Variable Cost and Net Operating Income

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TCO B Questions

1. (TCO C) The following overhead data are for a department of a large company. Actual costs Static Incurred budget

Activity level (in units) 800 750

Variable costs:
Indirect materials $6,850 $6,600 Electricity $1,312 $1,275 Fixed costs:
Administration $3,570 $3,700 Rent $3,320 $3,200

Required: Construct a flexible budget performance report that would be useful in assessing how well costs were controlled in this department.

(Points : 30)

2. (TCO D) Mr. Earl Pearl, Accountant for Margie Knall, Inc. has prepared the following product-line income data: PRODUCT

Total A B C

Sales................................................$ 100,000........$50,000.........$20,000...........$30,000

Variable Expenses.............................. 60,000..........30,000............10,000.............20,000

Contribution Margin............................. .40,000..........20,000............10,000.............10,000

Fixed Expenses:

Rent................................................. .5,000...........2,500..............1,000...............1,500

Depreciation..................................... 6,000...........3,000..............1,200................1,800

Utilities.............................................4,000...........2,000.................500................1,500

Supervisors' salaries....................... 5,000.............
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