Reference no: EM132811088

Question 1 - The following monthly budgeted data are available for the Stark Company:

Product A Product B Product C

Sales $500,000 $300,000 $900,000

Variable expenses 300,000 210,000 720,000

Contribution margin $200,000 $90,000 $180,000

The budgeted operating income for the month is $206,000.

Required -

a) Calculate the break-even sales for the month.

b) Calculate the margin of safety.

c) Calculate the degree of operating leverage (two decimal points).

Question 2 - The following costs relate to one month's activity in Martin Company:

Indirect materials $300

Rent on factory building $500

Maintenance of equipment $50

Direct material used $600

Utilities on factory $250

Direct labour $1,500

Selling expense $500

Administrative expense $300

Work in process inventory, beginning $600

Work in process inventory, ending $800

Finished goods inventory, beginning $500

Finished goods inventory, ending $200

Required -

a) Make a schedule of cost of goods manufactured in good form.

b) Determine the cost of goods sold.

c) Assume Martin Company produced the equivalent of 500 units during this particular month. What was the average cost per unit for direct materials? For rent on factory building?

d) Assume next month Martin Company plans to produce 600 units of product. What average cost per unit and total cost would you expect to be incurred for direct material? for rent?