SlideShare uma empresa Scribd logo
1 de 12
Module 5 Review Questions
I. Absorption costing and over-production
Under absorption costing, a company had the following per unit
costs when 10,000 units
were produced.
1. Compute the company’s total production cost per unit if
25,000 units had been
produced.
2. Why might a manager of a company using absorption costing
produce more units
than can currently be sold?
II. Computing contribution margin
AirTel Company sold 10,000 units of its product at a price of
$80 per unit. Total variable cost
is $50 per unit consisting of $40 in variable production cost and
$10 in variable selling and
administrative cost. Compute the contribution margin.
III. Computing unit cost under absorption costing
Rajeev Company reports the following information regarding its
production costs. Compute
its production cost per unit under absorption costing.
IV. Production level, absorption costing, and gross margin
Tramor Company reports the following cost data for its single
product. The company
regularly sells 20,000 units of its product at a price of $80 per
unit. If Tramor doubles its
production to 40,000 units while sales remain at the current
20,000-unit level, by how much
would the company’s gross profit increase or decrease under
absorption costing?
V. Variable costing income statement and conversion to
absorption costing income
Torres Company began operations this year. During this first
year, the company produced
100,000 units and sold 80,000 units. The absorption costing
income statement for its first
year of operation follows:
Sales (80,000 units x $50 per unit)
................................................ $4,000,000
Cost of goods sold
Beginning inventory ……....………………………………………
$ 0
Cost of goods manufactured (100,000 units x $30 per unit)
3,000,000
Cost of goods available for sale .....…………………….……….
3,000,000
Ending inventory (20,000 units x $30) ......……………………...
600,000
Cost of goods sold ....……………………………………………..
2,400,000
Gross margin
.....……………………………………………………….
1,600,000
Selling and administrative expenses
......…………………………… 530,000
Net income
.........………………………………………………………
$1,070,000
Additional information:
a. Selling and administrative expenses consist of $350,000 in
annual fixed expenses
and $2.25 per unit in variable selling and administrative
expenses.
b. The company’s product cost of $30 per unit is computed as
follows:
Direct materials ………………………………… $5 per unit
Direct labor ……………………………………… $14 per unit
Variable overhead ……………………………… $2 per unit
Fixed overhead ($900,000/100,000 units) …... $9 per unit
1. Prepare an income statement for the company under variable
costing.
2. Explain any difference between the income under variable
costing (from part 1) and
the income reported above.
Module 6 Case Study
Near the end of 2013, the management of Simid Sports Co., a
manufacturing company,
prepared the following estimated balance sheet for December
31, 2013.
To prepare a master budget for January, February, and March of
2014, management has
gathered the following information:
• Simid Sports’ single product is purchased for $30 per unit and
resold for $55 per unit.
The expected inventory level of 2,500 units on December 31,
2013, is more than
management’s desired level for 2014 which is 20% of the next
month’s expected sales
(in units). Expected sales are:
o January, 3,500 units;
o February, 4,500 units;
o March, 5,500 units; and
o April, 5,000 units.
• Cash sales and credit sales represent 25% and 75%,
respectively, of total sales. Of the
credit sales, 60% is collected in the first month after the month
of sale and 40% in the
second month after the month of sale. For the December 31,
2013, accounts receivable
balance, $62,500 is collected in January and the remaining
$200,000 is collected in
February.
• Merchandise purchases are paid for as follows: 20% in the
first month after the month of
purchase and 80% in the second month after purchase. For the
December 31, 2013,
accounts payable balance, $40,000 is paid in January and the
remaining $140,000 is
paid in February.
• Sales commissions equal to 20% of sales are paid each month.
Sales salaries
(excluding commissions) are $30,000 per year.
• General and administrative salaries are $72,000 per year.
Maintenance expense equals
$1,000 per month and is paid in cash.
• Equipment reported in the December 31, 2013, balance sheet
was purchased in January
2013. It is being depreciated over eight years using the straight-
line method with no
salvage value. The following amounts for new equipment
purchases are planned in the
coming quarter: January, $18,000; February, $48,000; and
March, $14,400. This
equipment will be depreciated using the straight-line method
over eight years with no
salvage value. A full month’s depreciation is taken for the
month in which equipment is
purchased.
• The company plans to acquire land at the end of March at a
cost of $75,000, which will
be paid for with cash on the last day of the month.
• Simid Sports has a working arrangement with its bank to
obtain additional loans as
needed. The interest rate is 12% per year, and interest is paid at
each month-end based
on the beginning balance. Partial or full payments on these
loans can be made on the
last day of the month. The company has agreed to maintain a
minimum ending cash
balance of $12,500 each month.
• The income tax rate for the company is 40%. Income taxes on
the first quarter’s income
will not be paid until April 15.
Module 6 Review Questions
I. Preparation of merchandise purchases budgets (for three
periods)
Formworks Company prepares monthly budgets. The current
budget plans for a
September ending inventory of 15,000 units. Company policy is
to end each month with
merchandise inventory equal to a specified percent of budgeted
sales for the following
month. Budgeted sales and merchandise purchases for the three
most recent months
follow.
1. Prepare the merchandise purchases budget for the months of
July, August, and
September.
2. Compute the ratio of ending inventory to the next month’s
sales for each budget
prepared in part 1.
3. How many units are budgeted for sale in October?
II. Preparation of cash budgets (for three periods)
Kasik Company budgeted the following cash receipts and cash
disbursements for the
first three months of next year.
According to a credit agreement with the company’s bank,
Kasik promises to have a
minimum cash balance of $30,000 at each month-end. In return,
the bank has agreed
that the company can borrow up to $150,000 at an annual
interest rate of 12%, paid the
last day of each month. The interest is computed based on the
beginning balance of the
loan for the month. The company has a cash balance of $30,000
and a loan balance of
$60,000 at January 1. Prepare monthly cash budgets for each of
the first three months
of next year.
III. Computing budgeted cash payments for purchases
Powerdyne Company’s cost of goods sold is consistently 60% of
sales. The company
plans to carry ending merchandise inventory for each month
equal to 40% of the next
month’s budgeted cost of goods sold. All merchandise is
purchased on credit, and 50%
of the purchases made during a month is paid for in that month.
Another 35% is paid for
during the first month after purchase, and the remaining 15% is
paid for during the
second month after purchase.
Expected dollar sales are:
August (actual), $150,000
September (actual), $350,000
October (estimated), $200,000
November (estimated) $300,000.
Use this information to determine October’s expected cash
payments for purchases.
IV. Budgeted Cash Receipts
Emily Company has sales on account and sales for cash.
Specifically, 60% of its sales
are on account and 40% are for cash. Credit sales are collected
in full in the month
following the sale. The company forecasts sales of $525,000 for
April, $535,000 for May,
and $560,000 for June. The beginning balance of Accounts
Receivable on April 1 is
$300,000.
Prepare a schedule of budgeted cash receipts for April, May,
and June.
Activity 5.4 - Assignment: Research Paper
Samanta Shoes, which was launched by entrepreneurs Samanta
and Kelvin Joseph, produces high-quality shoes in unique styles
and limited quantities. Selling prices for a pair of Samanta
Shoes can range from $100 per pair to $350 per pair.
1. Based on information in this chapter’s opening, identify at
least four examples of the types of costs that likely explain the
wide range of shoe selling prices. Be sure to justify your
responses, not just show a listing of costs.
2. The founders of Samanta Shoes use variable costing in their
business decisions. If Samanta Shoes used absorption costing,
would you expect the company’s income to be more than, less
than, or about the same as its income measured under variable
costing? Explain.
Your paper should be from one to two pages in length. It should
be well-thought out and free of spelling and grammatical errors.
Be sure to state the reasons for your answers. You may wish to
explain the difference in variable and absorption costing in
explaining your difference in income.
Use the following Research Paper Format:
· Times New Roman, with 12-point font size
· Double Spaced
· 1-inch report margins
Your Research Paper will be graded based upon the Writing
Rubric (PDF) and receive a maximum of 100 points.
Submit a document containing your memorandum as an
attachment utilizing the Activity link above. Include your
surname, module number, and title of the assignment in the
document name (e.g., surname_M5_ResearchPaper).
Module 5 Review Questions   I. Absorption costing and .docx

Mais conteúdo relacionado

Semelhante a Module 5 Review Questions I. Absorption costing and .docx

ACC 601 Managerial Accounting Group Case 3 (160 points) .docx
ACC 601 Managerial Accounting Group Case 3 (160 points) .docxACC 601 Managerial Accounting Group Case 3 (160 points) .docx
ACC 601 Managerial Accounting Group Case 3 (160 points) .docx
SALU18
 
Week 3 DQsLIFO vs. FIFOThe controller of Sagehen Enterprises.docx
Week 3 DQsLIFO vs. FIFOThe controller of Sagehen Enterprises.docxWeek 3 DQsLIFO vs. FIFOThe controller of Sagehen Enterprises.docx
Week 3 DQsLIFO vs. FIFOThe controller of Sagehen Enterprises.docx
melbruce90096
 
Due Tues., May 2- 7 questions Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions  Big Time Picture Frames h.docxDue Tues., May 2- 7 questions  Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions Big Time Picture Frames h.docx
sagarlesley
 
REQUIRED This project is worth 25 points. It is an opportunit.docx
REQUIRED This project is worth 25 points. It is an opportunit.docxREQUIRED This project is worth 25 points. It is an opportunit.docx
REQUIRED This project is worth 25 points. It is an opportunit.docx
debishakespeare
 

Semelhante a Module 5 Review Questions I. Absorption costing and .docx (15)

Bmal 530 excel project
Bmal 530 excel projectBmal 530 excel project
Bmal 530 excel project
 
ACT 305 Module 6 Assignment Choice #1- Cost of Production
ACT 305 Module 6 Assignment Choice #1- Cost of ProductionACT 305 Module 6 Assignment Choice #1- Cost of Production
ACT 305 Module 6 Assignment Choice #1- Cost of Production
 
ACC 601 Managerial Accounting Group Case 3 (160 points) .docx
ACC 601 Managerial Accounting Group Case 3 (160 points) .docxACC 601 Managerial Accounting Group Case 3 (160 points) .docx
ACC 601 Managerial Accounting Group Case 3 (160 points) .docx
 
Acc 561 final exam guide new 2018 score 100
Acc 561 final exam guide new 2018 score 100Acc 561 final exam guide new 2018 score 100
Acc 561 final exam guide new 2018 score 100
 
Week 3 DQsLIFO vs. FIFOThe controller of Sagehen Enterprises.docx
Week 3 DQsLIFO vs. FIFOThe controller of Sagehen Enterprises.docxWeek 3 DQsLIFO vs. FIFOThe controller of Sagehen Enterprises.docx
Week 3 DQsLIFO vs. FIFOThe controller of Sagehen Enterprises.docx
 
chapter four (2).pptx
chapter four (2).pptxchapter four (2).pptx
chapter four (2).pptx
 
Due Tues., May 2- 7 questions Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions  Big Time Picture Frames h.docxDue Tues., May 2- 7 questions  Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions Big Time Picture Frames h.docx
 
Wcm (2)
Wcm (2)Wcm (2)
Wcm (2)
 
Brewer chapter 10
Brewer chapter 10Brewer chapter 10
Brewer chapter 10
 
Acct 505 final exam (new) all 3 set
Acct 505 final exam (new) all 3 setAcct 505 final exam (new) all 3 set
Acct 505 final exam (new) all 3 set
 
ACCT 505 Final Exam Guide (New) All 3 Set
ACCT 505 Final Exam Guide (New) All 3 SetACCT 505 Final Exam Guide (New) All 3 Set
ACCT 505 Final Exam Guide (New) All 3 Set
 
ACCT 505 Final Exam (New) All 3 Set3
ACCT 505 Final Exam (New) All 3 Set3ACCT 505 Final Exam (New) All 3 Set3
ACCT 505 Final Exam (New) All 3 Set3
 
Acct 505 final exam
Acct 505 final examAcct 505 final exam
Acct 505 final exam
 
Acct 505 final exam (new) all 3 set
Acct 505 final exam (new) all 3 setAcct 505 final exam (new) all 3 set
Acct 505 final exam (new) all 3 set
 
REQUIRED This project is worth 25 points. It is an opportunit.docx
REQUIRED This project is worth 25 points. It is an opportunit.docxREQUIRED This project is worth 25 points. It is an opportunit.docx
REQUIRED This project is worth 25 points. It is an opportunit.docx
 

Mais de moirarandell

BOOK REVIEWS How to write a book review There are two .docx
BOOK REVIEWS How to write a book review  There are two .docxBOOK REVIEWS How to write a book review  There are two .docx
BOOK REVIEWS How to write a book review There are two .docx
moirarandell
 
Book required Current Issues and Enduring Questions, by Sylvan Ba.docx
Book required Current Issues and Enduring Questions, by Sylvan Ba.docxBook required Current Issues and Enduring Questions, by Sylvan Ba.docx
Book required Current Issues and Enduring Questions, by Sylvan Ba.docx
moirarandell
 
Book ListBecker, Ernest The Denial of D.docx
Book ListBecker, Ernest                          The Denial of D.docxBook ListBecker, Ernest                          The Denial of D.docx
Book ListBecker, Ernest The Denial of D.docx
moirarandell
 
BOOK 1984 MiniProject What makes a human beingOne .docx
BOOK 1984 MiniProject What makes a human beingOne .docxBOOK 1984 MiniProject What makes a human beingOne .docx
BOOK 1984 MiniProject What makes a human beingOne .docx
moirarandell
 
Bonnie Morgen First Day on the Job and Facing an Ethical Di.docx
Bonnie Morgen First Day on the Job and Facing an Ethical Di.docxBonnie Morgen First Day on the Job and Facing an Ethical Di.docx
Bonnie Morgen First Day on the Job and Facing an Ethical Di.docx
moirarandell
 
Boley A Negro Town in the American West (1908) The commu.docx
Boley A Negro Town in the American West (1908)  The commu.docxBoley A Negro Town in the American West (1908)  The commu.docx
Boley A Negro Town in the American West (1908) The commu.docx
moirarandell
 
Bolsonaro and Brazils Illiberal Backlash Wendy Hunter, Timo.docx
Bolsonaro and Brazils Illiberal Backlash Wendy Hunter, Timo.docxBolsonaro and Brazils Illiberal Backlash Wendy Hunter, Timo.docx
Bolsonaro and Brazils Illiberal Backlash Wendy Hunter, Timo.docx
moirarandell
 
BoF Professional Member Exclusive articles & analysis availa.docx
BoF Professional  Member Exclusive articles & analysis availa.docxBoF Professional  Member Exclusive articles & analysis availa.docx
BoF Professional Member Exclusive articles & analysis availa.docx
moirarandell
 

Mais de moirarandell (20)

BOOK REVIEWS How to write a book review There are two .docx
BOOK REVIEWS How to write a book review  There are two .docxBOOK REVIEWS How to write a book review  There are two .docx
BOOK REVIEWS How to write a book review There are two .docx
 
Book Review #3- The Spirit Catches You and You Fall Down”Ch.docx
Book Review #3- The Spirit Catches You and You Fall Down”Ch.docxBook Review #3- The Spirit Catches You and You Fall Down”Ch.docx
Book Review #3- The Spirit Catches You and You Fall Down”Ch.docx
 
Book required Current Issues and Enduring Questions, by Sylvan Ba.docx
Book required Current Issues and Enduring Questions, by Sylvan Ba.docxBook required Current Issues and Enduring Questions, by Sylvan Ba.docx
Book required Current Issues and Enduring Questions, by Sylvan Ba.docx
 
Book Review #1- The Spirit Catches You and You Fall Down”Chapte.docx
Book Review #1- The Spirit Catches You and You Fall Down”Chapte.docxBook Review #1- The Spirit Catches You and You Fall Down”Chapte.docx
Book Review #1- The Spirit Catches You and You Fall Down”Chapte.docx
 
Book reportGringo viejo- Carlos FuentesThe written book repo.docx
Book reportGringo viejo- Carlos FuentesThe written book repo.docxBook reportGringo viejo- Carlos FuentesThe written book repo.docx
Book reportGringo viejo- Carlos FuentesThe written book repo.docx
 
Book reference Kouzes, James M. and Posner, Barry Z. The Leadership.docx
Book reference Kouzes, James M. and Posner, Barry Z. The Leadership.docxBook reference Kouzes, James M. and Posner, Barry Z. The Leadership.docx
Book reference Kouzes, James M. and Posner, Barry Z. The Leadership.docx
 
BOOK PICTURE I POSTED TOO. Go to the the textbook, study chapt.docx
BOOK PICTURE I POSTED TOO. Go to the the textbook, study chapt.docxBOOK PICTURE I POSTED TOO. Go to the the textbook, study chapt.docx
BOOK PICTURE I POSTED TOO. Go to the the textbook, study chapt.docx
 
Book ListBecker, Ernest The Denial of D.docx
Book ListBecker, Ernest                          The Denial of D.docxBook ListBecker, Ernest                          The Denial of D.docx
Book ListBecker, Ernest The Denial of D.docx
 
Book list below.docx
Book list below.docxBook list below.docx
Book list below.docx
 
Book is Media Literacy. Eighth EditionW.JamesPotte.docx
Book is Media Literacy. Eighth EditionW.JamesPotte.docxBook is Media Literacy. Eighth EditionW.JamesPotte.docx
Book is Media Literacy. Eighth EditionW.JamesPotte.docx
 
Book Forensic and Investigative AccountingPlease answer t.docx
Book Forensic and Investigative AccountingPlease answer t.docxBook Forensic and Investigative AccountingPlease answer t.docx
Book Forensic and Investigative AccountingPlease answer t.docx
 
Book Criminoloy Second EditionRead Chapter 6. Please submit .docx
Book Criminoloy Second EditionRead Chapter 6. Please submit .docxBook Criminoloy Second EditionRead Chapter 6. Please submit .docx
Book Criminoloy Second EditionRead Chapter 6. Please submit .docx
 
Book Discussion #2 Ideas(may select 1 or more to respond to).docx
Book Discussion #2 Ideas(may select 1 or more to respond to).docxBook Discussion #2 Ideas(may select 1 or more to respond to).docx
Book Discussion #2 Ideas(may select 1 or more to respond to).docx
 
BOOK 1984 MiniProject What makes a human beingOne .docx
BOOK 1984 MiniProject What makes a human beingOne .docxBOOK 1984 MiniProject What makes a human beingOne .docx
BOOK 1984 MiniProject What makes a human beingOne .docx
 
Bonnie Morgen First Day on the Job and Facing an Ethical Di.docx
Bonnie Morgen First Day on the Job and Facing an Ethical Di.docxBonnie Morgen First Day on the Job and Facing an Ethical Di.docx
Bonnie Morgen First Day on the Job and Facing an Ethical Di.docx
 
Bonds are a vital source of financing to governments and corpora.docx
Bonds are a vital source of financing to governments and corpora.docxBonds are a vital source of financing to governments and corpora.docx
Bonds are a vital source of financing to governments and corpora.docx
 
Bond Company adopted the dollar-value LIFO inventory method on Janua.docx
Bond Company adopted the dollar-value LIFO inventory method on Janua.docxBond Company adopted the dollar-value LIFO inventory method on Janua.docx
Bond Company adopted the dollar-value LIFO inventory method on Janua.docx
 
Boley A Negro Town in the American West (1908) The commu.docx
Boley A Negro Town in the American West (1908)  The commu.docxBoley A Negro Town in the American West (1908)  The commu.docx
Boley A Negro Town in the American West (1908) The commu.docx
 
Bolsonaro and Brazils Illiberal Backlash Wendy Hunter, Timo.docx
Bolsonaro and Brazils Illiberal Backlash Wendy Hunter, Timo.docxBolsonaro and Brazils Illiberal Backlash Wendy Hunter, Timo.docx
Bolsonaro and Brazils Illiberal Backlash Wendy Hunter, Timo.docx
 
BoF Professional Member Exclusive articles & analysis availa.docx
BoF Professional  Member Exclusive articles & analysis availa.docxBoF Professional  Member Exclusive articles & analysis availa.docx
BoF Professional Member Exclusive articles & analysis availa.docx
 

Último

Jual Obat Aborsi Hongkong ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan...
Jual Obat Aborsi Hongkong ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan...Jual Obat Aborsi Hongkong ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan...
Jual Obat Aborsi Hongkong ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan...
ZurliaSoop
 

Último (20)

Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
Kodo Millet  PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...Kodo Millet  PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
Kodo Millet PPT made by Ghanshyam bairwa college of Agriculture kumher bhara...
 
Understanding Accommodations and Modifications
Understanding  Accommodations and ModificationsUnderstanding  Accommodations and Modifications
Understanding Accommodations and Modifications
 
latest AZ-104 Exam Questions and Answers
latest AZ-104 Exam Questions and Answerslatest AZ-104 Exam Questions and Answers
latest AZ-104 Exam Questions and Answers
 
How to Create and Manage Wizard in Odoo 17
How to Create and Manage Wizard in Odoo 17How to Create and Manage Wizard in Odoo 17
How to Create and Manage Wizard in Odoo 17
 
Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...
Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...
Beyond_Borders_Understanding_Anime_and_Manga_Fandom_A_Comprehensive_Audience_...
 
How to Add New Custom Addons Path in Odoo 17
How to Add New Custom Addons Path in Odoo 17How to Add New Custom Addons Path in Odoo 17
How to Add New Custom Addons Path in Odoo 17
 
OSCM Unit 2_Operations Processes & Systems
OSCM Unit 2_Operations Processes & SystemsOSCM Unit 2_Operations Processes & Systems
OSCM Unit 2_Operations Processes & Systems
 
Accessible Digital Futures project (20/03/2024)
Accessible Digital Futures project (20/03/2024)Accessible Digital Futures project (20/03/2024)
Accessible Digital Futures project (20/03/2024)
 
Fostering Friendships - Enhancing Social Bonds in the Classroom
Fostering Friendships - Enhancing Social Bonds  in the ClassroomFostering Friendships - Enhancing Social Bonds  in the Classroom
Fostering Friendships - Enhancing Social Bonds in the Classroom
 
Philosophy of china and it's charactistics
Philosophy of china and it's charactisticsPhilosophy of china and it's charactistics
Philosophy of china and it's charactistics
 
Graduate Outcomes Presentation Slides - English
Graduate Outcomes Presentation Slides - EnglishGraduate Outcomes Presentation Slides - English
Graduate Outcomes Presentation Slides - English
 
21st_Century_Skills_Framework_Final_Presentation_2.pptx
21st_Century_Skills_Framework_Final_Presentation_2.pptx21st_Century_Skills_Framework_Final_Presentation_2.pptx
21st_Century_Skills_Framework_Final_Presentation_2.pptx
 
Jual Obat Aborsi Hongkong ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan...
Jual Obat Aborsi Hongkong ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan...Jual Obat Aborsi Hongkong ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan...
Jual Obat Aborsi Hongkong ( Asli No.1 ) 085657271886 Obat Penggugur Kandungan...
 
Jamworks pilot and AI at Jisc (20/03/2024)
Jamworks pilot and AI at Jisc (20/03/2024)Jamworks pilot and AI at Jisc (20/03/2024)
Jamworks pilot and AI at Jisc (20/03/2024)
 
How to Manage Global Discount in Odoo 17 POS
How to Manage Global Discount in Odoo 17 POSHow to Manage Global Discount in Odoo 17 POS
How to Manage Global Discount in Odoo 17 POS
 
FSB Advising Checklist - Orientation 2024
FSB Advising Checklist - Orientation 2024FSB Advising Checklist - Orientation 2024
FSB Advising Checklist - Orientation 2024
 
Exploring_the_Narrative_Style_of_Amitav_Ghoshs_Gun_Island.pptx
Exploring_the_Narrative_Style_of_Amitav_Ghoshs_Gun_Island.pptxExploring_the_Narrative_Style_of_Amitav_Ghoshs_Gun_Island.pptx
Exploring_the_Narrative_Style_of_Amitav_Ghoshs_Gun_Island.pptx
 
Sociology 101 Demonstration of Learning Exhibit
Sociology 101 Demonstration of Learning ExhibitSociology 101 Demonstration of Learning Exhibit
Sociology 101 Demonstration of Learning Exhibit
 
REMIFENTANIL: An Ultra short acting opioid.pptx
REMIFENTANIL: An Ultra short acting opioid.pptxREMIFENTANIL: An Ultra short acting opioid.pptx
REMIFENTANIL: An Ultra short acting opioid.pptx
 
Mehran University Newsletter Vol-X, Issue-I, 2024
Mehran University Newsletter Vol-X, Issue-I, 2024Mehran University Newsletter Vol-X, Issue-I, 2024
Mehran University Newsletter Vol-X, Issue-I, 2024
 

Module 5 Review Questions I. Absorption costing and .docx

  • 1. Module 5 Review Questions I. Absorption costing and over-production Under absorption costing, a company had the following per unit costs when 10,000 units were produced. 1. Compute the company’s total production cost per unit if 25,000 units had been produced. 2. Why might a manager of a company using absorption costing produce more units than can currently be sold? II. Computing contribution margin AirTel Company sold 10,000 units of its product at a price of $80 per unit. Total variable cost is $50 per unit consisting of $40 in variable production cost and $10 in variable selling and administrative cost. Compute the contribution margin.
  • 2. III. Computing unit cost under absorption costing Rajeev Company reports the following information regarding its production costs. Compute its production cost per unit under absorption costing. IV. Production level, absorption costing, and gross margin Tramor Company reports the following cost data for its single product. The company regularly sells 20,000 units of its product at a price of $80 per unit. If Tramor doubles its production to 40,000 units while sales remain at the current 20,000-unit level, by how much would the company’s gross profit increase or decrease under absorption costing? V. Variable costing income statement and conversion to absorption costing income Torres Company began operations this year. During this first year, the company produced 100,000 units and sold 80,000 units. The absorption costing
  • 3. income statement for its first year of operation follows: Sales (80,000 units x $50 per unit) ................................................ $4,000,000 Cost of goods sold Beginning inventory ……....……………………………………… $ 0 Cost of goods manufactured (100,000 units x $30 per unit) 3,000,000 Cost of goods available for sale .....…………………….………. 3,000,000 Ending inventory (20,000 units x $30) ......……………………... 600,000 Cost of goods sold ....…………………………………………….. 2,400,000 Gross margin .....………………………………………………………. 1,600,000 Selling and administrative expenses ......…………………………… 530,000 Net income .........……………………………………………………… $1,070,000 Additional information: a. Selling and administrative expenses consist of $350,000 in annual fixed expenses and $2.25 per unit in variable selling and administrative expenses.
  • 4. b. The company’s product cost of $30 per unit is computed as follows: Direct materials ………………………………… $5 per unit Direct labor ……………………………………… $14 per unit Variable overhead ……………………………… $2 per unit Fixed overhead ($900,000/100,000 units) …... $9 per unit 1. Prepare an income statement for the company under variable costing. 2. Explain any difference between the income under variable costing (from part 1) and the income reported above. Module 6 Case Study Near the end of 2013, the management of Simid Sports Co., a manufacturing company, prepared the following estimated balance sheet for December 31, 2013. To prepare a master budget for January, February, and March of
  • 5. 2014, management has gathered the following information: • Simid Sports’ single product is purchased for $30 per unit and resold for $55 per unit. The expected inventory level of 2,500 units on December 31, 2013, is more than management’s desired level for 2014 which is 20% of the next month’s expected sales (in units). Expected sales are: o January, 3,500 units; o February, 4,500 units; o March, 5,500 units; and o April, 5,000 units. • Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 60% is collected in the first month after the month of sale and 40% in the second month after the month of sale. For the December 31, 2013, accounts receivable balance, $62,500 is collected in January and the remaining $200,000 is collected in
  • 6. February. • Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after purchase. For the December 31, 2013, accounts payable balance, $40,000 is paid in January and the remaining $140,000 is paid in February. • Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $30,000 per year. • General and administrative salaries are $72,000 per year. Maintenance expense equals $1,000 per month and is paid in cash. • Equipment reported in the December 31, 2013, balance sheet was purchased in January 2013. It is being depreciated over eight years using the straight- line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $18,000; February, $48,000; and March, $14,400. This
  • 7. equipment will be depreciated using the straight-line method over eight years with no salvage value. A full month’s depreciation is taken for the month in which equipment is purchased. • The company plans to acquire land at the end of March at a cost of $75,000, which will be paid for with cash on the last day of the month. • Simid Sports has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $12,500 each month. • The income tax rate for the company is 40%. Income taxes on the first quarter’s income will not be paid until April 15.
  • 8. Module 6 Review Questions I. Preparation of merchandise purchases budgets (for three periods) Formworks Company prepares monthly budgets. The current budget plans for a September ending inventory of 15,000 units. Company policy is to end each month with merchandise inventory equal to a specified percent of budgeted sales for the following month. Budgeted sales and merchandise purchases for the three most recent months follow. 1. Prepare the merchandise purchases budget for the months of July, August, and September. 2. Compute the ratio of ending inventory to the next month’s sales for each budget prepared in part 1. 3. How many units are budgeted for sale in October? II. Preparation of cash budgets (for three periods)
  • 9. Kasik Company budgeted the following cash receipts and cash disbursements for the first three months of next year. According to a credit agreement with the company’s bank, Kasik promises to have a minimum cash balance of $30,000 at each month-end. In return, the bank has agreed that the company can borrow up to $150,000 at an annual interest rate of 12%, paid the last day of each month. The interest is computed based on the beginning balance of the loan for the month. The company has a cash balance of $30,000 and a loan balance of $60,000 at January 1. Prepare monthly cash budgets for each of the first three months of next year. III. Computing budgeted cash payments for purchases Powerdyne Company’s cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 40% of the next month’s budgeted cost of goods sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is
  • 10. paid for during the second month after purchase. Expected dollar sales are: August (actual), $150,000 September (actual), $350,000 October (estimated), $200,000 November (estimated) $300,000. Use this information to determine October’s expected cash payments for purchases. IV. Budgeted Cash Receipts Emily Company has sales on account and sales for cash. Specifically, 60% of its sales are on account and 40% are for cash. Credit sales are collected in full in the month following the sale. The company forecasts sales of $525,000 for April, $535,000 for May, and $560,000 for June. The beginning balance of Accounts Receivable on April 1 is $300,000. Prepare a schedule of budgeted cash receipts for April, May, and June.
  • 11. Activity 5.4 - Assignment: Research Paper Samanta Shoes, which was launched by entrepreneurs Samanta and Kelvin Joseph, produces high-quality shoes in unique styles and limited quantities. Selling prices for a pair of Samanta Shoes can range from $100 per pair to $350 per pair. 1. Based on information in this chapter’s opening, identify at least four examples of the types of costs that likely explain the wide range of shoe selling prices. Be sure to justify your responses, not just show a listing of costs. 2. The founders of Samanta Shoes use variable costing in their business decisions. If Samanta Shoes used absorption costing, would you expect the company’s income to be more than, less than, or about the same as its income measured under variable costing? Explain. Your paper should be from one to two pages in length. It should be well-thought out and free of spelling and grammatical errors. Be sure to state the reasons for your answers. You may wish to explain the difference in variable and absorption costing in explaining your difference in income. Use the following Research Paper Format: · Times New Roman, with 12-point font size · Double Spaced · 1-inch report margins Your Research Paper will be graded based upon the Writing Rubric (PDF) and receive a maximum of 100 points. Submit a document containing your memorandum as an attachment utilizing the Activity link above. Include your surname, module number, and title of the assignment in the document name (e.g., surname_M5_ResearchPaper).