Acct 525 Fall 2017 Exam 1

Exam (elaborations) Acct 525 Fall 2017 Exam 1 Acct 525 Fall 2017 Exam 1 Submitted 1. A partial listing of costs incurred at Archut Corporation during September appears below: Direct materials $ 113,0 00 Utilities, factory $ 5,000 Administrative salaries $ 81,00 0 Indirect labor $ 25,00 0 Sales commissions $ 48,00 0 Depreciation of production equipment $ 20,00 0 Depreciation of administrative equipment $ 30,00 0 Direct labor $ 129,0 00 Advertising $ 135,0 00 The total of the period costs listed above for September is: Multiple Choice  $294,000 Correct  $344,000  $50,000  $292,000 Explanation Period costs include: Administrative salaries; Sales commissions; Depreciation of administrative equipment; and Advertising. $81,000 + $48,000 + $30,000 + $135,000 = $294,000 2. A manufacturer of tiling grout has supplied the following data: Kilograms produced and sold 380,00 0 Sales revenue $ 2,736,0 00 Variable manufacturing expense $ 1,349,0 00 Fixed manufacturing expense $ 336,00 0 Variable selling and administrative expense $ 399,00 0 Fixed selling and administrative expense $ 372,00 0 Net operating income $ 280,00 0 The company's break-even in unit sales is closest to: Multiple Choice  92,055  98,333  272,308 Correct  60,488 Explanation Contribution margin = Sales – Variable expenses = $2,736,000 – ($1,349,000 + $399,000) = $2,736,000 – $1,748,000 = $988,000 Unit CM = $988,000 ÷ 380,000 kilograms = $2.60 per kilogram Unit sales to break even = Fixed expenses ÷ Unit CM = $708,000 ÷ $2.60 per kilogram = 272,308 kilograms 3. A company makes a single product that it sells for $16 per unit. Fixed costs are $76,800 per month and the product has a contribution margin ratio of 40%. If the company's actual sales are $224,000, its margin of safety is: Multiple Choice  $128,000  $192,000  $32,000 Correct  $96,000 Explanation Dollar sales to break even = Fixed expenses ÷ CM ratio = $76,800 ÷ 0.4 = $192,000 Margin of safety in dollars = Total budgeted (or