Exercise Solutions

Topics: Variable cost, Contribution margin, Cost Pages: 8 (638 words) Published: April 9, 2015
1. Haar Inc. is a merchandising company. Last month the company's cost of goods sold was $61,000. The company's beginning merchandise inventory was $11,000 and its ending merchandise inventory was $21,000. What was the total amount of the company's merchandise purchases for the month?  A. $61,000

B. $51,000
C. $71,000
D. $93,000
Purchases = Cost of goods sold + Ending merchandise inventory - Beginning merchandise inventory = $61,000 + $21,000 - $11,000
= $71,000
2. Gabruk Inc. is a merchandising company. Last month the company's merchandise purchases totaled $88,000. The company's beginning merchandise inventory was $15,000 and its ending merchandise inventory was $13,000. What was the company's cost of goods sold for the month?  A. $88,000

B. $90,000
C. $86,000
D. $116,000
Cost of goods sold = Beginning merchandise inventory + purchases - Ending merchandise inventory = $15,000 + $88,000 - $13,000
= $90,000
3. A partial listing of costs incurred during December at Gagnier Corporation appears below:

  
The total of the period costs listed above for December is:  A. $89,000
B. $310,000
C. $325,000
D. $399,000
Period costs = Administrative wages and salaries + Sales staff salaries + Corporate headquarters building rent + Marketing = $105,000 + $68,000 + $34,000 + $103,000
= $310,000
The total of the manufacturing overhead costs listed above for December is:  A. $325,000
B. $635,000
C. $89,000
D. $40,000
Manufacturing overhead costs = Factory supplies + Factory depreciation + Indirect labor = $8,000 + $49,000 + $32,000
= $89,000
 The total of the product costs listed above for December is:  A. $310,000
B. $89,000
C. $635,000
D. $325,000
Product costs = Direct materials + Direct labor + Manufacturing overhead = $153,000 + $83,000 + $89,000
= $325,000
 
 

4. Dickison Corporation reported the following data for the month of December:

  
 The conversion cost for December was: 
A. $107,000
B. $142,000
C. $111,000
D. $178,000
Conversion cost = Direct labor + Manufacturing overhead
= $38,000 + $69,000
= $107,000

The prime cost for December was: 
A. $109,000
B. $111,000
C. $107,000
D. $66,000

Prime cost = Direct materials + Direct labor
= $71,000 + $38,000
= $109,000
5. Nikkel Corporation, a merchandising company, reported the following results for July:

  
The gross margin for July is: 
A. $358,500
B. $209,000
C. $233,700
D. $164,700

Gross margin = Total sales - Cost of goods sold
= $402,800 - $169,100
= $233,700

The contribution margin for July is: 
A. $333,800
B. $209,000
C. $233,700
D. $164,700

6. Holzhauer Corporation, a merchandising company, reported the following results for March:

  

Cost of goods sold is a variable cost in this company.
 
The gross margin for March is: 
A. $922,600
B. $1,120,000
C. $2,202,600
D. $1,360,000

 

 The contribution margin for March is: 
A. $922,600
B. $1,120,000
C. $1,962,600
D. $1,360,000

 

7. Fiene Sales, Inc., a merchandising company, reported sales of 2,200 units in June at a selling price of $600 per unit. Cost of goods sold, which is a variable cost, was $364 per unit. Variable selling expenses were $23 per unit and variable administrative expenses were $33 per unit. The total fixed selling expenses were $30,500 and the total administrative expenses were $55,300.  The contribution margin for June was: 

A. $1,111,000
B. $396,000
C. $310,200
D. $519,200

 
The gross margin for June was: 
A. $310,200
B. $1,234,200
C. $396,000
D. $519,200

 
8. Getchman Marketing, Inc., a merchandising company, reported sales of $592,500 and cost of goods sold of $305,000 for April. The company's total variable selling expense was $37,500; its total fixed selling expense was $16,000; its total variable administrative expense was $35,000; and its total fixed administrative expense was $38,900. The cost of goods sold in this company is a variable cost.  

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