Question

A partial listing of costs incurred at Archut Corporation during September appears below:

Direct materials	$ 113,000
Utilities, factory	$ 5,000
Administrative salaries	$ 81,000
Indirect labor	$ 25,000
Sales commissions	$ 48,000
Depreciation of production equipment	$ 20,000
Depreciation of administrative equipment	$ 30,000
Direct labor	$ 129,000
Advertising	$ 135,000

The total of the manufacturing overhead costs listed above for September is:

Multiple Choice

• $30,000

• $50,000

• $292,000

• $586,000

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Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $19,950 and variable expenses of $5,985. Product Y45E had sales of $26,190 and variable expenses of $10,476. The fixed expenses of the entire company were $17,000. If the sales mix were to shift toward Product C90B with total dollar sales remaining constant, the overall break-even point for the entire company:

Multiple Choice

• would increase.

• would decrease.

• could increase or decrease.

• would not change.

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Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$102
Units in beginning inventory	0
Units produced	3,800
Units sold	3,230
Units in ending inventory	570

Variable costs per unit:
Direct materials	$ 18
Direct labor	$ 38
Variable manufacturing overhead	$ 7
Variable selling and administrative expense	$ 5
Fixed costs:
Fixed manufacturing overhead	$64,200
Fixed selling and administrative expense	$ 2,500

The total contribution margin for the month under variable costing is:

Multiple Choice

• $43,120

• $45,620

• $109,820

• $125,970

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WV Construction has two divisions: Remodeling and New Home Construction. Each division has an on-site supervisor who is paid a salary of $86,000 annually and one salaried estimator who is paid $48,000 annually. The corporate office has two office administrative assistants who are paid salaries of $52,000 and $38,000 annually. The president's salary is $156,000. How much of these salaries are common fixed expenses?

Multiple Choice

• $246,000

• $156,000

• $90,000

• $318,000

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Younie Corporation has two divisions: the South Division and the West Division. The corporation's net operating income is $89,000. The South Division's divisional segment margin is $39,500 and the West Division's divisional segment margin is $171,900. What is the amount of the common fixed expense not traceable to the individual divisions?

Multiple Choice

• $122,400

• $128,500

• $260,900

• $211,400

Answer 1

Solution 1 -

Manufacturing overhead = Utilities, factory + Indirect labor + Depreciation of production equipment = $5,000 + $25,000 + $20,000 = $50,000

Answer: b. 50,000

Solution 2 -

Since Product C90B has a higher contribution margin ratio, a shift in sales to that product would decrease the break-even point of the entire company.

Answer: b. would decrease

Solution 3 -

Contribution Margin = Total Sales - Total Variable Costs

Total Variable Cost per Unit = Direct materials + Direct labor + Variable manufacturing overhead + Variable selling and administrative expense = $18 + $38 + $7 + $5 = $68

Sales = Unit Sold * Sale Price = 3,230 * $102 = $329,460

Variable Cost = Units Sold * Total Variable Cost per unit = 3,230 * $68 = $219,640

Contribution Margin = $329,460 - $219,640 = $109,820

Answer: c. $109,820

Solution 4 -

Common Fixed Expenses = Salary of office administrative assistants + president's salary = $52,000 + $38,000 + $156,000 = $246,000

Answer: a. $246,000

Solution 5 -

Total Divisional Segment Margin = South Division's divisional segment margin + West Division's divisional segment margin = $39,500 + $171,900 = $211,400

Common Fixed Expenses = Total Divisional Segment Margin - corporation's net operating income = $211,400 - $89,000 = $122,400

Answer: a. $122,400