Answered: Cranston Corporation makes four…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cranston Corporation makes four products in a single facility. Data concerning these products appear below:

	Products
	A	B	C	D
Selling price per unit	$	42.30	$	50.00	$	37.60	$	33.50
Variable manufacturing cost per unit	$	20.80	$	30.70	$	21.00	$	19.90
Variable selling cost per unit	$	2.70	$	2.10	$	1.00	$	2.40
Milling machine minutes per unit		3.30		4.10		2.60		1.30
Monthly demand in units		1,000		4,000		3,000		3,000

The milling machines are potentially the constraint in the production facility. A total of 28,200 minutes are available per month on these machines.

Which product makes the MOST profitable use of the milling machines?

		Product A
		Product C
		Product B
		Product D

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?

		$360,000
		$170,000
		$290,000
		$240,000

Dorcan Corporation manufactures and sells T-shirts imprinted with college names and slogans. Last year, the shirts sold for $7.50 each, and the variable cost to manufacture them was $2.25 per unit. The company needed to sell 20,000 shirts to break-even. The after tax net income last year was $5,040. Donnelly's expectations for the coming year include the following: (CMA adapted)

∙ The sales price of the T-shirts will be $9.
�� Variable cost to manufacture will increase by one-third.
∙ Fixed costs will increase by 10%.
∙ The income tax rate of 40% will be unchanged.

Sales for the coming year are expected to exceed last year's by 1,000 units. If this occurs, Dorcan's sales volume in the coming year will be:

		23,400 units.
		21,960 units.
		22,600 units.
		21,000 units.

Supler Corporation produces a part used in the manufacture of one of its products. The unit product cost is $18, computed as follows:


Direct materials	$	8
Direct labor		4
Variable manufacturing overhead		1
Fixed manufacturing overhead		5
Unit product cost	$	18

An outside supplier has offered to provide the annual requirement of 4,000 of the parts for only $14 each. The company estimates that 60% of the fixed manufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:

		$2 per unit on average
		($4) per unit on average
		$1 per unit on average
		($1) per unit on average

Two products, QI and VH, emerge from a joint process. Product QI has been allocated $9,600 of the total joint costs of $12,000. A total of 9,000 units of product QI are produced from the joint process. Product QI can be sold at the split-off point for $13 per unit, or it can be processed further for an additional total cost of $54,000 and then sold for $18 per unit. If product QI is processed further and sold, what would be the financial advantage (disadvantage) for the company compared with sale in its unprocessed form directly after the split-off point?

		$600
		($18,600)
		($9,000)
		$108,000

Caruso Inc., which produces a single product, has provided the following data for its most recent month of operations:


Number of units produced		4,000
Variable costs per unit:
Direct materials	$	39
Direct labor	$	71
Variable manufacturing overhead	$	5
Variable selling and administrative expense	$	8
Fixed costs:
Fixed manufacturing overhead	$	220,000
Fixed selling and administrative expense	$	308,000

There were no beginning or ending inventories.

The unit product cost under absorption costing was:

		$115 per unit
		$170 per unit
		$110 per unit
		$255 per unit

Wyrich Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period:

	Total Company	Blue Division		Gold Division
Sales	$	522,000	$	391,000	$	131,000
Variable expenses		160,670		89,930		70,740
Contribution margin		361,330		301,070		60,260
Traceable fixed expenses		286,000		239,000		47,000
Segment margin		75,330	$	62,070	$	13,260
Common fixed expenses		73,080
Net operating income	$	2,250

The Gold Division's break-even sales is closest to:

		$102,174
		$261,043
		$142,043
		$518,750

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?

		$1,011,000
		$1,134,000
		$1,112,000
		$1,033,000

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