In: Accounting
25. A.
If fixed costs are $256,000, the unit selling price is $34, and the unit variable costs are $18, what is the break-even sales (units) if fixed costs are reduced by $33,600?
a. 13,900 units
b. 20,850 units
c. 16,680 units
d. 11,120 units
25. B
If sales totaled $665,288 for the year (83,161 units at $8 each) and the planned sales totaled $848,276 (77,116 units at $11 each), the effect of the quantity factor on the change in sales is:
a. $66,495 increase
b. $182,988 decrease
c. $66,495 decrease
d. $182,988 increase
25. C.
A business operated at 100% of capacity during its first month, with the following results:
Sales (97 units) | $388,000 | |
Production costs (121 units): | ||
Direct materials | $52,320 | |
Direct labor | 13,358 | |
Variable factory overhead | 23,377 | |
Fixed factory overhead | 22,265 | 111,320 |
Operating expenses: | ||
Variable operating expenses | $5,349 | |
Fixed operating expenses | 3,810 | 9,159 |
What is the amount of the income from operations that would be reported on the absorption costing income statement?
a. $307,450
b. $387,879
c. $289,600
d. $311,260
Answer to question no.25 A
Calculation of Break-even sales (Units) if fixed cost is reduced by $33,600
Break-even sales (Units) = Fixed Cost / Contribution Per Unit
=($256,000-$33,600) / ($34-$18)
= 13,900 Units.
Accordigly, Option (a) is the correct answer.
Answer to question no. 25 B
Effect on the quantity factor of the sales
= ($665288-$848,276)
= ($182,988)
Accordingly option (b) is the correct answer as sales value is increase but the quantity is decreased as per planned sales quantity.
Answer to question no.25 C
Determination of Income from operation using absorption costing:
Particulars | Per Unit | Amount |
Sales (For 97 Units) | $4,000 | $388,000 |
Less: Variable Cost (for 121 Units) | ||
Direct material | $432.40 | $52,320 |
Direct labor | $110.40 | $13358 |
Variable Factory Overhead | $193.20 | $23377 |
Less: Fixed factory overhead | $184 | $22265 |
The production cost of 121 Units | $920 | $111,320 |
Less: Closing Inventory (24 Units) | $920 | $22,080 |
The production cost of goods sold | $920 | $89,240 |
Gross Profit | $3080 | $298,760 |
Less: Operating Expenses | $9159 | |
Operating Income | $289601 |
Accordingly Option (c) is the correct answer.