23-Laro Corporation produces and sells a single product with the following chara

Question

23-Laro Corporation produces and sells a single product with the following characteristics Per unit Percent of sales Seling price Variable expenses Contribution margin The company is currently selling 5,000 units per month. Fixed expenses are $302,000 per month Management is considering using a new component that would increase the unit variable cost by $7 since the component would increase the features of the company's product. The marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of the change? $ 150 75 A- increase of $1,000 B- decrease of $1,000 C- increase of $34,000 D- decrease of $34,000 26-Overapplied manufacturing overhead occurs when: A. applied overhead exceeds estimated overhead B. budgeted overhead exceeds actual overhead C. actual overhead exceeds estimated overhead D. applied overhead exceeds actual overhe.ad 35- The following data (in thousands of dollars) have been taken from the accounting records of Karalana corporation for the just completed year Sales: $910 Raw materials inventory, beginning: $80 Raw materials inventory, ending $20 Puschases of raw materials: $100 Direct labor: 130 Manufacturing overhead: $200 Administrative expenses: $160

Explanation / Answer

23 Current Estimated Increase Selling price 150 150 Less Variable cost 75 82 Contribution margin per unit 75 68 Number of units 5000 5500 Total contribution margin 375000 374000 Fixed cost 302000 302000 Net operating income 73000 72000 -1000 Decrease by 1000 Correct answer is B 24 When applied overheads are more than actual overheads then we say it is overapplied So correct answer is D Schedule for manufacturing cost beginning raw material 80 Add Purchase of raw material 100 Total 180 Less Ending Raw material 20 Raw material used in production 160 Ans 35 Direct labor 130 manufacturing cost applied 200 Total manufacturing cost 490 Add Beginning work in progress 40 530 less Ending work in progress 10 Cost of goods manufactured 520 Ans 36 Add Beginning finished goods inventory 130 Cost of goods available for sale 650 Less Ending finished goods inventory 150 Cost of goods sold 500 Ans 37 Sales 910 Less Cost of goods sold 500 Gross profit 410 Less Operating expense Administrative expense 160 Selling expense 140 300 Net operating income 110 Ans 38

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