Question

QUESTION 15 Traverse Company manufactures and sells women's skirts. Selected data from Traverse's master budget for next quarter are shown below Budgeted sales (in units) Budgeted production (in units). July August September 9,000 12,000 6,000 8,000 8,000 10,500 Each unit requires 1.5 hours of direct labor, and the average hourly cost of Traverse's direct labor is $10. What is the cost of Traverse Company's direct labor in September? 1. $135,000 O 2. $180,000 3. $157,500 O 4.$120,000 QUESTION 16 Mason Company's selling price for its only product was $20.00 per unit. Fixed expenses totaled $54,000, variable expenses were $14.00 per unit, and the company reported a profit of $9,000 for the year. What is the break-even point in units for Mason Company's product? 1.3857 units O 2.9000 units 3.7500 units O 4.none of the above QUESTION 17 True or False. A company which has a lower degree of operating leverage than its competitor will see its profits increase more than its competitor's even though both companies have the same increase in sales. It will also see its profits decrease more than it's competitors even when both companies have the same decrease in sales. O True O False

Answer 1

Solution 15:

Budgeted cost of direct labor in september = Budgeted direct labor hours * Budgeted rate of direct labor

= (12000*1.50) * $10 = $180,000

Hence option 2 is correct.

Solution 16:

contribution margin per unit = Selling price per unit - Variable cost per unit

= $20 - $14 = $6 per unit

Fixed expenses = $54,000

Breakeven point in units = Fixed expenses / Contribution margin per unit = $54,000 / $6 = 9000 units

Hence option 2 is correct.

Solution 17:

False, A company which has a lower degree of operating leverage than its competitor will see its profits increase lesser than its competitor's even though both companies have the same increase in sales. It will also its profit decrease lesser than its competitors even when both companies have the same decrease in sales.