Hadlock Company, which has only one product, has provided the following data concerning its most recent month of operations:
31. What is the total period cost for the month under the variable costing approach?
32. What is the net operating income for the month under variable costing?
DeAnne Company produces a single product. The company’s variable costing income statement for August appears below:
The company produced 35,000 units in August and the beginning inventory consisted of 8,000 units. Variable production costs per unit and total fixed costs have remained constant over the past several months.
33. The value of the company’s inventory on August 31 under the absorption costing method is:
34. Under absorption costing, for the month ended August 31, the company would report a:
A. $20,000 profit
B. $5,000 loss
C. $35,000 profit
D. $5,000 profit
35. Dull Corporation has been producing and selling electric razors for the past ten years. Shown below are the actual net operating incomes for the last three years of operations at Dull:
Dull Corporation’s cost structure and selling price has not changed during its ten years of operations. Based on the information presented above, which of the following statements is true?
A. Dull Corporation operated above the breakeven point in each of the three years presented.
B. For the three years presented in total, Dull Corporation sold more units than it produced.
C. In Year 10, Dull Corporation produced fewer units than it sold.
D. In Year 9, Dull Corporation produced more units than it sold.
36. Roberts Company produces a single product. This year, the company’s net operating income under absorption costing was $2,000 lower than under variable costing. The company sold 8,000 units during the year, and its variable costs were $8 per unit, of which $2 was variable selling and administrative expense. If production cost was $10 per unit under absorption costing, then how many units did the company produce during the year? (The company produced the same number of units last year.)
A. 7,500 units
B. 7,000 units
C. 9,000 units
D. 8,500 units
37. Craft Company produces a single product. Last year, the company had a net operating income of $80,000 using absorption costing and $74,500 using variable costing. The fixed manufacturing overhead cost was $5 per unit. There were no beginning inventories. If 21,500 units were produced last year, then sales last year were:
A. 16,000 units
B. 20,400 units
C. 22,600 units
D. 27,000 units
38. Stephen Company produces a single product. Last year, the company had 20,000 units in its ending inventory. During the year, Stephen’s variable production costs were $12 per unit. The fixed manufacturing overhead cost was $8 per unit in the beginning inventory. The company’s net operating income for the year was $9,600 higher under variable costing than it was under absorption costing. The company uses a last-in-first-out (LIFO) inventory flow assumption. Given these facts, the number of units of product in the beginning inventory last year must have been:
Eagle Corporation manufactures a picnic table. Shown below is Eagle’s cost structure:
In its first year of operations, Eagle produced and sold 10,000 tables. The tables sold for $120 each.
39. How would Eagle’s variable costing net operating income have been affected in its first year if only 9,000 tables were sold instead of 10,000?
A. net operating income would have been $37,100 lower
B. net operating income would have been $45,800 lower
C. net operating income would have been $56,000 lower
D. net operating income would have been $62,000 lower
40. How would Eagle’s absorption costing net operating income have been affected in its first year if 12,000 tables were produced instead of 10,000 and Eagle still sold 10,000 tables?
A. net operating income would not have been affected
B. net operating income would have been $27,000 higher
C. net operating income would have been $31,500 higher
D. net operating income would have been $116,000 lower
41. Iadanza Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $195.70 per unit.
The best estimate of the total contribution margin when 6,300 units are sold is:
42. Bakker Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product.
The best estimate of the total variable manufacturing cost per unit is:
43. Anderwald Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product.
The best estimate of the total monthly fixed manufacturing cost is:
Each time Mayberry Nursery hires a new employee, it must wait for some period of time before the employee can meet production standards. Management is unsure of the learning curve in its operations but it knows the first job by a new employee averages 30 hours and the second job averages 24 hours. Assume all jobs to be equal in size.
44. What is the learning-curve percentage, assuming the incremental unit-time method?
45. What is the time for a new employee to build 16 units with this learning curve using the cumulative average-time method? You may use an index of -0.1520.
A) 3.65 hours
B) 2.048 hours
C) 29.2 hours
D) 32.76 hours
Harry’s Picture manufactures various picture frames. He spends $ 20 on raw material for each frame. Each new employee takes 5 hours to make the first picture frame and 4 hours to make the second. He pays $20 per hour to his employee. The manufacturing overhead charge per hour is $10.
46. What is the total cost of building 8 picture frames by a new employee using the cumulative average-time method? You may use an index of -0.1520.
47. Craig’s Cola was to manufacture 1,000 cases of cola next week. The accountant provided the following analysis of total manufacturing costs.
Variable Coefficient Standard Error t-Value
Constant 100 71.94 1.39
Independent variable 200 91.74 2.18
r2 = 0.82
What is the estimated cost of producing the 1,000 cases of cola?