Practice Midterm Solutions

Page 1

1. B
2. B
3. D
4. C

Page 2

1. B
2. A
3. E
4. B

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Beca Company
Schedule of Cost of Goods Manufactured

Direct Materials: Beginning raw materials inventory $ 9,000 Add: Purchases of raw materials 124,000 Raw materials available for use 133,000 Deduct: Ending raw materials inventory 11,000 Raw materials used in production $122,000 Direct labor 80,000 Manufacturing overhead: Rent, factory building 70,000 Indirect labor 54,500 Utilities, factory 8,000 Maintenance, factory equipment 20,000 Supplies, factory 1,500 Depreciation, factory equipment 30,000 Total overhead costs 184,000
Total manufacturing costs 386,000
Add: Beginning work in process inventory 6,000 92,000
Deduct: Ending work in process inventory 21,000
Cost of goods manufactured $371,000

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a. Gross Margin: Sales – cost of sales = $60 – 15 = $45 per unit x 500 units = $22,500
b. Contribution margin: Sales – Variable Costs = $60 – 15 – 6 Commissions – 12 Variable admin = $33 per unit x 500 units = $13,500
c. Total Administrative expense: $3,000 + (20% of $60 x 500 units) = $9,000
d. Net operating income:

Sales $60 x 500 units $30,000
Less: Cost of sales #15 x 500 units - 7,500
Gross margin 22,500
Less Expenses: Commissions 10% of $30,000 3,000 Advertising 5,000 Admin $3,000 + (20% of sales)