The following information pertains to questions 16 and 17. Mediocre Manufacturin
ID: 2597519 • Letter: T
Question
The following information pertains to questions 16 and 17. Mediocre Manufacturing Company produces a single product. Management budgeted the following costs for its first year of operations. These costs are based on a budgeted volume of 4,000 units produced and sold: Direct materials $ 28,000 Direct labor $ 14,000 Manufacturing overhead Variable $ 56,000 Fixed $ 63,000 Selling and administrative Variable $ 7,000 Fixed $ 42,000 During the first year of operations, Mediocre actually produced 4,000 units but only sold 3,500 units. Actual costs did not fluctuate from the cost behavior patterns described above. The 3,500 units were sold for $72 per unit.
16. What is the total cost that would be assigned to Mediocre's finished goods inventory at the end of the first year of operations under the absorption costing method?
A. $12,250
B. $20,125 This is the answer
C. $23,000
D. $26,250
E. None of the above
17. Under the variable costing method, what is Mediocre's actual net operating income for its first year?
A. $42,000
B. $54,250
C. $55,125 This is the Answer
D. $63,000
E. None of the above
Please solve step by step. I dont understand.***
Explanation / Answer
16. What is the total cost that would be assigned to Mediocre's finished goods inventory at the end of the first year of operations under the absorption costing method?
A. $12,250
B. $20,125 This is the answer
C. $23,000
D. $26,250
E. None of the above
Product cost = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead
= $28,000 + $14,000 + $56,000 + $63,000 = $161,000
Unit product cost = $161,000 ÷ 4,000 = $40.25
Total cost of ending finished goods inventory = Unit product cost × Ending inventory in units = $40.25 × (4,000 3,500) = $20,125
17. Under the variable costing method, what is Mediocre's actual net operating income for its first year?
A. $42,000
B. $54,250
C. $55,125 This is the Answer
D. $63,000
E. None of the above
Unit product cost = (Direct materials + Direct labor + Variable manufacturing overhead) ÷ 4,000 units
= ($28,000 + $14,000 + $56,000) ÷ 4,000 = $24.50
Income statement(Contribution Format)
Sales revenue ($72 × 3,500)
$ 252,000
Variable costs:
Variable cost of goods sold ($24.50 × 3,500)
85,750
Variable selling and administrative ($1.75* × 3,500)
6,125
91,875
Contribution margin
160,125
Fixed costs:
Fixed manufacturing overhead
63,000
Fixed selling and administrative
42,000
105,000
Net operating income
55,125
*7000/4000 = 1.75
Income statement(Contribution Format)
Sales revenue ($72 × 3,500)
$ 252,000
Variable costs:
Variable cost of goods sold ($24.50 × 3,500)
85,750
Variable selling and administrative ($1.75* × 3,500)
6,125
91,875
Contribution margin
160,125
Fixed costs:
Fixed manufacturing overhead
63,000
Fixed selling and administrative
42,000
105,000
Net operating income
55,125
*7000/4000 = 1.75
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.