CHAPTER 1 EXERCISES

Q.1-6 AVAILABLE FOR SALES

ITEM TOT P.U.
4 20,000 5,000 PER UNIT = 20,000 / 4
REVENUE
SALES 2 UNITS @ 6,000 12,000
EXPENSES
COST OF GOODS SOLD @ 5,000 10,000
LOSS
2 UNITS @ 5,000 10,000
Q.1-7 PLAN-1 PLAN-2
PRODUCTION IN UNITS 4,500 7,200
FIXED COST 20,000 20,000
VARIABLE COST @ 2.25 P.U. 10,125 16,200
TOTAL PRODUCTION COST 30,125 36,200
Q.1-9 PRIME COST
DIRECT MATERIAL 25,000
DIRECT LABOR 30,000
55,000
CONVERSION COST
DIRECT LABOR 30,000
FOH (OTHER) 15,000
INDIRECT MATERIAL 5,000
INDIRECT LABOR 4,500
TOTAL FOH 24,500
54,500
PRODUCT COST
DIRECT MATERIAL 25,000
DIRECT LABOR 30,000
FOH 24,500
79,500
Q.1-12 COMPUTATION OF FIXED COST OF GOODS SOLD
TOTAL COGS FOR 800 UNITS 40,000
LESS: VAR COGS (800 X 35) 28,000
FIXED COST OF GOODS SOLD 12,000
COMPUTATION OF FIXED OPERATING EXPENSES
TOTAL OPERATING EXP FOR 800 UNITS 10,000
LESS: VAR OPERATING EXP (800 X 5) 4,000
FIXED OPERATING EXP 6,000
TRIPPLED SALES = EXISTING SALES X 3 = 800 X 3 = 2,400
PROJECTED INCOME STATEMENT FOR 2,400 UNITS
SALES 2,400 UNITS @ 90 216,000
LESS: COST OF GOODS SOLD
FIXED COGS 12,000
 VARIABLE COGS (2,400 X 35) 84,000
TOTAL COGS 96,000
GROSS PROFIT 120,000
LESS: OPERATING EXPENSES
FIXED OPERATING EXP 6,000
VARIABLE OPERATING EXP (2,400 X 5) 12,000
TOTAL OPERATING COST 18,000
OPERATING INCOME 102,000
CHAPTER 1 PROBLEMS
P. 1-1 PRIME COST
DIRECT MATERIAL 78,000
DIRECT LABOR (71,500 - 12,000) 59,500
137,500
PRODUCT COST
DIRECT MATERIAL 78,000
DIRECT LABOR (71,500 - 12,000) 59,500
FOH (DEP) 50,000
INDIRECT MATERIAL (82,000 -78,000) 4,000
INDIRECT LABOR 12,000
TOTAL FOH 66,000
203,500
CONVERSION COST
DIRECT LABOR 59,500
FOH 66,000
125,500
PERIOD COSTS
SELLING,GENERAL & ADMN EXP 62,700
P.1-2 COST OF GOODS MANUFACTURED 300,000
PRODUCTION IN UNITS 75,000
UNIT COST (300,000 / 75,000) 4.00
MULTILE STEP INCOME STATEMENT
SALES 59,000 UNITS @ 5 PER UNIT 295,000
LESS: COST OF GOODS SOLD (59,000 X 4) 236,000
GROSS PROFIT 59,000
LESS: LOSS ON DEFECTIVE UNITS (2,000 X 4) 8,000
NET INCOME 51,000
P.1-4 PRIME COST
DIRECT MATERIAL (375,000 X 80%) 300,000
DIRECT LABOR (400,000 X 65%) 260,000
560,000
PRODUCT COST
DIRECT MATERIAL (375,000 X 80%) 300,000
DIRECT LABOR (400,000 X 65%) 260,000
FOH
 INDIRECT MATERIAL (375,000 X 20%) 75,000
INDIRECT LABOR (400,000 X 35%) 140,000
HEAT, LIGHT & POWER 160,000
DEPRECIATION 45,000
PROPERTY TAX 85,000
REPAIRS & MAINTENANCE 20,000
TOTAL FOH 525,000
1,085,000
CONVERSION COST
DIRECT LABOR 260,000
FOH 525,000
785,000
PERIOD COSTS
SELLING EXP 125,000
GENERAL & ADMN EXP 80,000
205,000
P.1-7 TOTAL SALES IN DOZEN 100,000
TOTAL COST OF GOODS SOLD 40,000
LESS: FIXED COGS 10,000
VARIABLE COST OF GOODS SOLD 30,000
TOTAL OPERATING EXPENSES 50,000
LESS: FIXED OPERATING EXPENSES 25,000
VARIABLE OPERATING EXP 25,000
CONTRIBUTION MARGIN INCOME STATEMENT
SALES (100,000 DOZEN @0.60 PER DOZEN) 60,000
LESS: VARIABLE COST
VARIABLE COST OF GOODS SOLD 30,000
VARIABLE OPERATING EXP 25,000
55,000
CONTRIBUTION MARGIN 5,000
LESS: FIXED COST
FIXED COGS 10,000
FIXED OPERATING EXPENSES 25,000
35,000
OPERATING LOSS (30,000)