Reference no: EM132962450
Question 1 - Stark and Company would like to evaluate one of the product lines that they sell to the defense department. Every month the Stark and Company produce an identical number of units, although the sales in units differ from month to month.
Selling price $105
Units in beginning inventory 110
Units produced 6,400
Units sold 6,100
Units in ending inventory 600
Variable costs per unit:
Direct materials $62
Direct labour $48
Variable manufacturing overhead $3
Variable selling and administrative $7
Fixed costs:
Fixed manufacturing overhead $64,000
Fixed selling and administrative $35,600
Required -
1. Under variable costing, identify the unit product cost for the month.
2. What is the unit product cost for the month under absorption costing?
3. Prepare an income statement for the month using the contribution format and the variable costing method.
4. Prepare an income statement for the month using the absorption costing method.
Question 2 - The following information pertains to Death Star Corporation for a period:
Selling price per unit 49
Standard fixed manufacturing costs per unit 24
Variable selling and administrative costs per unit 3
Fixed selling and administrative cost 14900
Beginning inventories:
Units ?
Standard fixed manufacturing cost 36,900
Standard variable manufacturing cost 18,700
Units produced 8,900
Units sold 8,600
Required - Assume the unit standard costs data for the beginning and ending inventories remained constant during the period. What was the total standard cost of the ending inventory under absorption costing?
Question 3 - DC-Marvel would like to evaluate one of the product lines that they sell to defense department. Every month the company produces an identical number of units, although the sales in units differ from month to month.
Product B
Selling price $109
Units in beginning inventory 360
Units produced 6,900
Units sold 7,200
Variable costs per unit:
Direct materials $29
Direct labour $31
Variable manufacturing overhead $2
Variable selling and administrative $7
Fixed costs:
Fixed manufacturing overhead $53,500
Fixed selling and administrative $145,000
Required -
1. Compute the Contribution Margin.
2. Compute the Operating Income under Variable Costing.
3. Prepare a reconciliation from your Operating Income under Variable Costing to Operating Income under Absorption Costing. Show the differences between each method.
Question 4 - Stark and Company's has the following cost data:
Systems development $29,000
Final product testing and inspection $12,000
Quality data gathering, analysis, and reporting $9,000
Net cost of scrap $58,000
Customer returns arising from quality problems $56,000
Amortization of testing equipment $53,000
Rework labour and overhead $16,000
Testing and inspection of incoming materials $38,000
Product recalls $33,000
Required -
1. Determine the total prevention costs?
2. Determine total appraisal costs?
3. Determine the total internal failure costs?