Question

In: Accounting

The information that follows is for Becky’s Baskets for the year ended December 31, 2017 and...

The information that follows is for Becky’s Baskets for the year ended December 31, 2017 and covers questions 20-27.

Sales 2,000 baskets at $50 per basket = $100,000

Costs: (2,000 baskets produced and sold)

Variable Costs Total Cost

Direct materials 16,000

Direct labor 14,000

Manufacturing overhead 16,000

Selling and Administrative Costs 10,000

Fixed Costs

Manufacturing overhead 30,000

Selling and Administrative Costs 14,000

Assume 2,000 baskets are produced and sold this year unless the question specifies otherwise. The relevant range is from zero to 5,000 units.

20. If 2,000 baskets are produced, what is the product cost per basket?

$45
$38
$53
$12

21. What is the variable cost per basket (including period costs) at 4,000 baskets?

$45
$27
$28
$12

22. What is the fixed product cost per basket at 3,000 baskets?

$45
$30
$22
$10

23. If 3,000 baskets are produced, what is the product cost per basket?

$43
$38
$52
$33

24. What is the incremental cost (increase in cost) by increasing production from 2,000 baskets to 2,001 baskets?

$23
$28
$15
$56,000

25. If the company sells produces and sells 3,000 baskets how much operating income will they make?

$150,000
$104,000
$50,000
$22,000
None of the above

26. If the company produces and sells 2,000 baskets how much will their cost of goods sold be?

$150,000
$104,000
$50,000
$22,000
None of the above

27. What is the contribution margin per unit at 2,000 units of production and sales?

$20
$22
$30
$32
$42

Expert Solution

Part 20

Option B

B. $38

product cost per basket = total production cost / number of units

total production cost = direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead

product cost per basket = (16000+14000+16000+30000)/2000 = $38

Part 21

Option C

c. $28

Variable cost per basket is remain constant at every level

therefore,

Variable cost per basket =total variable cost / number of units = (16000+14000+16000+10000)/2000 = $28

total variable cost = direct materials + direct labor + variable manufacturing overhead + variable Selling and Administrative Costs.

Part 22

Option D

D. $10

Fixed product cost per basket = fixed manufacturing overhead / number of units = 30000/3000 = $10

Part 23

Option D

D. $33

Product cost per basket = variable product cost per basket + fixed cost per basket = ((16000+14000+16000)/2000)+(30000/3000) = $33

Part 24

Option A

A. $23

incremental cost = variable product cost per basket = $23

part 25

option D

D. $22000

operating income = sales – variable expenses – fixed expenses = (3000*50)-(3000*28)-(30000+14000) = 22000

part 26

option E

E. none of the above

cost of goods sold = variable production expenses + fixed production expense = (2000*23)+(30000) = $76000

part 27

option B

B. $22

contribution margin = price per unit – vairbale expense per unit = 50-28 = $22

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