Homework Answers
Answer
| Answer to 1 | ||||
| Computation of break even point in Units | ||||
| Particulars | ||||
| a | Sales | 56 | ||
| b | Total Variable Expenses(25+16+5+2) | 48 | ||
| c | Contribution(a-b) | 8 | ||
| d | Total Fixed Cost | |||
| (300000+180000) | 480000 | |||
| e | Break even point in Units | 60000 | ||
| Answer to 2 | ||||
| company uses variable costing | ||||
| (a) | ||||
| Computation of Unit Product Cost | ||||
| Particulars | Year 1 | Year 2 | Year 3 | |
| Units Produced | 60,000.00 | 75,000.00 | 40,000.00 | |
| Units sold | 60,000.00 | 50,000.00 | 65,000.00 | |
| Closing Inventory | 25,000.00 | |||
| Unit Product Cost (*) | 46 | 46 | 46 | |
| (* )- We only cover production cost here that’s why we do not consider variable selling and adminstrative cost. | ||||
| (b) | ||||
| Roberts Company | ||||
| Variable Costing Income Statement | ||||
| Particulars | Year 1 | Year 2 | Year 3 | |
| Sales | 3,360,000.00 | 2,800,000.00 | 3,640,000.00 | |
| Variable Expenses | ||||
| Direct material (Units Produced * 25) | 1,500,000.00 | 1,875,000.00 | 1,000,000.00 | |
| Direct Labor (Units Produced * 16) | 960,000.00 | 1,200,000.00 | 640,000.00 | |
| Variable Manufacturing Overhead (Units Produced * 5) | 300,000.00 | 375,000.00 | 200,000.00 | |
| Product Costs | 2,760,000.00 | 3,450,000.00 | 1,840,000.00 | |
| Add: Opening Inventory | - | - | 1,150,000.00 | |
| Less: Closing Inventory (25000*46) | - | 1,150,000.00 | - | |
| Variable Production Cost | 2,760,000.00 | 2,300,000.00 | 2,990,000.00 | |
| Add: Variable selling and Admin. Expense.(Units Sold * 2) | 120,000.00 | 100,000.00 | 130,000.00 | |
| Total Variable expenses | 2,880,000.00 | 2,400,000.00 | 3,120,000.00 | |
| Contribution | 480,000.00 | 400,000.00 | 520,000.00 | |
| Fixed expenses | ||||
| Fixed manufacturing Overhead | 300,000.00 | 300,000.00 | 300,000.00 | |
| Fixed selling and Admin. Overhead | 180,000.00 | 180,000.00 | 180,000.00 | |
| Total Fixed expenses | 480,000.00 | 480,000.00 | 480,000.00 | |
| Net Operating Income (Loss) | - | (80,000.00) | 40,000.00 | |
| Answer to 3 | ||||
| company uses absorption costing | ||||
| (a) | ||||
| Computation of Unit Product Cost | ||||
| Particulars | Year 1 | Year 2 | Year 3 | |
| Units Produced | 60,000.00 | 75,000.00 | 40,000.00 | |
| Units sold | 60,000.00 | 50,000.00 | 65,000.00 | |
| Closing Inventory | 25,000.00 | |||
| Variable Maufacturing Cost (25+16+5) | 46.00 | 46.00 | 46.00 | |
| Fixed manufacturing Cost (**) | 5.00 | 4.00 | 7.50 | |
| Unit Product Cost | 51.00 | 50.00 | 53.50 | |
| (**)Calculation of fixed manufacturing overhead per unit | ||||
| Fixed manufacturing overhead/Units Produced | ||||
| (b) | ||||
| Roberts Company | ||||
| Absorption Costing Income Statement | ||||
| Particulars | Year 1 | Year 2 | Year 3 | |
| Sales | 3,360,000.00 | 2,800,000.00 | 3,640,000.00 | |
| Cost of goods Sold | ||||
| Cost of goods Manufactured (units Produced * Unit Product Cost) | 3,060,000.00 | 3,750,000.00 |
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