tem October November Unita produced and sold 900 1,000 Sales $900,000 $1,000,000 Leather uaed for the biayale zeata 27,000 20,000 Production manager'i zalary 6,000 6,000 Life insuranoe for the oompany presideat 200 200 Elecricity uzed in the production facilities* 1,000 1,100 Sales commissicna 45,000 50,000 Iaternet advertiaing 1,000 1,000 Employee benefita for the production warkerat 18,000 20,000 Property taxes on the production facilities 1,000 1,000 Shipping oouta 45,000 50,000 Salary of the chief financial cfficer 10,000 10,000 "Each moath, regardless of how mach eleotricity ia used, Cycle Businesa paya a $100 baze charge to the utilities company. +Employee benefita total 20% of the wages paid to production woekera, who on average earn $20 per hour. Eash bioyele requires 5 houra of direct labour. Required: 1. With respect to the partial list of November expenses, answer the following: a. Which items represent variable manufacturing costs? b. Which items represent fixed manufacturing costs?
Precious Products Ltd.
Income Statement
For the year ended xxxx
Sales.................................................................... $______
Cost of goods sold:
Finished goods inventory, beginning.................... $ ______
Add: Cost of goods manufactured ....................... ______
Goods available for sale...................................... ______
Deduct: Finished goods inventory, ending............ ______ ______
Gross margin........................................................ ______
Selling and administrative expenses:
Selling expenses................................................. ______
Administrative expenses ..................................... ______ ______
Operating income ................................................. $ , .
3. Direct labour: $______÷ 10,000 units = $______per unit.
Insurance: $______÷ 10,000 units = $______per unit.
4. Direct materials:
Unit cost: $: $______÷ 10,000 units = $______per unit.
Total cost: ______units × $______ per unit = $______.
Insurance:
Unit cost: $______÷ 12,000 units = $______per unit.
Total cost: $______ (unchanged)
5. Unit cost for insurance dropped from $___ to $____, because of the increase in
production between the two years. Since fixed costs do not change in total as the
activity level changes, they will decrease on a unit basis as the activity level rises.
6. If the company produced 20,000 units then the following costs would appear in inventory: (hint, how many units would be in ending inventory?)
Direct materials ($______/20,000)*4,000 units = $______
Direct labour ($______/20,000)* 4,000 units = ______
Manufacturing
Total $
What is meant by Variable Cost?
The cost that varies with changes in production or sales units is called Variable cost.
For instance Direct labor
What is meant by Fixed Cost?
The cost remains fixed irrespective of changes in production or sales units.
For instance, Factory Rent
Note:
As you have posted multiple independent questions, we are answering the first question and its five sub-parts. Please resubmit the remaining unanswered questions as separate questions.
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