Information given

Julys manufacturing overhead breakdown

Question 15

A. Determine total costs of machine supplies and property taxes for May

~ Unit cost of machine supply = $170,000/68,000 hour = $2.5/machine hour

~ Costs of machine supplies for May

= $2.5/machine hour x 46,000 machine hour= $115,000 ~ Property taxes = $24,000 (fixed cost) ~ Total costs of machine supplies and property taxes for May = $115,000 + $24,000 = $139,000

Question 15 A

B. Using high-low method, calculate the fixed portion and variable cost per machine our of maintenance cost

~ Maintenance cost for May = 889,000 - 24,000 - 2.5 x 46,000 = $750,000 ~ Variable cost per machine hour =
1,080,000750,000 68,00046,000

= $15 per machine hour

~ Fix cost per machine hour for maintenance = $1,080,000 - $15/machine hour x 68,000 machine hour = $60,000

Question 15 B

C. Estimate total manufacturing overhead for September given 56,000 machine hours are work and present cost patterns still apply

(1) = $2.5/machine hour x 56,000 machine hours (2) = $15/machine hour x 56,000 machine hours

Question 15 C

Information given

Selling price = $50/unit

Sales commission = 10% of selling price = $50 x 10% = $5/unit

Question 16

A. Calculate the break-even sales volume (in dollar) on product No. 66

Unit contribution margin = Selling price variable costs = 50 50 x 10% - 25 = $20

Unit contribution margin ~ CM ratio = = $20/$50 = 0.4 Selling price ~ Break-even point in dollar = $340,000/0.4=$850,000

Question 16 A

B. Which product is more profit table at a sales level of $25,000

No. 65 Fixed costs Variable costs $220,000 $825,000 (1)

No. 66 $340,000 $625,000 (2)

Sales commissions
Total costs

$125,000 (3)
$1,170,000

$125,000 (3)
$1,090,000

(1) = $33/unit x 25,000 units (2) = $25/unit x 25,000 units (3) = $5/unit x 25,000 units

Question 16 B

B. Which product is more profit table at a sales level of $25,000

No. 65 Fixed costs Variable costs $220,000 $825,000

No. 66 $340,000 $625,000

Sales commissions
Total costs Sold at the same price Sold at same volume

$125,000
$1,170,000

$125,000
$1,090,000

No. 66 is $80,000 more profitable

No.66 that costs $80,000 less

Question 16 B

C. Calculate the unit-volume level at which profit/loss of product No. 65 equals that of product No. 66

~ Discrepancy in fixed cost = $340,00 - $220,000 = $120,000 ~ Discrepancy in variable cost per unit = $33 - $25

=$8
~ Unit volume =
$120,000 $8

= 15,000

Question 16 C