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2019A Company 1. The following information is taken from the records of 2019A Company for July: $7,000 32,000 Direct materials Sales 3,750 4,500 1,250 1,500 500 600 80 40 100 Salaries and wages: Selling and administrative salaries Direct manufacturing labour (hourly) Rent - Manufacturing Property Taxes - Plant Rent-Office Advertising Amortization of manufacturing equipment (straight-line) Amortization of office equipment (straight-line) General office expenses Indirect manufacturing labour (hourly) Miscellaneous plant overhead Lease cost for salespersons company vehicles Inventories: Direct materials Work in Process Finished goods 45 28 $4,000 $1,500 4500 18,000 480 00 24,000 2. The company produces two products; Anise and Basil. The total revenue and total variable cost for each product broke down as follows: Product 14,000 16,000 10,000 Revenue Variable costs 6,000 Required: a. Prepare a schedule of cost of goods manufactured. (6.5 marks) b. Prepare an income statement (absorption using gross margin) for the month. (5.5 marks) c. For each of the expenses on your cost of goods manufactured statement, in a column to the right of your statement, indicate if the expense is direct(D) or indirect(I), and fixed(F) orok variable(V). (1/2 mark each to a maximum of 3 marks) eg. Manufacturing Supervisor Salary 60,000 I& F d. If Anise sells for $7/unit and Basil sells for $4/unit, calculate the contribution margin per unit per product. (1.5 marks) e. Calculate the operating income if sales increase by 10%. (1.5 marks) f. Calculate how many units must be sold to break-even. (2.5 marks) come tax rate is 30%, calculate how many units must be sold to achieve net income of $12,000. (2.5 marks) h. Using the July results, calculate the margin of safety in dollars. (1 mark) L Calculate the degree of operating leverage for July. (1 mark)
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Part a and c:
Nature
Direct materials costs:
-Beginning inventory $    4,000
- Purchases of direct materials $    7,000
-Cost of direct materials available for use $ 11,000
Ending inventory $ -1,500
Direct Material Used $    9,500 D & V
Direct manufacturing labor costs $    4,500 D & V
Indirect manufacturing labor costs:
-Rent Manufacturing $    1,250 I & F
-Property Tax Plant $    1,500 I & F
-Amortization of Manufacturing Equip $         80 I & F
-Indirect manufacturing labor $         60 I & F
-Miscellaneous plant overhead $         45 $    2,935 I & F
Manufacturing costs incurred $ 16,935
Add beginning work-in-process inventory $       450
Total manufacturing costs to account for $ 17,385
Less Ending WIP $     -480
Cost of Goods Manufactured $ 16,905
Part b:
Sales $ 32,000
Less: Cost of Goods Sold:
Beginning Finished Goods Inventory $ 18,000
Add: Cost of Goods Manufactured $ 16,905
Cost of Goods available for sale $ 34,905
Less: Ending Finished goods inventory $-24,000 $-10,905
Gross Margin $ 21,095
Less: Selling and Administrative Expense:
-Selling and Administrative Salaries $    3,750
-Rent Office $       500
-Advertising $       600
-Amortization of Office Equipment $         40
-General Office Expense $       100
-Lease cost of Sales person vehicle $         28 $ -5,018
Net Income $ 16,077
Part d:
Anise Basil
Selling price per unit $      7.00 $      4.00
Less: Variable Cost per unit (Working below) $    -3.00 $    -2.50
Contribution Margin per unit $      4.00 $      1.50
Variable cost per unit:
No of Units Sold 14000/7 16000/4
(Revenue/Selling Price) B        2,000        4,000
Total Variable Cost A $    6,000 $ 10,000
Variable Cost per Unit A/B $      3.00 $      2.50
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