Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Chapter 1, Problem 18P
PROBLEM 1—18 Direct and Indirect Costs; Variable Costs
The following cost data pertain to the operations of Montgomery Department Stores, Inc., for the month of July. 
The Evendale Store is one of many stores owned and operated by the company. The Apparel Department is one of many departments at the Evendale Store. The central warehouse serves all of the company’s stores.
Required:
1.What is the total amount of the costs listed above that are direct costs of the Apparel Department?
2. What is the total amount of the costs listed above that are direct costs of the Evendale Store?
3. What is the total amount of the Apparel Department’s direct costs that are also variable costs with respect to total departmental sales?
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REQUIRED
Prepare the Income Statement of Abbey Limited for the month ended 31 March 2023 using the following
methods:
2.1 Absorption costing
2.2 Variable costing
INFORMATION
The following information was extracted from the accounting records of Abbey Limited for the month ended 31
March 2023:
Inventory on 01 March 2023
Production
Sales
Selling price per unit
Manufacturing costs:
Fixed manufacturing overheads costs
Direct materials cost per unit
Direct labour cost per unit
Variable manufacturing overheads costs per unit
Marketing costs:
Advertising
Sales personnel's salaries and commission
Delivery costs
Administration costs:
Salaries
Other office costs
Nil
50 000 units
40 000 units
R200
R480 000
R40
R24
R16
R32 000 per month
R36 000 per month plus 5% of sales
R24 per unit sold
R80 000 per month
R32 000 per month plus R16 per unit sold
Question 2
CRAZY Co, is a major producer of beauty products. The company uses a standard cost system to
help control costs. Manufacturing overhead is applied to production on the basis of standard
direct labor-hours. The company has a standard of 10 labor hours per unit.
According to the company's planning budget, the following manufacturing overhead costs
should be incurred at an activity level of 17,500 labor-hours (the denominator activity level):
Variable manufacturing overhead cost ....$ 175,000
Fixed manufacturing overhead cost .
Total manufacturing overhead cost.......
$420,000
... $595,000
During the most recent year, the following operating results were recorded:
Activity:
Actual Production. ..
1,600
15,000
Total Actual labor-hours worked .
Cost:
Actual variable manufacturing overhead cost incurred .....$156,000
Actual fixed manufacturing overhead cost incurred ........ $418,800
Required:
1. Calculate the standard fixed manufacturing overhead rate and variable manufacturing…
Assume you are the department B manager for Marley's Manufacturing. Marley's operates
under a cost-based transfer structure. Assume you receive the majority of your raw materials
from department A, which sells only to department B (they have no outside sales). After
calculating the operating income in dollars and operating income in percentage, analyze the
following financial information to determine costs that may need further investigation.
Marley's Manufacturing
Income Statement
Month Ending August 31, 2018
Dept. A
Dept. B
Sales
$22,000
$52,000
Cost of goods sold
10,780
27,040
Gross profit
$11,220
$24,960
Expenses:
Utility expenses
$880
$3,640
Wages expense
5,280
10,920
Costs allocated from corporate
1,980
14,560
Total expenses
$8,140
$29,120
Operating income/(loss) in dollars
$
$
Operating income/(loss) in percentage
%
Department B had an operating loss.
Department A had an operating loss.
Department B has a higher wage percent of sales.
Department A receives a higher percent…
Chapter 1 Solutions
Introduction To Managerial Accounting
Ch. 1 - What are the three major types of product costs in...Ch. 1 - Define the following: (a) Direct materials, (b)...Ch. 1 - Explain the difference between a product cost and...Ch. 1 - Distinguish between (a) a variable cost, (b) a...Ch. 1 - What effect does an increase in the activity level...Ch. 1 - Define the following terms: (a) Costbehavior and...Ch. 1 - What is meant by an activity base when dealing...Ch. 1 - Managers often assume a strictly linear...Ch. 1 - Distinguish between discretionary fixed costs and...Ch. 1 - Does the concept of the relevant range apply to...
Ch. 1 - What is the difference between a traditional...Ch. 1 - Prob. 12QCh. 1 - Define the following terms: differential cost,...Ch. 1 - Only variable costs can be differential costs. Do...Ch. 1 - Prob. 1AECh. 1 - This Excel worksheet form is to be used to...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Prob. 4F15Ch. 1 - Prob. 5F15Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Prob. 8F15Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Martinez Company’s relevant range of production is...Ch. 1 - Prob. 15F15Ch. 1 - Identifying Direct and Indirect Costs Northwest...Ch. 1 - Prob. 2ECh. 1 - Classifying Costs as Product or Period Costs...Ch. 1 - Prob. 4ECh. 1 - Prob. 5ECh. 1 - Traditional and Contribution Format Income...Ch. 1 - Direct and Indirect CostsKubin Company’s relevant...Ch. 1 - Product Costs and Period Costs; Variable and Fixed...Ch. 1 - Fixed, Variable, and Mixed Costs Refer to the data...Ch. 1 - Differential Costs and Sunk Costs Refer to the...Ch. 1 - Cost Behavior; Contribution Format Income...Ch. 1 - Product and Period Cost Flows The Devon Motor...Ch. 1 - Prob. 13ECh. 1 - Cost Classification Wollogong Group Ltd. of New...Ch. 1 - Traditional and Contribution Format Income...Ch. 1 - Cost Classifications for Decision Making Warner...Ch. 1 - Classifying Variable and Fixed Costs and Product...Ch. 1 - PROBLEM 1—18 Direct and Indirect Costs; Variable...Ch. 1 - Traditional and Contribution Format Income...Ch. 1 - Variable and Fixed Costs; Subtleties of Direct and...Ch. 1 - Traditional and Contribution Format Income...Ch. 1 - Cost Terminology; Contribution Format Income...Ch. 1 - Cost Classification Listed below are costs found...Ch. 1 - Different Cost Classifications for Different...Ch. 1 - Traditional and Contribution Format Income...
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