Question

15. Kevin company manufactures and sells one product. The following information pertains to the company's first year of operations:

Selling price per unit	$100
Variable costs per unit:
Manufacturing:
Direct materials	$8
Direct labor	$20
Variable manufacturing overhead	$11
Variable selling and administrative expense	$18
Fixed costs per year:
Fixed manufacturing overhead	$48,000
Selling and administrative expense	$72,200

Production	6,000 units
Sales	4,500 units

(Q.) What is net operating income under variable costing in the first year?

(A.) $ ?

16.

The following data are average times per order over the last month for Gamora Corp.

	days
Queue time	3
Inspection time	12
Move time	1
Wait time to start production	5
Process time	4

(Q.) What is Manufacturing Cycle Efficiency (MCE)? Use two decimal places in the answer (for example, if the answer is 44%, key in "0.44").

(A.) ?

Answer 1

Ans. 15	In variable costing method, the unit product cost is the sum of only variable
	manufacturing costs per unit
	Unit product cost under Variable Costing:
	Direct materials	$8.00
	Direct labor	$20.00
	Variable Overhead per unit	$11.00
	Total production cost per unit	$39.00
	KEVIN   COMPANY
	Variable Costing Income Statement
	PARTICULARS		Amount
	Sales   (6,000 * $100)		$450,000
	Less: Variable cost of goods sold:
	Opening inventory	$0
	Add: Variable cost of goods manufactured (4,500 * $39)	$234,000
	Variable cost of goods available for sale	$234,000
	Less: Ending inventory [(6,000 - 4,500) * $39]	-$58,500
	Variable cost of goods sold		$175,500
	Gross Contribution Margin		$274,500
	Less: Variable Selling and Administrative Expenses (4,500 * $18)		$81,000
	Contribution Margin		$193,500
	Less: Fixed expenses:
	Fixed manufacturing overhead	$48,000
	Fixed selling and administrative expenses	$72,200	$120,200
	Net operating income		$73,300
	*Variable cost of goods manufactured = Units produced * Variable unit product cost
	*Ending inventory = (Units produced - Units sold) * Unit product cost
Ans. 16	*Calculations for Throughput time :
	Particulars	Days
	Move time	1
	Process time	4
	Inspection time	12
	Queue time	3
	Total (Throughput Time)	20	days
	*Calculations for Manufacturing cycle efficiency (MCE) :
	Manufacturing cycle efficiency = Process time or value added time / Throughput time * 100
	4 / 20 * 100
	20% of 0.20