Question

The following data pertains to activity and costs for two months at PQ Company:

	May	June
Activity level in units	9,000	10,000
Variable costs	36,000	?
Fixed costs	20,000	?
Mixed costs	14,000	?
Total costs	70,000	78,000

Assuming that these activity levels are within the relevant range, the mixed cost for June was:

		$18,000
		$10,000
		$15,500
		$14,000

4 points   

QUESTION 16

Production costs for The Widget Factory are listed below:

july	15,000	$12,075
august	13,500	$10,800
sept.	11,500	$9,580
oct.	15,500	$12,080
nov.	14,800	$11,692
dec	12,100	$9,922

Management believes that production costs depend on the number of machine hours. Using the high-low method to estimate the variable and fixed components of cost, the cost formula would be:

		Y=$939 + $0.74X
		Y=$2,160 + $0.80X
		Y=$2,392.50 + $0.625X
		Y=$1,415 + $0.71X

4 points   

QUESTION 17

A partial listing of costs incurred at Gollum Corporation during January appears below:

Direct materials: $68,000

Factory foremen salaries $125,000

Lubricants for factory maintenance $2,000

Direct Labor $143,000

Janitorial COsts for factory $33,000

Insurance on factory building $27,000

Repair costs for factory equipment $19,000

What is the total amount of manufacturing overhead costs for the month of January?

		$211,000
		$417,000
		$206,000
		$338,000

4 points   

QUESTION 18

A partial listing of  costs incurred at Blackburn Corporation during January appears below:

direct materials $198,000

depreciation of administrative equipment $25,000

rental expense for factory equipment $81,000

direct labor $213,000

indirect materials $21,000

sales saleries $108,000

electrical costs of the factory $12,000

warehouse costs for storing finished goods $9,000
What is the total amount of product costs for the month of January?

		$123,000
		$114,000
		$525,000
		$148,000

4 points   

QUESTION 19

Frost Corporation reported the following results for March:

sales: $762,000

cost of all goods sold- all variable $401,000

total variable selling expense $122,000

total fixed selling expense $78,000

total variable administrative expense $28,000

total fixed administrative expense $39,000
The gross margin for March is:

		$612,000
		$211,000
		$361,000
		$94,000

4 points   

QUESTION 20

Gorman Corporation reported the following results for March:

Sales $654,000

Cost of goods sold- all variables $321,000

Total variable selling expense $89,000

Total fixed selling expense $56,000

total variable administrative expense $23,000

total fixed administrative expense $15,000

The contribution margin for March is:

		$244,000
		$333,000
		$150,000
		$221,000

Answer 1

Answer to Question 1.

Variable Cost = $36,000
Activity level in Units = 9,000 Units
Variable Cost per Unit = 36,000 / 9,000 = $4

Activity Level in Units = 10,000:
Variable Cost = 10,000 * $4 = $40,000
Fixed Cost = $20,000
Total Cost = $78,000
Total Cost = Variable Cost + Fixed Cost + Mixed Cost
$78,000 = $40,000 + $20,000 + Mixed Cost
Mixed Cost = $18,000

Answer to Question 16.

As per High-Low Cost Method:
Variable Cost per Unit = (y2- y1) / (x2 – x1)
Total Cost at the Highest Level of Activity (y2) = $12,080
Total Cost at the Lowest Level of Activity (y1) = $9,580
Units at the Highest Level of Activity (x2) = 15,500 Units
Units at the Lowest Level of Activity (x1) = 11,500 Units

Variable Cost per Unit = (12,080 – 9,580) / (15,500 – 11,500)
Variable Cost per Unit = 2,500 / 4,000
Variable Cost per Unit = $0.625

Total Cost at the 11,500 Units = $9,580
$9,580 = ($0.625 * 11,500) + Fixed Cost
Fixed Cost = $9,580 - $7,187.50
Fixed Cost = $2,392.50

Y = $2,392.50 + $0.625 X

Answer to Question 17.

Manufacturing Overhead = Factory Foremen Salaries + Lubricants for Factory Maintenance + Janitorial Costs for Factory + Insurance on Factory Building + Repair Costs for Factory Equipment
Manufacturing Overhead = $125,000 + $2,000 + $33,000 + $27,000 + $19,000
Manufacturing Overhead = $206,000

Answer to Question 18.

Product Cost = Direct Materials + Direct Labor + Manufacturing Overhead
Manufacturing Overhead = Indirect Materials + Rental Expense for Factory Equipment + Electrical Costs of the Factory
Manufacturing Overhead = $21,000 + $81,000 + $12,000
Manufacturing Overhead = $114,000

Product Cost = $198,000 + $213,000 + $114,000
Product Cost = $525,000