Question

1. Grover Company has the following data for the production and sale of 2,000 units.

Sales price per unit	$	800	per unit
Fixed costs:
Marketing and administrative	$	400,000	per period
Manufacturing overhead	$	200,000	per period
Variable costs:
Marketing and administrative	$	50	per unit
Manufacturing overhead	$	80	per unit
Direct labor	$	100	per unit
Direct Materials	$	200	per unit

  
What is the prime cost per unit?

a.) $100

b.) $280

c.) $300

d.) $480

Prime cost per unit

= Direct materials per unit+ Direct labor per unit

= $200+ $100

=$ 300 per unit

2.Prime cost consists of direct materials combined with:

a.) direct labor.

b.) manufacturing overhead.

c.) indirect materials.

d.) cost of goods manufactured.

3.Given the following information for a retail company, what is the total cost of goods purchased for the period?

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Purchases discounts	$	3,500
Transportation-in		6,700
Ending inventory		35,000
Gross merchandise cost		304,000
Purchases returns		8,400
Beginning inventory		27,000
Sales discounts		10,300

a.) $298,800

b.) $290,800

c.) $282,100

d.) $304,000

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4.Foxburg Company has the following information:

  

	Work-in-Process				Finished Goods				Materials
Beginning inventory	$	300			$	400			$	500
Ending inventory	$	700			$	900			$	1,500
Purchases of materials (net)	$	7,700
Cost of Goods Sold	$	15,600
Manufacturing overhead	$	4,300

What was the cost of goods available for sale for the period?

a.) $16,800

b.) $16,500

c.) $16,100

d.) $15,100

5.During the year, a manufacturing company had the following operating results:

Beginning work-in-process inventory	$	45,000
Beginning finished goods inventory	$	190,000
Direct materials used in production	$	308,000
Direct labor	$	475,000
Manufacturing overhead incurred	$	250,000
Ending work-in-process inventory	$	67,000
Ending finished goods inventory	$	89,000

What is the cost of goods manufactured for the year?

a.) $1,011,000

b.) $1,134,000

c.) $1,033,000

d.) $1,112,000

6.The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows:

Cost Item	Estimated Unit Cost
Direct material	$	32
Direct labor		20
Variable manufacturing overhead		15
Fixed manufacturing overhead		6
Variable selling expenses		3
Fixed selling expenses		4

What are the estimated prime costs per unit?

a.) $73

b.) $32

c.) $67

d.) $52

7.Grover Company has the following data for the production and sale of 2,000 units.  

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Sales price per unit	$	800	per unit
Fixed costs:
Marketing and administrative	$	400,000	per period
Manufacturing overhead	$	200,000	per period
Variable costs:
Marketing and administrative	$	50	per unit
Manufacturing overhead	$	80	per unit
Direct labor	$	100	per unit
Direct materials	$	200	per unit

What is the full cost per unit of making and selling the product?

a.) $430

b.) $480

c.) $530

d.) $730

8.Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected.

Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products.
  

	Product L				Product W
Direct materials	$	44			$	36
Machining labor ($12/hour)		18				15
Assembly labor ($10/hour)		30				10
Variable overhead ($8/hour)		36				18
Fixed overhead (4/hour)		18				9
Total Manufacturing Cost	$	146			$	88
Estimated selling price per unit	$	170			$	100
Actual research and development costs	$	240,000			$	175,000
Estimated advertising costs	$	500,000			$	350,000

The difference between the $100 estimated selling price for Mountainburg's Product W and its total cost of $88 represents

a.) Contribution margin per unit.

b.) Gross margin per unit.

c.) Variable cost per unit.

d.) Operating profit per unit.

9.Ramos Company has the following unit costs:

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Variable manufacturing overhead	$	13
Direct materials		12
Direct labor		17
Fixed manufacturing overhead		10
Fixed marketing and administrative		8

What cost per unit would be used for product costing under variable costing?

a.) $29

b.) $42

c.) $52

d.) $60

10.Vegas Company has the following unit costs:

Variable manufacturing overhead	$	25
Direct materials		20
Direct labor		19
Fixed manufacturing overhead		12
Variable marketing and administrative		7

Vegas produced and sold 10,000 units. If the product sells for $100, what is the contribution margin?

a.) $170,000

b.) $240,000

c.) $290,000

d.) $360,000

11.Vegas Company has the following unit costs:

Variable manufacturing overhead	$	25
Direct materials		20
Direct labor		19
Fixed manufacturing overhead		12
Variable marketing and administrative		7

Vegas produced and sold 10,000 units. If the product sells for $100, what is the operating profit using a contribution margin income statement?

a.) $170,000

b.) $240,000

c.) $290,000

d.) $360,000

Answer 1

1. Prime Cost = Raw Materials + Direct Labor
Prime cost per unit
= Direct materials per unit+ Direct labor per unit
= $200+ $100
=$ 300 per unit
2.Prime cost consists of direct materials combined with:
a.) direct labor.
3.Total cost of goods purchased for the period
Gross merchandise cost	304,000
Add:Transportation-in	6,700
Less:Purchases discounts	3,500
Less:Purchases returns	8,400
Cost of goods purchased for the period	298,800
4.    ANSWER: c.) 16100
COG available for sale=COGS+Ending Inventory of Finished goods-Op.Inv of finished goods =15600+900-400=16100

5. ANSWER:      a.) 1,011,000
Beginning work-in-process inventory	45,000
Add:Direct materials used in production	308,000
Add:Direct labor	475,000
Add:Manufacturing overhead incurred	250,000
Less:Ending work-in-process inventory	67,000
Cost of goods manufactured for the year	1,011,000

6. Estimated prime costs per unit
Direct material	32
Direct labor	20
Total Estd. Prime cost/unit	52
ANSWER: d. $ 52

7. Full cost per unit of making and selling the product
Variable costs:
Direct materials	200	per unit
Direct labor	100	per unit
Manufacturing overhead	80	per unit
Marketing and administrative	50	per unit
Total Variable costs/unit	430	per unit
Fixed costs:
Marketing and administrative400000/2000	200	per unit
Manufacturing overhead200000/2000	100	per unit
Total Fixed costs/unit	300	per unit
Total /Full cost/unit(430+300)	730	per unit
Sales price per unit	800	per unit

8
As,Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries& not selling and administrative expenses ,it is not operating profit
ANSWER: b.) Gross margin per unit.

9. cost per unit would be used for product costing under variable costing
Variable manufacturing overhead	13
Direct materials	12
Direct labor	17
Total	42
ANSWER: b.) $ 42

10. Vegas produced and sold 10,000 units. If the product sells for $100, what is the contribution margin
Selling Price/unit		100
Less: Variable costs/unit
Direct materials	20
Direct labor	19
Variable manufacturing overhead	25
Variable marketing and administrative	7	71
Contribution Margin/unit(100-71)		29
No.of units sold		10000
Total contribution margin 36*10000		290000
ANSWER: c.) $ 290,000

11.   Vegas produced and sold 10,000 units. If the product sells for $100,the operating profit using contribution margin income statement
Selling Price/unit		1000000
Less: Variable costs/unit
Direct materials at 20/unit	200000
Direct labor at 19/unit	190000
Variable manufacturing overhead at 25/unit	250000
Variable marketing and administrative at 7/unit	70000	710000
Contribution Margin(100-71)*10000		290000
Less: Fixed manufacturing overhead		120000
Operating Profit		170000
ANSWER: a.) $ 170,000