Question

Check only the correction statements below. Check the incorrect statements will result in losing a half of the points for a correct statement. ABC Inc. plans to expand the production by replacing the existing capital equipment. The following information is available.

	Last period	This period
Production (units)	3,000	3,500
materials (pounds)	3,000	3,000
cost per unit	$0.80	$0.65
labor (hrs)	400	425
labor rate/hr	$16.00	$16.00
capital equipment and its maintenance	$12,000	$15,000
capital equipment fully depreciated, in periods	4	4
energy, units	6,000	5,000
energy rate	$0.15	$0.15
other overhead (is part of fixed costs)	$4,000	$4,000
assume that the prices that market can accept for both periods. The market demand for the company's products is what the company can sell.	$8.00	$8.50

	a.	% change in contribution, this period compared with last period is (0.21)
	b.	unit cost of materials, this period, is not $.056.
	c.	% cost change per unit output between the two periods is 0.11.
	d.	Total annual cost, last period, was $5.57.
	e.	breakeven point for last period was 1,340.
	f.	total annual variable cost, this period, is $2.71.
	g.	unit cost of energy, last period, was $900.
	h.	unit cost of labor, last period, was $1.94.
	i.	unit variable cost, this period, is $2.71.
	j.	unit cost of energy, this period, is not $750.
	k.	% cost change in labor cost per unit output between the two periods is not 0.09.
	l.	% cost change in energy cost per unit output between the two periods is (0.29).
	m.	unit variable cost, last period, was $9,700.
	n.	unit cost of materials, last period, was $0.56.
	o.	breakeven point for this period is not $1,340.
	p.	% cost change in material cost per unit output between the two periods is not 0.30.
	q.	unit cost of labor, this period, is $1.94.
	r.	total annual cost, this period, is $4.93.
	s.	total annual variable cost, last period, was not $3.23.
	t.	% cost change in capital cost per unit output between the two periods is 0.07.

Answer 1

For answering the given question either as correct or incorrect, the Comparative Income statement is prepared. And also the workings for each of the sub questions from a) to t) is also attached along with the solution. Kindly refer the solutions below:

Correct Statements - b), i), j), k), l), p), q), s)