1. The following is a list of various costs of producing shirts. Classify each cost as either a variable, fixed, or mixed cost for units produced and sold.
(a) Hourly wages of sewing machine operators.
(b) Warehouse rent of $8,000 per month.
(c) Electricity costs of $0.049 per kilowatt-hour.
(d) Salary of the production supervisor.
(e) Property taxes on factory, building, and equipment.
(f) Salary of the night-time security guard of $3,800 per month.
(g) Cotton and polyester cloth.
(h) Advertising costs of $12,000 per month.
(i) Sales commissions of $6,000 plus $0.05 for each item sold.
(j) Straight-line depreciation on sewing machines.
(k) Buttons for the shirts.
(l) Maintenance costs with sewing machine company – the cost is $2,000 per year plus $0.001 for each machine hour of use.
2. Silver Company sells 25,000 units at $59 per unit. Variable costs are $29 per unit, and fixed costs are $800,000. Determine the following:
(a) unit contribution margin
(b) contribution margin ratio
(c) operating income (Income from operations)
3. Department A had 5,000 units of work in process that were 60% completed at the beginning
of the period; 31,000 units were completed and transferred during the period; and 2,000 units
were 80% completed at the end of the period. All materials were added at the beginning of the
Determine the number of equivalent units for (a) direct materials and (b) conversion.
4. On April 6, Abercrombie Company purchased on account 60,000 units of raw materials at $12 per unit. On
April 21, raw materials were requisitioned for production as follows:
25,000 units for Job 50 at $10 per unit
27,000 units for Job 51 at $12 per unit.
Journalize the entry on April 6 to record the purchase and on April 21 to record the requisition from the
5. The following is a list of costs that were incurred in producing a textbook. Please indicate whether
each cost is:
(a) a product or period cost, and
(b) if it is a product cost, whether it is a direct material, direct labor, or factory overhead cost.
(a) Insurance on the factory building and equipment
(b) Salary of the vice president of finance
(c) Hourly wages of printing press operators during production
(d) Straight-line depreciation on the printing presses used to manufacture the textbook
(e) Straight-line depreciation on the office building
(f) Electricity used to run the presses during the printing of the textbook
(g) Sales commissions paid to textbook representatives for each textbook sold
(h) Paper on which the textbook is printed
(i) Book covers used to bind the pages
(j) Salaries of staff used to develop artwork for the textbook
(k) Glue used to bind pages to cover
(l) Salary of quality control supervisor who inspects each textbook before it is shipped
(m) Plant manager’s salary
(n) Maintenance supplies
(o) Property taxes on the headquarters building
(p) Factory supervisors’ salaries
(q) Travel costs of marketing executives to annual sales meeting
(r) Supplies used by the Accounting Department in preparing various managerial reports
(s) Fees paid to lawn service for office grounds upkeep
(t) Cost for marketing at a national conference
(u) Attorney fees for drafting a new lease for headquarters offices
(v) License fees for use of patent for printing press, based on number of textbooks produce
6. The DeWayne Company sells binoculars for $140 per unit. The variable cost is $100 per unit while the
fixed costs are $1,200,000.
a. The anticipated break-even sales (units) for binoculars.
b. The sales (units) for binoculars required to realize target operating income of $400,000.
c. Determine the probable operating income (loss) if sales total 32,000 units.
d. If selling price goes up to $150 per unit while all costs remain the same, what is the new break-even point?
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