Gross margin				265,000
Selling and administrative expenses
Selling	$	103,000
Administration		110,000		213,000
Net operating income			$	52,000

On average, a book sells for $65. Variable selling expenses are $6 per book with the remaining selling expenses being fixed. The variable administrative expenses are 5% of sales with the remainder being fixed.

The contribution margin for Iyekqv603 Corp. for the first quarter is:

Multiple Choice

• $135,500

• $181,000

• $780,500

• $774,500

Cerezo Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products:

Activity Cost Pools	Activity Rate
Assembling products	$	3.96	per assembly hour
Processing customer orders	$	49.33	per customer order
Setting up batches	$	77.33	per batch

Data for one of the company's products follow:

	Product Q79P
Number of assembly hours’	263
Number of customer orders	53
Number of batches	79

How much overhead cost would be assigned to Product Q79P using the activity-based costing system? (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

• $130.62

• $51,594.90

• $6,109.07

• $9,765.04

Socrates Corporation produces and sells a single product. Data concerning that product appear below:

	Per Unit			Percent of Sales
Selling price	$	150			100	%
Variable expenses		90			60	%
Contribution margin	$	60			40	%

The company is currently selling 6,400 units per month. Fixed expenses are $214,000 per month. The marketing manager believes that a $5,600 increase in the monthly advertising budget would result in a 150 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

rev: 03_09_2018_QC_CS-121313, 02_13_2019_QC_CS-158424

Multiple Choice

• decrease of $5,600

• increase of $3,400

• decrease of $3,400

• increase of $9,000

Answer 1

Calculate contribution margin for product
No of units sold	14000	910000/65
Sales revenue	$910,000
Cost of goods sold	$645,000
Variable selling and administrative expenses	$84,000	14000*6
Variable administrative expenses	$45,500	910000*5%
Contribution margin	$135,500
Thus, contribution margin is $135,500
Calculate overhead costs assigned to product Q79P
Assembling products	$1,041.48	3.96*263
Processing customer orders	$2,614.49	49.33*53
Setting up batches	$6,109.07	77.33*79
Overhead costs assigned	$9,765.04
Thus, overhead costs assigned to product is $9,765.04
Calculate overall effect on company's monthly income
	Current	Revised	Difference
Sales revenue (6400*150,6550*150)	$960,000	$982,500
Variable expenses (6400*90; 6550*90)	-$576,000	-$589,500
Fixed expenses	-$214,000	-$214,000
Advertising expense		-$5,600
Net income	$170,000	$173,400	$3,400
Thus, net income would increase by $3,400