Managerial Study Problems
Brief Exercise 2-2
Following are a number of costs that are incurred in a variety of organizations.
Required:
Classify each cost as variable or fixed with respect to the number of units sold or services provided by the organization by placing an X in the appropriate column.
Brief Exercise 3-8
The Alpine House, Inc. is a large retailer of winter sports equipment. Here is an income statement for the company's ski department for a recent quarter:
D
On average, skis sell for $700 per pair. Variable selling expenses are $50 per pair of skis sold. The remaining selling expenses are fixed. The administrative expenses are 20% variable and 80% fixed. The company does not manufacture its own skis; it purchases them from a supplier for $450 per pair.
Page 92
Required:
1. Prepare a contribution margin income statement for the quarter.
2. For every pair of skis sold during the quarter, what was the contribution toward covering fixed expenses and toward earning profits?
Brief Exercise 4-7
Osborn Manufacturing uses a predetermined overhead rate of $28.20 per direct labour-hour. This predetermined rate was based on 12,000 estimated direct labour-hours and $338,400 of estimated total manufacturing overhead.
The company incurred actual total manufacturing overhead costs of $315,000 and 11,500 total direct labour-hours during the period.
Required:
1. Determine the amount of underapplied or overapplied manufacturing overhead for the period.
2. Assuming that the entire amount of the underapplied or overapplied overhead is closed out to cost of goods sold, what would be the effect of the underapplied or overapplied overhead on the company's gross margin for the period?
Brief Exercise 5-7
In June, 4,600 units were completed and transferred out of the mixing process at Avalanche Industries
Ltd. The ending work-in-process inventory was 400 units, 30% complete as to conversion costs and
100% complete as to materials costs. The month's charges were $18,880 for conversion costs and
Following are a number of costs that are incurred in a variety of organizations.
Required:
Classify each cost as variable or fixed with respect to the number of units sold or services provided by the organization by placing an X in the appropriate column.
Brief Exercise 3-8
The Alpine House, Inc. is a large retailer of winter sports equipment. Here is an income statement for the company's ski department for a recent quarter:
D
On average, skis sell for $700 per pair. Variable selling expenses are $50 per pair of skis sold. The remaining selling expenses are fixed. The administrative expenses are 20% variable and 80% fixed. The company does not manufacture its own skis; it purchases them from a supplier for $450 per pair.
Page 92
Required:
1. Prepare a contribution margin income statement for the quarter.
2. For every pair of skis sold during the quarter, what was the contribution toward covering fixed expenses and toward earning profits?
Brief Exercise 4-7
Osborn Manufacturing uses a predetermined overhead rate of $28.20 per direct labour-hour. This predetermined rate was based on 12,000 estimated direct labour-hours and $338,400 of estimated total manufacturing overhead.
The company incurred actual total manufacturing overhead costs of $315,000 and 11,500 total direct labour-hours during the period.
Required:
1. Determine the amount of underapplied or overapplied manufacturing overhead for the period.
2. Assuming that the entire amount of the underapplied or overapplied overhead is closed out to cost of goods sold, what would be the effect of the underapplied or overapplied overhead on the company's gross margin for the period?
Brief Exercise 5-7
In June, 4,600 units were completed and transferred out of the mixing process at Avalanche Industries
Ltd. The ending work-in-process inventory was 400 units, 30% complete as to conversion costs and
100% complete as to materials costs. The month's charges were $18,880 for conversion costs and