Product Cost
Period
Direct (selling and
Name of the Variabl Fixed Material
Direct Manufacturi administrativ Opportuni
Sunk
cost e Cost Cost s Labor ng overhead e) cost ty cost Cost
Rental
income 30000 / yr
80/uni 80/un
Material cost t it
WH rental
cost 500/mth 500/mth
4000/mt
EQ rental cost h 4000/mth
60/uni 60/un
Direct labor t it
8000/
Depreciation 8000/yr 8000/yr yr
Advertising 50000/
cost yr 50000/yr
Supervisor 1500/mt
salary h 1500/mth
1.2/un
Electricity it 1.2/unit
Shipping cost 9/unit 9/unit
Return on
temp inv 3000/yr
Problem 2-17
Selling expenses would be the correct viewpoint, since product cost will only be considered a
Cost after the completed product is sold. However, for salary, it will be considered expense irrespective
of the product is sold or not, which is the same approach as selling expenses
From the point of view of the reported net operating income for the year, the president's view
point would be slightly incorrect. The coordinator's salary would not be based on how many
completed product is sold to the customer; therefore, there will be a slight difference between
operating expenses using the product cost and selling expenses. In this case, selling expenses
would most probably be slightly higher than the product cost
Problem 2-24
Direct materials
910,000
Deduct : work in process inventory,
ending 40,000
Number of units in the finished goods inventory at the end of the year :
Units sold during the = Total sales / Unit selling price = 1,300,000 / $50 = 26,000 units
year sold
Units in the finished goods inventory, ending = 29,000 units - 26,000 units sold = 3000 units
Cost of the units in the finished goods inventory at the end of the year :
Average cost = Cost of goods manufactured / Number of units produced = 870,000 / 29,000 = $30/unit
Cost of the units in the finished goods inventory, ending = $30 x 3,000 unit = $90,000
Income
Statement
1300
Sales ,000
Cost of goods sold:
Beginning finished goods
inventory 0
Add:Cost of good 870
manufactured 000
goods available for 870
sale 000
Deduct:Ending finished 900 7800
goods inventory 00 00
5200
Gross margin 00
Selling and administrative 380
expenses: 000
140,
Net operating income 000
E3-6
1.
Unit
Month Shipped Total Shipping Expense
High level ( June) 8 2700
Low level ( July ) 2 1200
Change 6 1500
=1500/6 = 250
=2700-250*8 = 700
Months
3000
1500
1000
500
0
1 2 3 4 5 6 7 8 9
E4-7.
Q = 4200/3
= 1400 Units
E4-10 .
=24000/0.3 = $ 80,000.00
A.
2.A.
B.
3.
P4-26
1.
Present Scenario
3.
After increment in
production Scenario
Product type New product
Particulars Amount %
Sales 1360000 100
Variable
800000 58.82353
expense
Contribution margin 560000 41.17647
Fixed expense 540000
Net operating Profit 20000
Selling Price = $68
4.
Because of the decrease in selling price will result in the breakeven point to increase.