Answer:
B) 1.64
Explanation:
Given that there is 95% service probability i.e. assured
So here the company applied the approach in normally that sets the probability for not stocking out the 95 percent
So it would have the approx 1.64 standard deviation with respect to the safety stock
Therefore the option c is correct
Which of the following food borne illness has a preventative vaccine
A. E.coli
B.norovirus
C. Hep. A
D. Shigella
Answer:
C. Hep. A
Explanation:
From the available options, Hep. A is preventable with a vaccine. The vaccine was created in 1995. It is administered to individuals in two seperate doses and usually done with a time span of 6 months between dose. Having both doses administered helps prevent the individuals from the Hep. A virus long term. Like most vaccines, this one has a 95% effectiveness for preventing the virus from affecting the individual's body.
Define ethics and law and show how they are different and similar.
Answer: The law sets minimum standards of behavior while ethics set maximum standards. Laws are created and enforced by governments based on society's ethics to mediate our relationships with each other and to protect their citizens.
Inflation is noted as having a correlation with positive economic growth. People can receive a better education and do which of the following with a small level of inflation?
Answer:
increase their income
Explanation:
The yield on a three-month T-bill is 3.29%, and the yield on a 10-year T-bond is 4.67%. the market risk premium is 6.17%. The Allen Company has a beta of 0.92. Using the Capital Asset Pricing Model (CAPM) approach, Allen’s cost of equity is
Answer:
10.35 %
Explanation:
Using the Capital Asset Pricing Model (CAPM) approach, Allen’s cost of equity is
Cost of Equity = 4.67% + 0.92 x 6.17%
= 10.35 %
bRamapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. Product Number of Units Direct Labor Hours Per Unit Machine Hours Per Unit Blinks 1,048 4 7 Dinks 2,236 5 6 All of the machine hours take place in the Fabrication department, which has an estimated overhead of $82,200. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $102,000. Ramapo Company uses a single plantwide overhead rate to apply all factory overhead costs based on direct labor hours. The factory overhead allocated per unit of Dinks is
Answer:
Ramapo Company
The factory overhead allocated per unit of Dinks is:
= $56.94.
Explanation:
a) Data and Calculations:
Product Number of Units Direct Labor Machine
Hours Per Unit Hours Per Unit
Blinks 1,048 4 7
Dinks 2,236 5 6
Fabrication Assembly
Estimated overhead $82,200 $102,000
Machine hours:
Blinks 7,336
Dinks 13,416
Total machines hours 20,752
Direct Labor hours:
Blinks 4,192
Dinks 11,180
Total machines hours 15,372
Total factory overhead Blinks Dinks
Fabrication department $29,058 $53,142
Assembly department 27,816 74,184
Total allocated overhead $56,874 $127,326
Units produced 1,048 2,236
Factory overhead per unit $54.27 $56.94 ($127,326/2,236)
TB MC Qu. 08-152 Minor Company installs a machine... Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. Determine the machines' first year depreciation under the double-declining-balance method.
Answer:
The correct answer is "$54000".
Explanation:
According to the question,
Annual depreciation rate will be:
= [tex]\frac{100 \ percent}{5}[/tex]
= [tex]20[/tex] (%)
hence,
The depreciation as per double decline will be:
= [tex]2\times Annual \ depreciation \ rate\times Beginning \ value[/tex]
By putting the values, we get
= [tex]2\times 20 \ percent\times 135000[/tex]
= [tex]54000[/tex] ($)
Andrews Corporation has income from operations of $240,000. In addition, it received interest income of $24,000 and received dividend income of $29,500 from another corporation. Finally, it paid $11,800 of interest income to its bondholders and paid $45,000 of dividends to its common stockholders. The firm's federal tax rate is 21%. What is the firm's federal income tax
Answer: $54,820.50
Explanation:
Federal income tax = Taxable income * tax rate
Taxable income = Income from operations + Interest income received + Dividend income received - Interest income paid
= 240,000 + 24,000 + (30% * 29,500) - 11,800
= $261,050
Federal income tax = 261,050 * 21%
= $54,820.50
Note: Only 30% of Dividends received are taxable
On January 1, 20X1 when the effective interest rate was 14%, a company issued bonds with a maturity value of $1,000,000. The stated rate of interest is 12%, the bonds pay interest semi-annually and sold for $893,640. The amount of bond discount amortized on July 1, 20X1 is approximately:__________.
Answer: $2,555
Explanation:
Bond discount amortization = Interest cost - Coupon payment
Coupon payment = Stated interest * Par value
= 12% * 1,000,000 * 6/12 months
= $60,000
Interest cost = Issue price * effective interest
= 893,640 * 14% * 6/12
= $62,554.80
Amortized amount:
= 62,554.80 - 60,000
= $2,554.80
= $2,555
Vaughn Manufacturing is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $24 and Vaughn would sell it for $51. The cost to assemble the product is estimated at $14 per unit and the company believes the market would support a price of $61 on the assembled unit. What decision should Vaughn make?
Answer:
Sell before assembly, The company will be better off by $4 Per Unit
Explanation:
Calculation to determine what decision should Vaughn make
PROFIT BEFORE ASSEMBLY
Profit = Sale price - Cost price
Profit= $51 - $24
Profit= $27 Per Unit
PROFIT AFTER ASSEMBLY
First step is calculate the Cost of Assembled Product
Cost of Assembled Product =$24 + $14
Cost of Assembled Product= $38 Per Unit
Now let determine the profit
Profit = Sale price - Cost price
Profit= $61 - $38
Profit = $23 Per Unit
Now let Determine what decision should Vaughn make
Hence, the Profit by selling assembled product is LOWER than selling the Unassembled product by :
$27 Per Unit - $23 Per Unit
= $4 Per Unit
Therefore the decision that Vaughn should make is: Sell before assembly, The company will be better off by $4 Per Unit
Perit Industries has $135,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $ 135,000 $ 0 Working capital investment required $ 0 $ 135,000 Annual cash inflows $ 25,000 $ 63,000 Salvage value of equipment in six years $ 9,800 $ 0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 17%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
Answer:
1. Net present value of Project A = -41,449.96
2. Net present value of Project B = $143,746.85
3. I would recommend that company accept Project B.
Explanation:
Note: This question is not complete as the requirement are omitted. The requirements are therefore provided to complete the question before answering it as follows:
Perit Industries has $135,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are:
Project A Project B
Cost of equipment required $ 135,000 $ 0
Working capital investment required $ 0 $ 135,000
Annual cash inflows $ 25,000 $ 63,000
Salvage value of equipment in six years $ 9,800 $ 0
Life of the project 6 years 6 years
The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 17%.
Required:
1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
3. Which investment alternative (if either) would you recommend that the company accept?
The explanation of the answers is now provided as follows:
1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
Cost of equipment required = $135,000
Using the formula for calculating the present value of an ordinary annuity, the present value (PV) of the annual cash inflows can be calculated as follows:
PV of annual cash inflow = Annual cash inflow * (1 - (1 / (1 + discount rate))^Project life) / discount rate) = $25,000 * ((1 - (1 / (1 + 0.17))^6) / 0.17) = $89,729.62
The present value (PV) of the salvage value can be calculated as follows:
PV of salvage value = Salvage value / (1 + + discount rate)^Project life = $9,800 / (1 + 0.17)^6 = $3,820.42
Net present value of Project A = PV of annual cash inflow + PV of salvage value - Cost of equipment required = $89,729.62 + $3,820.42 - $135,000 = -41,449.96
2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.)
Working capital investment required = $135,000
Using the formula for calculating the present value of an ordinary annuity, the present value (PV) of the annual cash inflows can be calculated as follows:
PV of annual cash inflow = Annual cash inflow * (1 - (1 / (1 + discount rate))^Project life) / discount rate) = $63,000 * ((1 - (1 / (1 + 0.17))^6) / 0.17) = $226,118.64
The present value (PV) of the Working capital investment required can be calculated as follows:
PV of Working capital investment required = Working capital investment required / (1 + + discount rate)^Project life = $135,000 / (1 + 0.17)^6 = $52,628.21
Net present value of Project B = PV of annual cash inflow + PV of Working capital investment required - Working capital investment required = = $226,118.64 + $52,628.21 - $135,000 = $143,746.85
3. Which investment alternative (if either) would you recommend that the company accept?
From parts 1 and 2 above, we have:
Net present value of Project A = -41,449.96
Net present value of Project B = $143,746.85
Since the Net present value of Project A is negative, it should be rejected.
Since the Net present value of Project B is positive, it should be accepted.
Therefore, I would recommend that company accept Project B.
There is a proverb "anything worth doing is worth doing well." Do you think an economist would agree with this proverb? A. No, because doing something well has no next best alternatives with which to compare. B. Yes, because the marginal of extra effort is typically as effort increases. C. Yes, because doing something to the best of your ability is optimizing behavior. D. No, because the marginal cost of extra effort may be greater than the marginal benefit. E. , because the total net benefit of extra effort is by definition.
Answer:
D. No, because the marginal cost of extra effort may be greater than the marginal benefit.
Explanation:
Marginal cost can be defined as the additional or extra cost that is being incurred by a company as a result of the production of an additional unit of a product or service.
Generally, marginal cost can be calculated by dividing the change in production costs by the change in level of output or quantity.
Utility can be defined as any satisfaction or benefits a customer derives from the use of a product or service.
This ultimately implies that, any satisfaction or benefits a customer derives from the use of a product or service is generally referred to as a utility.
Furthermore, the marginal utility of goods and services is the additional satisfaction that a consumer derives from consuming or buying an additional unit of a good or service.
Hence, an economist wouldn't agree with the proverb (anything worth doing is worth doing well.) because the marginal cost of extra effort may be greater than the marginal benefit.
This ultimately implies that, the satisfaction that an individual such as an entrepreneur would derive from putting in more efforts into a business would be lesser than the cost incurred. As a result, he would not benefit anything or generate profit from his efforts.
n investment project has annual cash inflows of $4,000, $4,900, $6,100, and $5,300, for the next four years, respectively. The discount rate is 13 percent. a. What is the discounted payback period for these cash flows if the initial cost is $6,700
Answer:
the answer is 11,000
Explanation:
Dynamic Futon forecasts the following purchases from suppliers:
Jan. Feb. Mar. Apr. May Jun.
Value of goods ($ millions) 37 33 30 27 25 25
a. Sixty percent of goods are supplied cash-on-delivery. The remainder are paid with an average delay of 1 month. If Dynamic Futon starts the year with payables of $27 million, what is the forecasted level of payables for each month?
b. Suppose that, from the start of the year, the company stretches payables by paying 50% after 1 month and 20% after 2 months. (The remainder continue to be paid cash-on-delivery.) Recalculate payables for each month assuming that there are no cash penalties for late payment. Assume that Dynamic Futon didn't have any payable balance at the start of the year.
Answer:
Please find the complete solution in the attached file.
Explanation:
Freddy offers to supply water bottles to Jerry’s Gym at a cost of $40a case. The signed contract says that Jerry’s Gym will buy one case of water a month for 12 months. Three months into the contract, Freddy calls Jerry And tells Jerry that the price has gone up to $70a month because Freddy’s product is in such high demand. Jerry refuses to pay. Jerry finds a new supplier, Wally, who will provide one case of water for 9 months at a cost of $50a case. Jerry sues Freddy for breach of contract. What type of damages is Jerry’s Gym entitled to and how much money does Freddy have to pay Jerry’s Gym
Answer:
-jerry is entitled to monetary damages compensations due to a contract breach.
-Freddy has to pay Jerry $90
Explanation:
the damage that the gym is entitled to would be that of a contract breach. Freddy wanted to earn more money so he breached the contract. Now given that Jerry had to go with another supplier of water at a greater cost of 50 dollars for 9 months, just to satisfy his requirements. Freddy has to pay him monetary damages for this breach in contract. he has to pay the difference that exists between the price in the contract they had and what jerry now has to pay due to the breach. The difference is 10 dollars, which is to be paid every month for 9 months
= (50 - 40)*9
= 10 * 9 = $90
During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $4 per unit, Direct labor, $2 per unit, Variable overhead, $3 per unit, and Fixed overhead, $160,000. The company produced 20,000 units, and sold 15,000 units, leaving 5,000 units in inventory at year-end. What is the value of ending inventory under absorption costing
Answer: $85,000
Explanation:
Find out the cost of per unit of inventory under absorption costing:
= Direct materials + Direct labor + Variable overhead + Fixed overhead per unit
= 4 + 2 + 3 + 160,000 / 20,000 units
= 4 + 2 + 3 + 8
= $17 per unit
If 5,000 units are left, the value of those units are:
= 5,000 * 17
= $85,000
g If there is a breach of contract, the objective of the remedy in the breach contract case will be to: Question 21 options: place the parties back into the position that they would have been in had there been no contract punish the party that committed breach of contract provide both parties relief place the non breaching party into the position that they would have been had the contract not been breached
Answer: place the non breaching party into the position that they would have been had the contract not been breached
Explanation:
A contract is meant to satisfy the reasons for which the contract was gone into for both parties. If one party breaches the contract, the party that did not breach should still have their reason for entering the contract satisfied because they did what they were supposed to do according to the contract.
This is why the purpose of a breach of contract remedy is to ensure that this non-breaching party does indeed get what was supposed to come to them by the contract.
According to the authors, price controls on water, designed to ensure that lower income people can afford water, have resulted in
Answer: a. a reduced supply of usable water
Explanation:
I am unsure as to the text being referred to but this should be the correct answer.
The market allocates resources efficiently based on price. This means that it sets the price such that people who can afford the goods are able to buy them. This ensures that not everybody gets the good and the good can be sustainably used.
If the government imposes price controls on a good as they did here. The market would be unable to efficiently allocate the water so more people than before would be able to access it. This would lead to the supply being used up so there will be a reduced supply of the good which in this case is water.
What is the present value of an annuity that pays $58 per year for 13 years and an additional $1,000 with the final payment
Answer:
$882.03
Explanation:
Interest rate used is 7.23%
Present value is the sum of discounted cash flows
Present value can be calculated using a financial calculator
Cash flow in year 1 to 12 = 58
cash flow in year 13 = 1058
I = 7.23
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
On June 1, 2019, Irene places in service a new automobile that cost $21,000. The car is used 70% for business and 30% for personal use. (Assume this percentage is maintained for the life of the car.) She does not take additional first-year depreciation. Determine the cost recovery deduction for 2020.
Answer:
the cost recovery deduction for 2020 is $4,704
Explanation:
The calculation of the cost recovery deduction is given below:
According to the MACRS depreciation table, the second year depreciation rate should be 32%
So, the cost recovery deduction should be
= 32% of 70% of $21,000
= $4,704
Hence, the cost recovery deduction for 2020 is $4,704
Therefore the same should be considered
Question 4
Which of the following is an example of an asset?
A. Repairs and Maintenance
B. Accounts Receivable
C. Accounts Payable
D. GST Collected
Answer:
Accounts Receivable
Explanation:
A is an expense, C and D are liabilities
The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system. April 30 May 31 Inventories Raw materials $ 33,000 $ 32,000 Work in process 9,400 20,800 Finished goods 50,000 34,600 Activities and information for May Raw materials purchases (paid with cash) 171,000 Factory payroll (paid with cash) 250,000 Factory overhead Indirect materials 12,000 Indirect labor 57,500 Other overhead costs 110,000 Sales (received in cash) 1,700,000 Predetermined overhead rate based on direct labor cost 55 % Exercise 19-7 Cost flows in a job order costing system LO P1, P2, P3, P4 Compute the following amounts for the month of May using T-accounts. Cost of direct materials used. Cost of direct labor used. Cost of goods manufactured. Cost of goods sold\.\* Gross profit. Overapplied or underapplied overhead. *Do not consider any underapplied or overapplied overhead.
Answer:
Lock-Tite Company
Cost of direct materials used = $160,000
Cost of direct labor used = $192,500 ($250,000 - $57,500)
Cost of goods manufactured = $446,975
Cost of goods sold = $462,375
* Gross profit = $1,237,625
Overapplied or underapplied overhead = $73,625
*Do not consider any underapplied or overapplied overhead.
Explanation:
a) Data and Calculations:
Inventories April 30 May 31
Raw materials $ 33,000 $ 32,000
Work in process 9,400 20,800
Finished goods 50,000 34,600
Activities and information for May:
Raw materials purchases (paid with cash) 171,000
Factory payroll (paid with cash) 250,000
Factory overhead:
Indirect materials 12,000
Indirect labor 57,500
Other overhead costs 110,000
Sales (received in cash) 1,700,000
Predetermined overhead rate based on direct labor cost 55 %
T-accounts:
Raw materials
Date Account Titles Debit Credit
April 30 Inventory balance $ 33,000
May Cash 171,000
May Factory overhead $12,000
May Work in process 160,000
May 31 Inventory balance $ 32,000
Work in process
Date Account Titles Debit Credit
April 30 Inventory balance $ 9,400
May Raw materials 160,000
Factory payroll 192,500
Factory overhead 105,875
Finished goods $446,975
May 31 Inventory balance $ 20,800
Finished goods
Date Account Titles Debit Credit
April 30 Inventory balance $ 50,000
May Work in process 446,975
May Cost of goods sold $462,375
May 31 Inventory balance $ 34,600
Factory overhead
Date Account Titles Debit Credit
May Raw materials 12,000
Payroll 57,500
Other expenses 110,000
May Work in process $105,875
May Underapplied overhead 73,625
Sales revenue = $1,700,000
Cost of goods sold (462,375)
Gross profit $1,237,625
Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: M N OUnit sales price$12 $10 $11Unit variable costs 9 8 9Total fixed costs are $585,000. The selling price per composite unit for the current sales mix (rounded to the nearest cent) is:
Answer:
Selling price per composite unit= $11.3
Explanation:
Giving the following information:
Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2.
Unit price and cost data are: M N OUnit sales price$12 $10 $11
First, we need to calculate the sales proportion for each product:
M= 3/6= 0.5
N= 1/6= 0.17
O= 2/6= 0.33
Now, the selling price per composite unit:
Selling price per composite unit= (0.5*12) + (0.17*10) + (0.33*11)
Selling price per composite unit= $11.3
A sporting equipment store expects to purchase $8,200 of ski boots in October. The store had $2,800 of ski boots in merchandise inventory at the beginning of October, and expects to have $1,800 of ski boots in merchandise inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October?
a) $7,000.
b) $9,000.
c) $8,000.
d) $12,000.
e) $11,000.
Answer:
$9,200
Explanation:
Calculation to determine the budgeted cost of goods sold for October
Using this formula
Budgeted cost of goods sold for October =Cost of ski boots + Inventory at the beginning - Inventory at the end
Let plug in the formula
Budgeted cost of goods sold for October = $2800 + $8200 - $1800
Budgeted cost of goods sold for October= $9200
Therefore the budgeted cost of goods sold for October is $9,200
Tim is a single father with 1 child. He can work as a bagger at the local grocery store for $6 per hour up to 1,200 hours per year. He is eligible for welfare, and if he does not earn any income, he will receive $15,000 a year. If Tim works, the government policy is to deduct 60 cents from his welfare stipend for every $1 that he earns in income. This government policy provides a monetary incentive to work, because
Answer:
The more he works, the higher Tim's salary level. A further explanation is provided below.
Explanation:
Throughout this instance, we must look at Tim's degree of labor as well as his revenue.
Tim would then earn $15,000 if he doesn’t really perform, then he can make,
= [tex]6\times 1200[/tex]
= [tex]7200 \ per \ year[/tex]
60 per cent of its revenue as well from his assistance fund would be deducted by the administration.
= [tex]15000-0.60\times 7200[/tex]
= [tex]10680[/tex]
Now,
His total income will be:
= [tex]10680+7200[/tex]
= [tex]17880[/tex]
Thus the above is the correct answer.
Pencils sell for 10 cents and pens sell for 50 cents. Suppose Jae, whose preferences satisfy all of the basic assumptions, is currently spending all his income on both goods. The marginal rate of substitution for pens to pencils is 5. In order to achieve optimum, what should he do
Answer:
Jae should do nothing and continue purchasing the same amount of pens and pencils.
Explanation:
The current rate of substitution that maximizes Jae's utility is Px / Py = 0.50 / 0.10 = 5. That means that Jae will purchase 5 pencils for every pen that he buys, and that is exactly what he is doing right now.
Rita is a successful entrepreneur who owns a small coffee shop and serves her customers regular homemade coffee. She recently experimented with a new flavor and distributed free samples to her regular customers. She then sought their feedback on the new flavor. This is an example of ________.
a. brand positioning.
b. test marketing.
c. brand retailing.
d. commercialization.
Answer:
b. test marketing.
Explanation:
Test marketing is a marketing method that focused for exploring the response of the consumer with respect to the product by making it available on the limited basis prior to release in a bulk. Also the consumer may be or not be aware that is the part of the test group
Since in the given situation, rita experimented the new flavor and distributed it as a free sample
So, it is a test marketing situation
A firm sells two products, Regular and Ultra. For every unit of Regular sold, two units of Ultra are sold. The firm's total fixed costs are $1,782,000. Selling prices and cost information for both products follow. The contribution margin per composite unit is:
Answer:
Total Contribution = $52
Explanation:
Given:
Fixed cost = $1,782,000
Product Sales price VC per unit
Regular $20 $8
Ultra $24 $4
Computation:
Contribution = Sales - VC
Contribution on regular product = 20 - 8 = $12
Contribution on ultra product = 24 - 4 = $20
Total Contribution = (1 x 12) + (2 x 20)
Total Contribution = 12 + 40
Total Contribution = $52
Broker Pat received an offer for a listing along with a $5,000 check from the buyer as an earnest money deposit. When the owner accepts the offer, Pat should handle the check in any of the following ways, except to:____.
a. deposit the check into Pat's brokerage account.
b. give the check to the owner of the property.
c. give the check to the escrow agent.
d. deposit the check in Pat's trust fund account.
Answer:
b. Give the check to the owner of the property.
Explanation:
Pat is a broker who has received an offer for a listing along with check. He can give the check to an escrow agent or deposit the check into pat's brokerage account. he cannot give check directly to the owner of the property.
Two years ago, Global Airlines sold a $250 million bond issue to finance the purchase of new jet airliners. These bonds were issued in at par value with an original maturity of 12 years and a coupon rate of 12%. Determine the value today of one of these bonds to an investor who requires a 14% rate of return on these securities. Is it a discount or premium bond and why
Answer:
$897
Explanation:
Calculation to determine the value today
Using Financial calculator to determine the Present value (PV)
N = (12- 2) = 10 years
I = 14%
PMT =12%*1,000=120
FV = $1000
PV=?
Hence;
PV = $896.68
PV=$897 (Approximately)
Therefore the value today is $897
Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $910. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 310 Units sold 280 Units in ending inventory 30 Variable costs per unit: Direct materials $ 130 Direct labor $ 350 Variable manufacturing overhead 50 Variable selling and administrative 40 Fixed costs: Fixed manufacturing overhead $ 62,000 Fixed selling and administrative $ 26,000 The absorption costing income statement prepared by the company’s accountant for last year appears below: Sales $ 254,800 Cost of goods sold 204,400 Gross margin 50,400 Selling and administrative expense 37,200 Net operating income 13,200Required:1. Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.Total fixed manufacturing overhead in ending inventory: ?2. Prepare an income statement for the year using variable costing.
Answer:
1. 6,000
2. 7,200
Explanation:
1. Calculation to determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period.
Using this formula
Ending inventory=Fixed manufacturing overhead/Units produced*Ending units
Let plug in the formula
Ending inventory=62,000/310*30
Ending inventory=6,000
Therefore how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period is 6,000
2. Preparation of an income statement for the year using variable costing.
IDA SIDHA KARYA Company Variable Costing Income Statement
Units produced cost (130+350+50=530)
Sales $254,800
(280*910)
VARIABLE EXPENSES:
Variable cost of goods sold $148,400
(280*530)
Variable selling and administrative expense $11,200
(280*40)
Contribution margin $95,200
($254,800-$148,400-$11,200)
FIXED EXPENSES:
Fixed manufacturing overhead $62,000
Fixed selling and administrative expense $26,000
Net operating income $7,200
($95,200-$62,000-$26,000)
Therefore the income statement for the year using variable costing is $7,200
