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Practice Midterm Solutions
Practice Midterm Solutions
Page 1
1.
2.
3.
4.
B
B
D
C
Page 2
1.
2.
3.
4.
B
A
E
B
Page 3
Beca Company
Schedule of Cost of Goods Manufactured
Direct Materials:
Beginning raw materials inventory
Add: Purchases of raw materials
Raw materials available for use
Deduct: Ending raw materials inventory
Raw materials used in production
Direct labor
Manufacturing overhead:
Rent, factory building
Indirect labor
Utilities, factory
Maintenance, factory equipment
Supplies, factory
Depreciation, factory equipment
Total overhead costs
Total manufacturing costs
Add: Beginning work in process inventory
Deduct: Ending work in process inventory
Cost of goods manufactured
9,000
124,000
133,000
11,000
$122,000
80,000
70,000
54,500
8,000
20,000
1,500
30,000
184,000
386,000
6,000
92,000
21,000
$371,000
Page 4
200
18,000
18,200
Equivalent Units
Materials Conversion
17,700
500
18,200
17,700
350
18,050
17,700
400
18,100
2,264
792,001
$794,265
Materials Conversion
$
756
116,569
$117,325
18,050
$6.500
1,508
675,432
$676,940
18,100
$37.400
$43.900
Cost reconciliation
Total
Cost
Cost accounted for as follows:
Transferred out ................................
Work in process, ending:
Materials ......................................
Conversion ...................................
Total work in process, ending .........
Total cost ............................................
Equivalent Units
Materials Conversion
$777,030
17,700
$2,275
14,960
17,235
$794,265
350
17,700
400
Page 5
a. Gross Margin: Sales cost of sales = $60 15 = $45 per unit x 500 units = $22,500
b. Contribution margin: Sales Variable Costs = $60 15 6 Commissions 12 Variable admin = $33
per unit x 500 units = $13,500
c. Total Administrative expense: $3,000 + (20% of $60 x 500 units) = $9,000
d. Net operating income:
Sales $60 x 500 units
Less: Cost of sales #15 x 500 units
Gross margin
Less Expenses:
Commissions 10% of $30,000
Advertising
Admin $3,000 + (20% of sales)
Net operating Income
$30,000
- 7,500
22,500
3,000
5,000
9,000
$5,500
Page 6
1.B
2.B
3.C. First Calculate the CM% at breakeven. Since at breakeven FC = 30,000 then CM must also =
$30,000. Then, CM / Sales = $30,000 / $120,000 = .25 CM % of 25%....then, ($12,000 target profit +
$30,000 FC) / .25 = $168,000 Sales
4.D First calculate the amount of FC. Since with the data given CM is 70% of sales, CM in $$ = 196,000
and since NOI = 21,000, then FC must be $175,000 ( 196,000 21,000). Then, take FC / CM % =
$175,000 / 70% = $250,000
Page 7
1.C Total contribution margin currently is (50-15)x3600 = 126,000. If you increase total contribution
margin by 40% you get 176,400. Solving for A in (A-15)x 3600 = 176,400 you get $64, then times 3600
you get $230,400; an increase of $50,400.
2.B. First, calculate sales in units at breakeven = FC/ CM per unit = $40,530 / (50 15) = 1,158 units x
$50 per unit = $57,900 at breakeven. Since we want a margin of safety of $40,000, then sales in $ must
equal $97,900 and in units 1,958 ($97,900 / $50)
3.C. First, calculate the decrease in FC = $40,530 x (1-.20) = $32,424 new FC. Then, FC/CM per unit =
$32,424 / $35 = 926.4 new breakeven in unitsa decrease of 232 units approx (1,158 current unit sales at
breakeven 926.4 new)
Page 8
1.
a. At the break-even, the total contribution margin equals total fixed expenses. Therefore, the total
contribution margin would be $30,000.
$20,000
40%
$8,000
$6,000
2,000
$8,000
$8
1,000
2.
$666,500
$ 8,400
378,000
386,400
25,200
361,200
30,100
175,500
81,700
391,300
275,200
257,200
$ 18,000
$39.00
200
$18,000
7,800
$25,800