Question

A company manufactures and sells two produts. Debit and Credit. The following data were from last​ month’s accounting​ records:

	Debit	Credit
Sales Revenue	​$180,000	​$190,000
Product Costs	​$144,000	​$132,000
Period Costs	​$26,400	​$28,000

​Debit’s variable product costs consist of​ $45,000 of direct​material, $24,000 of direct​ labor, and​ $36,000 of manufacturing overhead. The remainder of its product costs are traceable fixed manufacturing overhead.​ Debit’s period costs consist of​ $20,000 of sales commission paid as a percentage of sales revenue. The remainder of its period costs are allocated common fixed costs.

​Credit’s variable cost percentage is​ 75%. Of its fixed​ costs, $11,000 are traceable. The remainder of its fixed costs are allocated common fixed costs.

Show evidence for each statement that either concludes it being either true or false.

1. ​Debit’s total traceable costs equal​ $39,000.

2. The​ company’s operating income for the period equals​ $39,600.

3. ​Credit’s contribution margin percentage for the period is​ 25%.

4. If Debit was expected to generate a segment margin of​ $18,000, it fell short of​ management’s expectations by​ $2,000.

​5. Credit’s performance should be judged on a segment margin of​$36,500.

Answer 1