1. Given the following cost and activity observations for Smithson Company\'s ut

Question

1. Given the following cost and activity observations for Smithson Company's utilities, use the high- low method to calculate Smithson's fixed costs per month. Do not round your intermediate calculations January Februa March Cost S52,200 75,000 57,000 64,000 Machine Hours 20,000 29,000 22,000 24,500 2. Given the following cost and activity observations for Taco Company's utilities, use the high-low method to calculate Taco's variable utilities costs per machine hour Ma June Jul August Cost $8,300 10,400 7,200 9.500 Machine Hours 15,000 20,000 12,000 18,000 3.If sales are $400,000, variable costs are 75% of sales, and operating income is $50,000, what is the operating leverage? 4. MULTIPLE PRODUCTS 5. Units manufactured 15000 Units Sold 12000 Variable cost of goods manufactured per unit $25 Selling price per unit $50 Variable selling and admin expenses per unit S5 Fixed Factory overhead (i.e., Fixed Manufacturing cost) Fixed selling and admin expenses $50,000 $$150,000 Prepare Variable costing income statement and disclose the variable cost of goods manufactured. Prepare Absorption costing income statement.

Explanation / Answer

1) Mh's Cost High 29,000 75,000 low 20,000 52,200 Difference 9,000 22,800 Variable cost per unit = 22800/9000 2.533333 Fixed cost = (75000           - 29000*2.53333) 1533 answer 2) Mh's Cost High 20,000 10,400 low 12,000 7,200 Difference 8,000 3,200 Variable cost per MH's= 3200/8000 0.4 Answer 3) operating leverage = contribution/net income Contribtuion = 400,000*25% 100000 Net income = 100,000-50,000 50,000 operating leverage = 100,000/50000 2 5) Variable costing income statement sales (12000*50) 600000 less:Variable expense Variable cost of goods sold (12000*25) 300000 varaible selling & adm (12000*5) 60000 Contribution margin 240000 Fixed expense Fixed factory overhead 150,000 Fixed selling & admin expense 50,000 Net income 40,000 Variable cost of goods manufactured is $300,000 Absorption Costing income statement Sales 600000 less:Cost of goods sold 12000*(25+10) 420000 Gross profit 180000 Variable selling exp (60,000+50000) 110,000 Net income 70,000

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