Bellucci Corporation has provided the following information:
Cost per Unit | Cost per Period | |||||
Direct materials | $ | 7.30 | ||||
Direct labor | $ | 3.45 | ||||
Variable manufacturing overhead | $ | 1.35 | ||||
Fixed manufacturing overhead | $ | 103,200 | ||||
Sales commissions | $ | 1.10 | ||||
Variable administrative expense | $ | 0.65 | ||||
Fixed selling and administrative expense | $ | 38,400 | ||||
The incremental manufacturing cost that the company will incur if it increases production from 8,000 to 8,001 units is closest to (assume that the increase is within the relevant range):
Multiple Choice
$28.45
$12.10
$31.55
$25.00
Question 2
An income statement for Sam's Bookstore for the first quarter of the year is presented below:
Sam's Bookstore | ||||
Income Statement | ||||
For Quarter Ended March 31 | ||||
Sales | $ | 950,000 | ||
Cost of goods sold | 650,000 | |||
Gross margin | 300,000 | |||
Selling and administrative expenses | ||||
Selling | $ | 104,000 | ||
Administration | 112,000 | 216,000 | ||
Net operating income | $ | 84,000 | ||
On average, a book sells for $50. Variable selling expenses are $4 per book with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales with the remainder being fixed.
The cost formula for selling and administrative expenses with "X" equal to the number of books sold is:
Multiple Choice
Y = $112,500 + $4.00X
Y = $112,500 + $5.50X
Y = $111,500 + $5.50X
Y = $111,500 + $7.00X
Part 1) OPTION B----$12.10
Calculation of Incremental Manufacturing cost per unit
Direct Material 7.3
Direct Labor 3.45
Variable Mfg O/H 1.35
Total Incremental Manufacturing cost per unit = $12.10
Part 2) OPTION C------- Y = 111500 + $5.50X
No of units sold = 950000/50 = 19000 units
Total Selling expenses = 104000
Variable selling expenses= 19000 *4 = 76000
Fixed Selling expenses= 104000 -76000= 28000
Total administration expenses= 112000
Variable administration expenses= 950000*3% = 28500
Fixed Administration expenses= 112000 -28500= 83500
Total Fixed Selling and Administration expenses= 28000 +83500= 111500
Variable will be =4% selling + 50*3% administration
Variable will be = 5.5% of units sold
Hence, Formula will be Y = 111500 + $5.50X
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