Question

In: Accounting

Krepps Corporation produces a single product. Last year, Krepps manufactured 32,210 units and sold 26,700 units....

Krepps Corporation produces a single product. Last year, Krepps manufactured 32,210 units and sold 26,700 units. Production costs for the year were as follows:

Direct materials $ 241,575
Direct labor $ 157,829
Variable manufacturing overhead $ 251,238
Fixed manufacturing overhead $ 418,730

Sales totaled $1,241,550 for the year, variable selling and administrative expenses totaled $138,840, and fixed selling and administrative expenses totaled $199,702. There was no beginning inventory. Assume that direct labor is a variable cost.

The contribution margin per unit was:

Garrison 16e Rechecks 2017-09-30

Multiple Choice

  • $22.80 per unit

  • $16.80 per unit

  • $21.10 per unit

  • $26.30 per unit

    • Question 2

    • Krepps Corporation produces a single product. Last year, Krepps manufactured 33,100 units and sold 27,800 units. Production costs for the year were as follows:

      Direct materials $ 248,250
      Direct labor $ 145,640
      Variable manufacturing overhead $ 274,730
      Fixed manufacturing overhead $ 595,800

      Sales totaled $1,320,500 for the year, variable selling and administrative expenses totaled $164,020, and fixed selling and administrative expenses totaled $205,220. 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

    • $229,960

    • $202,460

    • $272,460

    • $263,960

Solutions

Expert Solution

1)

Contribution margin = Selling price - Variable cost

Sales = 1,241,550

Variable cost

Direct material = 241,575

Direct labour = 157,829

Variable manufacturing overhead = 251,238

Total production cost = 650,642

Per unit cost = Total cost / Units produced

=650,642 / 32,210

= 20.20

Variable selling and administrative expense = 138,840

Per unit cost = Total expense / Units sold

= 138,840 / 26,700

= 5.20

Total cost per unit = 20.20 + 5.20 = $25.40

Sales per unit = 1,241,550 / 26,700 = 46.50

Contribution margin = 46.50 - 25.40

= $ 21.10

Therefore the correct option is 3rd.

2)

Under absorption costing all the variable expense is taken into consideration for calculating the ending inventory. Also on fixed manufacturing overhead expense is to be taken into consideration in the ending inventory.

Direct material = 248,250

Direct labour = 145,640

Variable manufacturing overhead = 274,730

Fixed manufacturing overhead = 595,800

Total = $1,264,420

Total units manufactured = 33,100

Cost per unit = 1,264,420 / 33,100

= $ 38.20

Ending inventory units = 33,100 - 27,800

= 5,300 units

Ending inventory

= 5,300*38.20

= $ 202,460

Therefore the correct option is 2nd.

If you find the answer helpful please upvote.

ekkarill92 answered 2 years ago
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