Posted: April 14th, 2016

What is the inventory cost per unit using variable costing?

12. Gage Company had the following information:
Revenues $600,000
Cost of Goods Sold 60%
Selling and administrative expenses 0,000
What is the markup on Cost of Goods sold?
a. .1833
b. .6667
c. .3611
d. none of these

ANS: B
Support:
Cost of Goods Sold = .60 ? $600,000 = $360,000
Operating Income = $600,000 – $360,000 – $130,000 = $110,000
Markup on COGS = (selling and administrative expenses + operating income) / COGS
.6667 = ($130,000 + $110,000) / $360,000

PTS: 1 DIF: Difficult OBJ: 18-2 NAT: AACSB Analytic

13. Perry Products is thinking of expanding their product line. Their current income statement is as follows:
Revenues $600,000
Cost of Goods Sold:
Direct Materials $250,000
Direct Labor 100,000
Overhead 80,000 430,000
Gross Profit 170,000
Selling and Administrative 70,000
Operating Income $100,000

The cost of the new product is $95 per unit made up of $50 of direct materials, $35 of direct labor and $10 of overhead per unit. What is the bid price assuming Perry utilizes a mark-up on direct materials?
a. $70
b. $133
c. $119
d. $19.77

14. The following information pertains to Stark Corporation:

Beginning inventory 0 units
Ending inventory 5,000 units
Direct labor per unit $20
Direct materials per unit 16
Variable overhead per unit 4
Fixed overhead per unit 10
Variable selling costs per unit 12
Fixed selling costs per unit 16

What is the value of ending inventory using the variable costing method?
a. $310,000
b. $250,000
c. $200,000
d. $390,000

15. Toshi Company incurred the following costs in manufacturing desk calculators:

Direct materials $14
Indirect materials (variable) 4
Direct labor 8
Indirect labor (variable) 6
Other variable factory overhead 10
Fixed factory overhead 28
Variable selling expenses 20
Fixed selling expenses 14

During the period, the company produced and sold 1,000 units.

What is the inventory cost per unit using variable costing?
a. $52
b. $62
c. $42
d. $70

16. Meulo Company is considering the purchase of production equipment that costs $800,000. The equipment is expected to generate an annual cash flow of $250,000 and have a useful life of five years with no salvage value. The firm’s cost of capital is 12 percent. The company uses the straight-line method of depreciation with no mid-year convention. There are no income taxes.

The payback period in years for the project is
a. 2.90 years.
b. 3.20 years.
c. 3.25 years.
d. 4.20 years.

17. Dunkin, Inc., is considering the purchase of production equipment that costs $300,000. The equipment is expected to generate an annual cash flow of $100,000 and have a useful life of five years with no salvage value. The firm’s cost of capital is 14 percent. The company uses the straight-line method of depreciation with no mid-year convention. Ignore income taxes.

Payback for the project is
a. 5.00 years.
b. 3.50 years.
c. 3.00 years.
d. 2.38 years.

18. Hunziker Company is considering the purchase of wood cutting equipment. Data on the equipment are as follows:

Original investment $45,000
Net annual cash inflow $18,000
Expected economic life in years 5
Salvage value at the end of five years $4,500

The company uses the straight-line method of depreciation with no mid-year convention.

Expert paper writers are just a few clicks away

Place an order in 3 easy steps. Takes less than 5 mins.

Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:
$0.00
Live Chat+1-631-333-0101EmailWhatsApp