Question

In: Accounting

25. A. If fixed costs are $256,000, the unit selling price is $34, and the unit...

25. A.

  1. 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

  1. 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.

  1. 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

Solutions

Expert Solution

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.

ekkarill92 answered 2 years ago
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