Question

Wyrich Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period:

	Total Company		Blue Division			Gold Division
Sales	$	522,000	$	391,000		$	131,000
Variable expenses		160,670		89,930			70,740
Contribution margin		361,330		301,070			60,260
Traceable fixed expenses		286,000		239,000			47,000
Segment margin		75,330	$	62,070		$	13,260
Common fixed expenses		73,080
Net operating income	$	2,250

The Blue Division’s break-even sales is closest to:

Multiple Choice

a) $310,390

b) $518,750

c) $381,481

d) $405,299

1b) Ing Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	159
Units in beginning inventory		0
Units produced		7,800
Units sold		7,700
Units in ending inventory		100

Variable costs per unit:
Direct materials	$	47
Direct labor	$	50
Variable manufacturing overhead	$	2
Variable selling and administrative expense	$	9
Fixed costs:
Fixed manufacturing overhead	$	304,200
Fixed selling and administrative expense	$	84,700

What is the unit product cost for the month under variable costing?

Multiple Choice

a) $99 per unit

b) $108 per unit

c) $147 per unit

d) $138 per unit

Answer 1

1) The Blue-Division break-even sales is a. $310,390

Segment CM Ratio = Contribution margin ÷ segment sales = $301,070 ÷ $391,000 = 0.770

The break even sales = traceable fixed expenses ÷ segment CM Ratio = $239,000 ÷ 0.770 = $310,390

CM = Contribution margin

Contribution margin of blue - division = $301,070

Sales of blue division is $391,000

Traceable fixed expense of blue division is $239,000

2) the unit product cost is a. $99.

UNIT PRODUCT COST

= direct material + direct labour + variable manufacturing overhead = $47 + $50 + $2 = $99

NOTE : - variable selling and administrative expenses is not considered in unit product cost.

In variable costing fixed cost is not considered.