Question

5 Jeanlouis, Inc., manufactures and sells two products: Product D0 and Product D5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

		Estimated	Expected Activity
Activity Cost Pools	Activity Measures	Overhead Cost	Product D0	Product D5	Total
Labor-related	DLHs	$313,743	3,600	3,300	6,900
Production orders	orders	70,264	300	500	800
General factory	MHs	253,555	4,300	4,200	8,500
		$637,562

The total overhead applied to Product D5 under activity-based costing is closest to:

$319,252

$125,286

$304,920

$273,240

6 Ofarrell Corporation, a company that produces and sells a single product, has provided its contribution format income statement for March.

Sales (6,800 units)	$401,200
Variable expenses	265,200
Contribution margin	136,000
Fixed expenses	103,500
Net operating income	$32,500

If the company sells 6,700 units, its net operating income should be closest to:

$31,979

$28,000

$30,500

$32,500

7

Dybala Corporation's produces and sells a single product. Data concerning that product appear below:

	Per Unit	Percent of Sales
Selling price	$170	100%
Variable expenses	85	50%
Contribution margin	$ 85	50%

The company is currently selling 5,400 units per month. Fixed expenses are $402,200 per month. The marketing manager believes that a $6,400 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?

Decrease of $6,400

Increase of $6,350

Decrease of $6,350

Increase of $12,750

8 Data concerning Wang Corporation's single product appear below: (Do not round your intermediate calculations.)

Selling price per unit	$	210.00
Variable expense per unit	$	73.50
Fixed expense per month	$	138,450

The break-even in monthly dollar sales is closest to:

$213,000

$287,550

$138,450

$426,000

Answer 1

5)

The correct answer is $319,252

Note:

	Activity Measures	Estimated	Expected Activity
Activity Cost Pools		Overhead Cost	Product D0	Product D5	Total	Activity Rate ( Overhead Cost / Total Expected Activity)	Overhead Applied (Activity Rate * Expected Activity of Product D5)
Labor-related	DLHs	313743	3,600	3,300	6,900	45.47	150,051
Production orders	orders	70,264	300	500	800	87.83	43,915
General factory	MHs	2,53,555	4,300	4,200	8,500	29.83	125,286
		637562					319,252

6) The Correct answer is $ 30,500

Note :

		Per Unit ( Price / 6,800 Units)	At 6,700 Units (Per Unit * 6700 Units)
Sales (6,800 units)	4,01,200	59	3,95,300
Variable expenses	2,65,200	39	2,61,300
Contribution margin	1,36,000	20	1,34,000
Fixed expenses	1,03,500		1,03,500
Net operating income	32,500		30,500

7)

Expected Units = 5400+ 150

= 5,550 Units

The correct answer is Increase of $6,350

Note :

	Per Unit	Percent of Sales	At 5400 Units ( Per Unit * 5400 Units)	At 5550 Units ( Per Unit * 5550 Units)	Change ( Revised - Existing)
Selling price	170	100%	9,18,000	9,43,500
Variable expenses	85	50%	4,59,000	4,71,750
Contribution margin	85	50%	4,59,000	4,71,750
Fixed expenses			4,02,200	4,08,600
Net operating income			56,800	63,150	6,350

8)

Contribution Margin Ratio = ( Selling price per unit -  Variable expense per unit) / Selling price per unit *100

= ($ 210 - $ 73.50) / $ 210 * 100

= $ 136.50 / $ 210*100

= 65%

The break-even in monthly dollar sales is closest to = Fixed Expenses / Contribution Margin Ratio  

= $ 138,450 / 65%

= $ 213,000

Hence the correct answer is $ 213,000