Chapter 2 Handout Questions

Acct 5200
Chapter 2 Handout Questions
1. Rally Synthesis Inc. manufactures and sells 100 bottles per day. Fixed costs are $22,000 and the variable
costs for manufacturing 100 bottles are $30,000. Each bottle is sold for $1,200. How would the daily profit
be affected if the daily volume of sales drop by 10%?
A) profits are reduced by $9,000
B) profits are reduced by $3,000
C) profits are reduced by $12,000
D) profits are reduced by $59,000
2. The East Company manufactures several different products. Unit costs associated with Product
ORD105 are as follows:
Direct materials
$54
Direct manufacturing labor
8
Variable manufacturing overhead
11
Fixed manufacturing overhead
25
Sales commissions (2% of sales)
5
Administrative salaries
12
Total
$115
What is the percentage of the total fixed costs per unit associated with Product ORD105 with respect to
total cost?
A) 37%
B) 32%
C) 15%
D) 26%
3. When 25,000 units are produced, fixed costs are $21.00 per unit. Therefore, when 20,000 units are
produced, fixed costs will ________.
A) increase to $26.25 per unit
B) remain at $21.00 per unit
C) decrease to $16.80 per unit
D) total $420,000
4. Pederson Company reported the following:
Manufacturing costs
Units manufactured
Units sold
Beginning inventory
$360,000
9,000
7,500
1,000
units sold for $90 per unit
units
What is the manufacturing cost for the ending finished goods inventory?
A) $100,000
B) $60,000
C) $744,000
D) $54,000
5. Denver City Manufacturing currently produces 2,000 glasses per month. The following per unit data
apply for sales to regular customers and is based on 1,000 units produced.
Direct materials
$200
Direct manufacturing labor
40
Variable manufacturing overhead
70
Fixed manufacturing overhead
50
Total manufacturing costs
$360
The plant has capacity for 3,000 glasses. Plant supervisor’s salary is $15,000.
Required:
a. What is the total cost of producing 2,000 glasses?
b. What is the total cost of producing 1,600 glasses?
c.
What is the per unit cost when producing 1,500 glasses?
6. The following information pertains to Alleigh’s Mannequins:
Manufacturing costs
Units manufactured
Units sold
Beginning inventory
$2,170,000
31,000
28,500 units sold for $90 per unit
0 units
What is the amount of gross margin?
A) $1,995,000
B) $2,170,000
C) $2,565,000
D) $570,000
7. The American West Company manufactures several different products. Unit costs associated with
Product ORD210 are as follows:
Direct materials
Direct manufacturing labor
Variable manufacturing overhead
Fixed manufacturing overhead
Sales commissions (2% of sales)
Administrative salaries
Total
$90
24
20
10
18
38
$200
What are the inventoriable costs per unit associated with Product ORD210?
A) $134
B) $124
C) $144
D) $114
8. All Rite Manufacturing reported the following:
Revenue
Beginning inventory of direct materials, January 1, 2015
Purchases of direct materials
Ending inventory of direct materials, December 31, 2015
Direct manufacturing labor
Indirect manufacturing costs
Beginning inventory of finished goods, January 1, 2015
Cost of goods manufactured
Ending inventory of finished goods, December 31, 2015
Operating costs
What is Leslie’s cost of goods sold?
A) $390,000
B) $240,000
C) $239,000
D) $389,000
$460,000
26,000
156,000
14,000
30,000
41,000
46,000
239,000
45,000
150,000
9. Millworks Company manufactured 100,000 units in 2018 and reported the following costs:
Sandpaper
$ 32,000
Materials handling
320,000
Coolants & lubricants
22,400
Indirect manufacturing labor 275,200
Direct manufacturing labor 2,176,000
Direct materials, 1/1/18
348,000
Finished goods, 1/1/18
672,000
Finished goods, 12/31/18
1,280,000
Work-in-process, 1/1/18
96,000
Work-in-process, 12/31/18
64,000
Leasing costs-plant
$ 384,000
Depreciation-equipment
224,000
Property taxes-equipment
32,000
Fire insurance-equipment
16,000
Direct material purchases
3,140,000
Direct materials, 12/31/18
280,000
Sales revenue
12,800,000
Sales commissions
640,000
Sales salaries
576,000
Advertising costs
480,000
Administration costs
800,000
Required:
a. What is the amount of direct materials used during 2018?
b. What manufacturing costs were added to WIP during 2018?
c. What is cost of goods manufactured for 2018?
d. What is cost of goods sold for 2018?
10. What is the cost of goods manufactured for 2018?
Beginning finished good, 1/1/2018
Ending finished goods, 12/31/2018
Cost of goods sold
Sales revenue
Operating expenses
A) $248,000
B) $369,000
C) $270,000
D) $259,000
$47,000
36,000
259,000
488,000
110,000