Question

Chapter 1 2/04/20 (A EXERCISE 1-6 Traditional and Contribution Format Income Statements LO1-6 Cherokee Inc. is a merchandiser that provided the following information: mount 20,000 $30 $4 $2 Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit Total fixed selling expense Lav Total fixed administrative expense Beginning merchandise inventory... Ending merchandise inventory Merchandise purchases t $40,000 $30,000 $24,000 $44,000 $180,000 Required: 1. Prepare a traditional income statement 2 Prepare a contribution format income statement. EXERCISE 1-7 Direct and Indirect Costs L01-1 Kubin Company's relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows: Direct materials .......................... Direct labor........... ...... .... Variable manufacturing overhead....... Fixed manufacturing overhead. Fixed selling expense. Fixed administrative expense..... ..... Sales commissions ... .. . Variable administrative expense..... $7.00 $4.00 $1.50 $5.00 $3.50 $2.50 $1.00 $0.50 Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 20,000 units? b. What is the total indirect manufacturing cost incurred to make 20,000 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 20,000 units. a. How much total manufacturing cost is directly traceable to the Manufacturing Department? b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department? 3. Assume the cost object is the company's various sales representatives. Furthermore, assume that the company spent $50,000 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives compensation a. When the company sells 20,000 units, what is the total direct selling expense that can be readily traced to individual sales representatives? b. When the company sells 20,000 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives? 4. Are Kubin's administrative expenses always going to be treated as indirect costs in its internal management reports? fixed: won't change of actresting (time) aruste: sime par wait

Exercise 1-9 Fixed, Variable, and Mixed Costs LO1-4

Refer to the data given in Exercise 1-7. Answer all questions independently (1-8).

Answer 1

Answer 1

Variable cost per unit for 18,000 units = Direct material +Direct Labor + Variable manufacturing overhead + sales commission + Variable administrative overhead

Variable cost per unit = $ 7 + $ 4 + $ 1.50 + $ 1 + $ 0.50

Variable cost per unit = $ 14 per unit

Answer 2

Variable cost per unit for 22,000 units = Direct material +Direct Labor + Variable manufacturing overhead + sales commission + Variable administrative overhead

Variable cost per unit = $ 7 + $ 4 + $ 1.50 + $ 1 + $ 0.50

Variable cost per unit = $ 14 per unit

Answer 3

Total Variable cost for 18,000 units = Variable cost per unit for 18,000 units * 18,000

Total Variable cost for 18,000 units = $ 14* 18000

= $ 252,000

Answer 4

Total Variable cost for 22,000 units = Variable cost per unit for 22,000 units * 22,000

Total Variable cost for 22,000 units = $ 14* 22000

= $ 308,000

Answer 5

Total fixed cost = ($ 5 + $ 3.5 + $ 2.5) * 20,000 units = $ 220,000

Fixed cost per unit for 18,000 units = $ 220,000 / 18,000

= $ 12.22 per unit

Answer 6

Total fixed cost = ($ 5 + $ 3.5 + $ 2.5) * 20,000 units = $ 220,000

Fixed cost per unit for 22,000 units = $ 220,000 / 22,000

= $ 10 per unit

Answer 7

Total fixed cost = ($ 5 + $ 3.5 + $ 2.5) * 20,000 units = $ 220,000

Answer 8

Total fixed cost = ($ 5 + $ 3.5 + $ 2.5) * 20,000 units = $ 220,000

In case of any doubt, please comment.