21 Jared Beverage Corporation uses a process costing system to collect costs rel

Question

21 Jared Beverage Corporation uses a process costing system to collect costs related to the production of its celery flavored cola. The cola is first processed in a Mixing Department at Health and is then transterred out and finished up in the Bottling Department. The finished cases of cola are then transferred to Finished Goods Inventory. The following information relates to the company's two departments for the month of January: Mixing Bottling 10,000 5,000 65,000 Cases of cola in work in process, January 110 Cases of cola completed/transferred out during January.. Cases of cola in work in process, January 3 4,000 7,000 How noncases f col we completedandrascedtoinised Goods Inventory during January? A) 70,000 B) 63,000 C) 58,000 D) 77,000 22. A S2.00 increase in a products variable expense per unit accompanied by a $2.00 increase in its selling price per unit will: A) decrease the degree of operating leverage B) decrease the contribution margin. C) have no effect on the break-even volume. D) have no effect on the contribution margin ratio. 23. Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (5,700 units) Variable expenses Contribution margin Fixed expenses Net operating income s 319,200 188,100 131,100 106,500 24.600 If the company sells 5,300 units,its net operating income should be closest to: A) $24,600 B) $2,200 C) $22,874 D) S15,400

Explanation / Answer

21) Calculation of cases which is completed and transferred to finished goods inventory :

Completed and transferred to finished goods inventory = (5000+65000-7000) = 63000

so answer is b) 63000

22) When variable expenses is $10 and selling price is $5 by contribution margin is (10-5) =$5 when price increase by $2 and variable cost increase by $2 so contribution margin is fix so Break even point has no effect.

so answer is c) have no effect on the break even volume.

23) If company sells 5300 unit then net operating income should be :

Contribution margin per unit = (131100/5700) = 23 per unit

Net operating income = Contribution margin-Fixed cost

                               = (5300*23)-106500

Net operating income = 15400

so answer is d) $15400

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