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QUIZ CH 5
1 Absorption Costing (similar to exercise 5-7)
Kasey Company manufactures and sells a single product. The following
costs were incurred during the first year of operations
Variable Cost Per Unit
Manufacturing:
Direct Materials $ 20
Direct Labor $ 9
Variable Manufacturing Overhead $ 4
Variable selling and administrative $ 2
Fixed Manufacturing Overhead $ 200,000
Fixed Selling and Administrative $ 50,000
The company produces 10,000 units and sells 8,000 units
a. If the company produces 10,000 units, what is the per unit total variable manufacturing costs?
Total Variable Manufacturing 350,000
b. What is the per unit total product costs under absorption costing?
Add: hint: (fixed manufacturing overhead divided by units produced)
Absorption costing unit product cost 20
c. Prepare the Absorption Method Income Statement
Sales (8,000 x $ 62) 496,000
Less: Cost of Goods Sold (8,000 x $?)
Gross Margin (Gross Profit)
Less: Selling and Administrative
Variable S&A (8,000 x $ 2)
Fixed S&A
Net Operating Income - 0
2 Variable Costing
Kasey Company manufactures and sells a single product. The following
costs were incurred during the first year of operations
Variable Cost Per Unit
Manufacturing:
Direct Materials $ 20
Direct Labor $ 9
Variable Manufacturing Overhead $ 4
Variable selling and administrative $ 2
Fixed Manufacturing Overhead $ 200,000
Fixed Selling and Administrative $ 50,000
a. What is the Variable Cost per Unit
Total Variable Manufacturing
b. Prepare the Variable Costing Method Income Statement (Contribution Margin).
Sales (8,000 x $ 62) 496,000
Less Variable Cost of Goods Sold (8,000 x $ ?)
Less Variable Selling expenses (8,000 x $ 2)
Contribution Margin
Less: Fixed Expenses
Fixed Manufacturing Overhead
Fixed Selling and Administrative
Net Operating Income
3 Segmented Income Statement (similar to exercise 5-11)
Bossley Co. has been experiences losses and asked for a segmented
income statement by geographic market.
Sales $ 1,100,000
Less: Variable Costs 548,000
Contribution Margin 552,000
Fixed Expenses 575,000
Net Operating Loss $ (23,000)
The Accounting Department has developed the following data:
Total Division 1 Division 2 Common
Sales $ 1,100,000 $ 500,000 $ 600,000
Variable expenses as a % of Sales 52% 48%
a. What are Variable Costs in Dollars for Div 1 & 2?
Fixed Costs $ 575,000 $ 275,000 $ 250,000 $ 50,000
b. Fill out the following chart:
Total Company Division 1 Division 2
Sales (in dollars)
Less: Variable expenses
Contribution Margin
Less: Traceable Fixed Costs
Division Market Segment Margin
Less Common Fixed (not traceable)
Net Operation Income (loss)
Extra Credit:
For number 3 above answer the following questions:
The company sold 500 units from Division 1 and 600 units in Division 2 for a total of 1,100 units.
instructions: round to 0 decimal places
Total Company Division 1 Division 2
What is the Contribution Margin Ratio?
What is the Sales in dollars per Unit?
What is the Per Unit Contribution Margin
What is the Total of common & traceable fixed costs
What is the Break Even in Number of Units?
(hint: Fixed expenses/Unit CM see pg 85)
What is the Break Even in Dollars?
(hint: Fixed expenses/CM ratio see pg 86)

&F &P of &N

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