Exam 8: Absorption and Variable Costing, and Inventory Management

Green Bluff Assume the following information for the #1 Product Line for Green Bluff: Sales \ 600,000 Variable manufacturing expenses 120,000 Direct fixed manufacturing expenses 75,000 Variable selling and administrative expenses 65,000 Direct fixed selling and administrative expenses 60,000 -Refer to Green Bluff. What is the segment margin of the product line?

Ella Company Last year, Ella Company produced 10,000 units and sold 9,000 units at a sales price of $9 per unit. Costs for last year were as follows: Direct materials \ 10,000 Direct labour 15,000 Variable manufacturing overhead 5,000 Fixed manufacturing overhead 20,000 Variable selling expense 7,200 Fixed selling expense 5,000 Fixed administrative expense 12,000 Fixed manufacturing overhead is applied on the basis of expected production. Last year, the company expected to produce 10,000 units.The company had no beginning inventories. -Refer to Ella Company. What is the operating income for using the absorption costing method?

Consider the following portion of a segmented income statement for the year just ended. Assume fixed expenses of Division A include $60,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments or reduce the common expenses. $\begin{array}{lr}\text { Division } A\\\text { Sales } & \$ 200,000 \\\text { Variable manufacturing costs } & 120,000 \\\text { Gross profit } & \$ 80,000 \\\text { Fixed expenses (direct and allocated) } & 100,000\\\text { Operating income (loss) }&\$(20,000)\end{array}$ What is A's divisional segment margin?

Stimpson Company sells 900 units of its deluxe product each year. The cost of setting up for one production run is $150; the cost of carrying one unit in inventory for a year is $3. A. Calculate the economic order quantity. B. Calculate the annual setup cost of the EOQ policy. C. Calculate the annual carrying cost of the EOQ policy. D. Calculate the total inventory-related cost of the EOQ policy.

Prairie Inc. mines three products. Gold ore sells for $1,000 per ton, variable costs are $600 per ton, and fixed mining costs are $250,000. The segment margin for the year was ($100,000). The management of Prairie Mining was considering dropping the mining of gold ore. Only one-half of the fixed expenses are direct and would be eliminated if the segment was dropped. What were the sales in tons for the year?

Refer to Carmel Company. What is the EOQ?

Darker Company produced 30,000 units and sold 28,000 units in the current year. Beginning inventory was zero. During the period, the following costs were incurred: Indirect labour \ 60,000 Indirect materials 30,000 Other variable manufacturing overhead 90,000 Fixed manufacturing overhead 180,000 Fixed administrative expenses 150,000 Fixed selling expenses 120,000 Variable selling expenses, per unit 40 Direct labour, per unit 80 Direct materials, per unit 20 Required: Compute the dollar amount of ending Finished Goods Inventory using: A. Absorption costing B. Variable costing

LaTiffa Company orders 250 units at a time and places 15 orders per year. Total ordering cost is $1,100, and total carrying cost is $1,100. Which statement best describes the economic order quantity?

Lauren Company orders 250 units at a time and places 15 orders per year. Total ordering cost is $1,600, and total carrying cost is $1,250. Which statement best describes the economic order quantity?

What is the formula to calculate total carrying cost?

Operating Company Operating Company has the following information pertaining to its two divisions for the current year: North Division South Division Variable selling and administrative expenses \ 70,000 \ 90,000 Direct fixed manufacturing expenses 35,000 100,000 Sales 300,000 500,000 Direct fixed selling and administrative expenses 30,000 70,000 Variable manufacturing expenses 40,000 100,000 Common expenses are $50,000 for the current year. -Refer to Operating Company. What is the net income?

Triple M Company Triple M Company had the following data for the month: Variable costs per unit: Direct materials \ 4.00 Direct labour 3.20 Variable manufacturing overhead 1.00 Variable selling expenses 0.40 Fixed manufacturing overhead is $4,000 per month, which is applied to production on the basis of normal activity of 2,000 units. During the month, 2,000 units were produced. The company started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at sales price of $14 per unit. Selling and administrative expense for the month, all fixed, totalled $3,600. -Refer to Triple M Company. What is the operating income using the variable costing method?

Select the appropriate classification of each of the costs listed below.* Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Variable administrative expense

Which type of cost is NOT included in product cost?

The variable costing income statement for Kilem Company for this year is as follows: Sales ( 6,000 units) \1 20,000 variable expenses: Cost of Goods Sold \ 36,000 Selling (10\% of sales) 12,000 48,000 Contribution margin \ 72,000 Fixed expenses: Manufacturing overhead \ 32,000 Administrative 14,400 38,400 Net income \2 5,600 Selected data for this year concerning the operations of the company are as follows: Beginning inventory -0 - units Units produced 8,000 units Manufacturing costs: Direct labour \ 3.00 per unit Direct materials 1.40 per unit Variable manufacturing overhead 1.60 per unit Required: Prepare an absorption costing income statement for this year.

Common fixed expenses are avoidable if a segment is eliminated.

Refer to Carmel Company. The company has decided to begin ordering 60 units at a time. What is the average annual carrying cost of this new policy?

Raymond Company Raymond Company reported the following units of production and sales for June and July: Units Units Month Produced Sold June 100,000 90,000 July 100,000 105,000 Net income using the absorption costing method for June was $40,000; net income using the variable costing method for July was $50,000. Fixed manufacturing costs were $600,000 for each month. -Refer to Raymond Company. What was the net income for June using the variable costing method?

Operating Company Operating Company has the following information pertaining to its two divisions for the current year: North Division South Division Variable selling and administrative expenses \ 70,000 \ 90,000 Direct fixed manufacturing expenses 35,000 100,000 Sales 300,000 500,000 Direct fixed selling and administrative expenses 30,000 70,000 Variable manufacturing expenses 40,000 100,000 Common expenses are $50,000 for the current year. -Refer to Operating Company. What is the segment margin for the South Division?

Triple M Company Triple M Company had the following data for the month: Variable costs per unit: Direct materials \ 4.00 Direct labour 3.20 Variable manufacturing overhead 1.00 Variable selling expenses 0.40 Fixed manufacturing overhead is $4,000 per month, which is applied to production on the basis of normal activity of 2,000 units. During the month, 2,000 units were produced. The company started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at sales price of $14 per unit. Selling and administrative expense for the month, all fixed, totalled $3,600. -Refer to Triple M Company. What is the operating income using the absorption costing method?