Question

1. Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period:

sales	total company 341700	souther division 212300	northern division 129400
variable expense	118766	72182	46584
traceble fixed expenses	168400	70300	98100
common fixed expense	68340	42460	25880

The common fixed expenses have been allocated to the divisions on the basis of sales.

The Northern Division’s break-even sales is closest to:

2. Data for January for Bondi Corporation and its two major business segments, North and South, appear below:

Sales revenues, North $ 640,000
Variable expenses, North $ 371,300

Traceable fixed expenses, North $ 76,500

Sales revenues, South $ 493,900 Variable expenses, South $ 281,800

Traceable fixed expenses, South $ 63,900

In addition, common fixed expenses totaled $173,300 and were allocated as follows: $90,000 to the North business segment and $83,300 to the South business segment. A properly constructed segmented income statement in a contribution format would show that the segment margin of the North business segment is:

3. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

Selling price $ 140

Units in beginning inventory 0

Units produced 3,150

Units sold 2,760

Units in ending inventory 390

Variable costs per unit:

Direct materials $ 47

Direct labor $ 18

Variable manufacturing overhead $ 10

Variable selling and administrative expense $ 19

Fixed costs:

Fixed manufacturing overhead $ 107,100

Fixed selling and administrative expense $ 24,840

The total gross margin for the month under absorption costing is:

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

Selling price $ 116

Units in beginning inventory 0

Units produced 9,000

Units sold 8,600

Units in ending inventory 400

Variable costs per unit:

Direct materials $ 19

Direct labor $ 61

Variable manufacturing overhead $ 7

Variable selling and administrative expense $ 11

Fixed costs:

Fixed manufacturing overhead $ 135,000

Fixed selling and administrative expense $ 8,900

What is the net operating income for the month under absorption costing?

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

Selling price $ 99

Units in beginning inventory 0

Units produced 4,800

Units sold 4,030

Units in ending inventory 770

Variable costs per unit:

Direct materials $ 20

Direct labor $ 40

Variable manufacturing overhead $ 6

Variable selling and administrative expense $ 4

Fixed costs:

Fixed manufacturing overhead $ 54,900

Fixed selling and administrative expense $ 3,500

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

Answer 1

Solution 1:

Contribution margin for northern division = Sales - Variable cost = $129,400 - $46,584 = $82,816

Contribution margin ratio = $82,816 / $129,400 = 64%

Total fixed expense for northern division = $98,100 + $25,880 = $123,980

Breakeven sales of northern division = Fixed expenses / contribution margin ratio

= $123,980 / 64%

= $193,719

Solution 2:

Segmented income statement
Particulars	Total	North	South
Sales Revenue	$1,133,900.00	$640,000.00	$493,900.00
Variable Expenses	$653,100.00	$371,300.00	$281,800.00
Contribution margin	$480,800.00	$268,700.00	$212,100.00
Traceable fixed expenses	$140,400.00	$76,500.00	$63,900.00
Segment Income	$340,400.00	$192,200.00	$148,200.00
Common fixed expenses	$173,300.00
Net Income	$167,100.00

Segmant margin for north business segment is $192,200

Solution 3:

Computation of unit product cost
Particulars	Per unit
Direct materials	$47.00
Direct labor	$18.00
Variable manufacturing overhead	$10.00
Fixed manufacturing overhead ($107,100/3150)	$34.00
Unit Product Cost	$109.00

Computation of Gross Margin
Particulars	Per unit
Sales (2760*$140)	$386,400.00
Cost of goods sold (2760 * $109)	$300,840.00
Gross Profit	$85,560.00

Solution 4:

Computation of unit product cost
Particulars	Per unit
Direct materials	$19.00
Direct labor	$61.00
Variable manufacturing overhead	$7.00
Fixed manufacturing overhead ($135,000/9000)	$15.00
Unit Product Cost	$102.00

Computation of Net Operating income - Absorption Costing
Particulars	Per unit
Sales (8600*$116)	$997,600.00
Cost of goods sold (8600 * $102)	$877,200.00
Gross Profit	$120,400.00
Variable selling and administrative expenses (8600*$11)	$94,600.00
Fixed selling and administrative expenses	$8,900.00
Net Operating income	$16,900.00

Solution 5:

Selling price per unit = $99

Variable cost per unit = $20 + $40 + $6 + $4 = $70

Contriubtion margin per unit = $99 - $70 = $29

Nos of unit sold = 4030

Total contribution margin for the month = 4030 * $29 = $116,870