Module 2 Exercise

Topics: Variable cost, Costs / Pages: 5 (400 words) / Published: Feb 15th, 2015
Task: 1
a. Kao Tiles, Inc—October Unit Reconciliation Units in beg. WIP (65% material, 35% conversion costs) 5,000 Units started during 6,000 Units to account for 11,000 Units completed 4,000* Units in ending WIP (75% material, 50% conversion costs) 7,000 Units accounted for 11,000

*Computed as 11,000 - 7,000 = 4,000.
Cost per Equivalent Unit Calculation

Material Labor Overhead Total Cost Beginning WIP $170,000 $160,000 $ 50,000 $ 380,000 Cost incurred during Oct. 422,000 1,055,000 107,500 1,584,500 Total $592,000 $1,215,000 $157,500 $1,964,500

Units Units completed 4,000 4,000 4,000 Equivalent units Ending WIP (75% material, 50% Conversion cost) 5,250 3,500 3,500 Total 9,250 7,500 7,500

Cost per equivalent unit $64 $162 $21 $247

Cost Reconciliation

Total cost to account for $1,964,500

Cost of completed units (4,000 units  $247) $ 988,000 Cost of ending WIP Material (5,250 equivalent units  $64) $336,000 Labor (3,500 equivalent units  $162) 567,000 Overhead (3,500 equivalent units  $21) 73,500 976,500 Total cost accounted for $1,964,500

b. Finished Goods Inventory 988,000 Work in Process Inventory 988,000
Task: 2
a) Let the BEP sales be x dollars, x * 0.40 + 300,000 = x
a) So, x = 500,000 dollars
Total Selling price = 500,000
Total Variable cost = 200,000
Total fixed cost = 300,000
b) For a monthly profit of $ 60,000
Let sales be x dollars
So, x - 60000 = 0.4 * x + 300,000
So, sales, x = $ 600,000
c) Sales = 1,000,000
So, variable cost = 400,000
Fixed cost = 300,000
So, level of profit = sales - total cost = $300,000

Task: 3

a.
Axar Products
Income Statement
For the Year Ended December 31, 2011

Sales ($30 × 18,000)

$540,000
Less Cost of goods sold ($20* × 18,000)

360,000
Gross margin

180,000
Less:

Fixed selling and administrative expenses

80,000 Variable selling expense ($3 × 18,000)

54,000
Net income

$46,000

* Product cost per unit:

Direct material

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