Reference no: EM132815965

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

Budgeted operating income for the month is $220,000.

Required -

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

b) Calculate the margin of safety.

c) Calculate the degree of operating leverage.

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 $1,200

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 $250

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?