Question

Krepps Corporation produces a single product. Last year, Krepps manufactured 29,650 units and sold 24,600 units. Production costs for the year were as follows:

Direct materials	$222,375
Direct labor	$145,285
Variable manufacturing overhead	$243,130
Fixed manufacturing overhead	$563,350

Sales totaled $1,070,100 for the year, variable selling and administrative expenses totaled $140,220, and fixed selling and administrative expenses totaled $210,515. There was no beginning inventory. Assume that direct labor is a variable cost.

Under absorption costing, the ending inventory for the year would be valued at:

Multiple Choice

• $269,980

• $199,980

• $261,480

• $227,480

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An income statement for Sam's Bookstore for the first quarter of the year is presented below:

Sam's Bookstore
Income Statement
For Quarter Ended March 31
Sales		$ 910,000
Cost of goods sold		565,000
Gross margin		345,000
Selling and administrative expenses
Selling	$ 120,000
Administrative	144,000	264,000
Net operating income		$ 81,000

On average, a book sells for $70. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed.

The contribution margin for Sam's Bookstore for the first quarter is:

Garrison 17e Rechecks 2020-09-09

Multiple Choice

• $243,600

• $280,000

• $666,400

• $808,600

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A partial listing of costs incurred during March at Febbo Corporation appears below:

Factory supplies	$ 9,000
Administrative wages and salaries	$ 85,000
Direct materials	$ 126,000
Sales staff salaries	$ 30,000
Factory depreciation	$ 33,000
Corporate headquarters building rent	$ 43,000
Indirect labor	$ 26,000
Marketing	$ 65,000
Direct labor	$ 99,000

The total of the period costs listed above for March is:

Multiple Choice

• $291,000

• $293,000

• $68,000

• $223,000

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Answer 1

Answer :-

1 - Option B) Inventory Cost = $1,99,980

2 - Option A) Contribution Margin = $2,43,600

3 - Option D) Period Cost = $223,000

.

Explanations :-

1- Inventory Cost

Inventory Cost = Units in Inventory × Product cost per Unit

Units in Inventory = Units manufctured - Units sold

= 29,650 - 24600

= 5,050 Units

Product cost per Unit = Total Production Cost / No.Units manufactured

Total Production cost = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead

= $222,375 + $145,285 + $243,130 + $563,350

Total Production cost = $11,74,140

No.Units manufactured = 29,650

Product cost per Unit = Total Production Cost / No.Units manufactured

= $11,74,140 / 29,650

= $39.60

Inventory Cost = Units in Inventory × Product cost per Unit

= 5,050 Units × $39.60

Inventory Cost = $1,99,980

.

2- Contribution Margin

Contribution Margin = Net Sales Revenue - Total Variable Cost

Sales Revenue = $ 910,000

Sales Price = $70

No. of Units sold = Sales Revenue / Sales Price

= $ 910,000 / $70

No. of Units sold = 13,000 Book

Variable Expenses = Cost of Goods Sold + Variable selling expenses +  Variable Administrative expenses

Cost of Goods Sold = $5,65,000

Variable selling expenses = $5 per Book = $5 × 13,000

= $65,000

Variable Administrative expenses = 4% of sales

= $ 910,000 × 4%

= $36,400

Total Variable Expenses = $5,65,000 + $65,000 + $36,400

= $6,66,400

Contribution Margin = Net Sales Revenue - Total Variable Cost

= $ 910,000 - $6,66,400

Contribution Margin = $2,43,600

.

3) Period Cost

Period cost are those that are not related to manufacuring of a particular product or Cost,As per the above question:-

Period Cost = Administrative wages and salaries + Sales staff salaries + Corporate headquarters building rent + Marketing

= $ 85,000 + $30,000 + $43,000 + $65,000

Period Cost = $2,23,000