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Chapter 4 Practice Exercises-1

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2 views

Chapter 4 Practice Exercises-1

Uploaded by

Grace Asuru
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Chapter 4 Practice Exercises

1. Solve exercises 4–2 on p. 203, 4–3 on p. 203, 4–5 on p. 204, and 4.27 on p. 216.

4-2
Fixed manufacturing overhead per unit = 60,000/250 = $240 per unit
Fixed manufacturing overhead in ending inventory = 240 x 25 = $6,000
Variable Cost Income Statement
Variable Cost per Unit:
• Direct Materials = $100
• Direct Labor = $320
• Variable Manufacturing Overhead = $40
• Total Variable Manufacturing Cost per Unit = $100 + $320 + $40 = $460
Variable Selling and Administrative per Unit = $20
Variable Cost of Goods Sold = 460 x 225 = $103,500
Variable Selling and Administrative Expenses= 20 x225 = $4,500
Contribution Margin
• Total variable costs = 103,500 + 4,500 = $108,000
• Contribution margin = 191,250 – 108,000 = $83,250

Variable Costing Income Statement:


Description Amount
Sales $191,250
Variable Cost of Goods Sold $103,500
Variable Selling & Administrative $4,500
Total Variable Costs $108,000
Contribution Margin $83,250
Fixed Manufacturing Overhead $60,000
Fixed Selling & Administrative $20,000
Total Fixed Costs $80,000
Net Operating Income $3,250
4-3
• PV Factor = [1-(1+0.11)^(-10)/(0.11) = 5.89
• Present value = 809,300 x 5.88968 = 4,773,890.78 = 4,773.891
• Inventories Increased
• Fixed Manufacturing Overhead Cost Deferred: $28,000

4-5
• Total fixed expenses = 120,000 + 50,000 = 170,000
• Contribution margin ratio 240,000/600,000 = .4
• Break-even point = 170,000/.40 = 425,000

4-27
• Required Production = 600 + 50 – 0 = 650
• Units schedules for production during the last quarter = 1,500 units

2. Answer the following two questions from p. 199:


(Note: Questions are distinct from exercises.)

● What is a segment of an organization? Give at least one example not included in


the textbook.

In managerial accounting, a segment refers to any part of a company


analyzed as an independent entity for performance and profitability, such
as a department, product line, or customer group. Segment reporting helps
managers understand each division's contributions and expenses,
supporting resource allocation and decision-making. An uncommon
example might be a corporate wellness program division in a large
company. This segment could manage its budget, design initiatives, and
report on metrics like reduced healthcare costs or productivity gains. By
analyzing impacts like lower sick days or insurance premiums,
management can assess whether the wellness program provides value.
Although not a traditional revenue-generating segment, it offers insights
into operational efficiency and employee satisfaction.
● Distinguish between a traceable fixed cost and a common fixed cost. Give two
examples of each.

A traceable fixed cost directly supports a specific segment and would end
if that segment were removed. Examples include depreciation on product-
line-specific equipment and salaries for staff dedicated to one department.
Additional examples might be custom software fees for a medical billing
team or security contracts for a high-security lab. By contrast, a common
fixed cost benefits multiple segments and would persist even if one
segment closed. Some examples include executive salaries covering all
departments and rent for headquarters serving various functions. Less
typical examples include general cybersecurity services that protect all
digital assets or corporate event costs for annual gatherings that involve
every department.

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