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    Class Activity Exercises Problem 1: Instructions

    Uploaded by

    Trine De Leon
    This document provides information and instructions for 5 problems involving cost accounting concepts like cost of goods manufactured, contribution margin, break-even point, and impact of changes in revenues and costs. Problem 1 asks to calculate direct materials used, manufacturing overhead, and cost of goods for 2018. Problem 2 asks to calculate contribution margin per machine hour and which product to make based on available hours. Problem 3 asks which product to emphasize based on unlimited demand. Problem 4 asks about break-even point and units needed to earn different income levels. Problem 5 asks similar questions using contribution margin approach.

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    Class Activity Exercises Problem 1: Instructions

    Uploaded by

    Trine De Leon
    61 views3 pages
    This document provides information and instructions for 5 problems involving cost accounting concepts like cost of goods manufactured, contribution margin, break-even point, and impact of changes in revenues and costs. Problem 1 asks to calculate direct materials used, manufacturing overhead, and cost of goods for 2018. Problem 2 asks to calculate contribution margin per machine hour and which product to make based on available hours. Problem 3 asks which product to emphasize based on unlimited demand. Problem 4 asks about break-even point and units needed to earn different income levels. Problem 5 asks similar questions using contribution margin approach.

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    Class Activity Exercises

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    This document provides information and instructions for 5 problems involving cost accounting concepts like cost of goods manufactured, contribution margin, break-even point, and impact of changes in revenues and costs. Problem 1 asks to calculate direct materials used, manufacturing overhead, and cost of goods for 2018. Problem 2 asks to calculate contribution margin per machine hour and which product to make based on available hours. Problem 3 asks which product to emphasize based on unlimited demand. Problem 4 asks about break-even point and units needed to earn different income levels. Problem 5 asks similar questions using contribution margin approach.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    61 views3 pages

    Class Activity Exercises Problem 1: Instructions

    Uploaded by

    Trine De Leon
    This document provides information and instructions for 5 problems involving cost accounting concepts like cost of goods manufactured, contribution margin, break-even point, and impact of changes in revenues and costs. Problem 1 asks to calculate direct materials used, manufacturing overhead, and cost of goods for 2018. Problem 2 asks to calculate contribution margin per machine hour and which product to make based on available hours. Problem 3 asks which product to emphasize based on unlimited demand. Problem 4 asks about break-even point and units needed to earn different income levels. Problem 5 asks similar questions using contribution margin approach.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    CLASS ACTIVITY EXERCISES

    PROBLEM 1
    The following costs and inventory data were taken from the accounts of Reser
    Company for 2018:
    January 1, 2018 December 31, 2018
    Inventories:
    Raw materials $ 8,000 $ 7,000
    Work in process 15,000 13,000
    Finished goods 16,000 10,000

    Costs incurred:
    Raw materials purchases $93,000
    Direct labor 42,000
    Factory rent 8,000
    Factory utilities 7,000
    Indirect materials 4,000
    Indirect labor 6,000
    Selling expenses 5,000
    Administrative expenses 12,000
    Instructions
    a. Prepare a schedule showing the amount of direct materials used in production
    during the year.
    b. Compute the amount of manufacturing overhead incurred during the year.
    c. Prepare a schedule of Cost of Goods Manufactured for Reser Company for the
    year ended December 31, 2018 in good form.
    d. Prepare the Cost of Goods Sold section of the Income Statement for Reser
    Company for the year ended December 31, 2018 in good form.

    Problem 2
    Genavine manufactures and sells two products. Relevant per unit data concerning
    each product are given below:
    Product
    X21 R45
    Selling price $55 $88
    Variable costs $30 $48
    Machine hours 2.5 4.2
    Instructions
    (a) Compute the contribution margin per unit of limited resource for each
    product.
    (b) Which product should be manufactured if 1,200 additional machine hours
    are available? Explain.
    PROBLEM 3
    Sam Company makes 2 products, footballs and baseballs. Additional information
    follows:
    Footballs Baseballs
    Units 4,000 2,500
    Sales $60,000 $25,000
    Variable costs 36,000 7,000
    Fixed costs 9,000 9,000
    Net income $15,000 $ 9,000
    Profit per unit $3.75 $3.60
    Instructions
    Sam has unlimited demand for both products. Therefore, which product should
    Sam tell his sales people to emphasize?
    Problem 4
    The income statement for Baxter Company for 2008 appears below.
    BAXTER COMPANY
    Income Statement
    For the Year Ended December 31, 2018
    —————————————————————————————————
    —————————
    Sales (40,000 units)...................................................................... $1,000,000
    Variable expenses......................................................................... 700,000
    Contribution margin...................................................................... 300,000
    Fixed expenses.............................................................................. 330,000
    Net income (loss).......................................................................... $ (30,000)

    Instructions
    Answer the following independent questions and show computations using the
    contribution margin technique to support your answers:
    1. What was the company's break-even point in sales dollars in 2018?
    2. How many additional units would the company have had to sell in 2019 in
    order to earn net income of $30,000?
    3. If the company is able to reduce variable costs by $2.50 per unit in 2019 and
    other costs and unit revenues remain unchanged, how many units will the company
    have to sell in order to earn a net income of $35,000?

    Problem 5
    Rush Company developed the following information for its product:
    Per Unit
    Sales price $90
    Variable cost 54
    Contribution margin $36

    Total fixed costs $1,080,000


    Instructions
    Answer the following independent questions and show computations using the
    contribution margin technique to support your answers.
    1. How many units must be sold to break even?
    2. What is the total sales that must be generated for the company to earn a
    profit
    of $60,000?
    3. If the company is presently selling 45,000 units, but plans to spend an
    additional $108,000 on an advertising program, how many additional units must
    the company sell to earn the same net income it is now making?
    4. Using the original data in the problem, compute a new break-even point in
    units if the unit sales price is increased 20%, unit variable cost is increased by
    10%, and total fixed costs are increased by $135,000.

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