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Solutions Manual, Chapter 1 41
Problem 1-22 (45 minutes)
1. The total manufacturing overhead cost is computed as follows:
Direct labor cost (a) …………………………………... $15,000
Direct labor as a percenta
g
e of total conversion
costs (b) ……………………………………………..…
30%
2. The total direct materials cost is computed as follows:
Direct labor cost (a) …………………………………... $15,000
Direct labor as a percenta
g
e of total prime costs
(b) ………………………………………..……………..
40%
3. The total amount of manufacturing cost is computed as follows:
Direct materials cost …………………………………… $22,500
4. The total variable selling and administrative cost is computed as
follows:
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42 Managerial Accounting, 16th edition
Problem 1-22 (continued)
5. The total variable cost is computed as follows:
Direct materials cost …………………………………… $22,500
T
6. The total fixed cost is computed as follows:
T
otal sellin
g
and administrative expenses
(a) ………………………………………………..
$18,000
Sales commissions (b) ………………………… $6,000
T
otal fixed sellin
g
and administrative
T
T
7. The total contribution margin is calculated as follows:
Sales (a) ………………………………………………….. $120,000
V
‒
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Solutions Manual, Chapter 1 43
Problem 1-23 (30 minutes)
Note to the Instructor: There may be some exceptions to the answers below. The purpose of this
problem is to get the student to start
thinking
about cost behavior and cost purposes; try to avoid
lengthy discussions about how a particular cost is classified.
Variable or Selling Administrative
Manufacturing
(Product) Cost
Cost Item Fixed Cost Cost Direct Indirect
1. Property taxes, factory …………………………. F X
2. Boxes used for packa
g
in
g
deter
g
ent
produced by the company …………………… V X
3. Salespersons’ commissions ……………………. V X
4. Supervisor’s salary, factory ……………………. F X
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44 Managerial Accounting, 16th edition
Problem 1-23 (continued)
Variable or Selling Administrative
Manufacturing
(Product) Cost
Cost Item Fixed Cost Cost Direct Indirect
15. Ink used in textbook production……………… V X
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Solutions Manual, Chapter 1 45
Problem 1-24 (30 minutes)
1a. The total product cost is computed as follows:
Direct materials …………………………………………. $ 69,000
T
T
1b. The total period cost is computed as follows:
T
otal sellin
g
expense ………………………………….. $30,000
T
T
2a. The total direct manufacturing cost is computed as follows:
Direct materials …………………………………………. $ 69,000
T
2b. The total indirect manufacturing cost is computed as follows:
V
ariable manufacturin
g
overhead ………………….. $15,000
T
3a. The total manufacturing cost is computed as follows:
Direct materials …………………………………………. $ 69,000
T
T
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46 Managerial Accounting, 16th edition
Problem 1-24 (continued)
3b. The total nonmanufacturing cost is computed as follows:
T
otal sellin
g
expense ………………………………….. $30,000
T
T
3c. The total conversion cost is computed as follows:
Direct labor …………………………………………..…. $35,000
T
T
The total prime cost is computed as follows:
Direct materials …………………………………………. $ 69,000
T
4a. The total variable manufacturing cost is computed as follows:
Direct materials …………………………………………. $ 69,000
V
T
4b. The total amount of fixed cost for the company as a whole is
computed as follows:
Fixed manufacturin
g
overhead ……………………… $28,000
T
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Solutions Manual, Chapter 1 47
Problem 1-24 (continued)
4c. The variable cost per unit produced and sold is computed as follows:
Direct materials …………………………………………. $ 69,000
Direct labor………………………………….………..…. 35,000
T
otal variable manufacturin
g
overhead……………. 15,000
V
V
T
V
5a. The incremental manufacturing cost is computed as follows:
Direct materials …………………………………………. $ 69,000
Direct labor………………………………….………..…. 35,000
V
T
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48 Managerial Accounting, 16th edition
Problem 1-25 (30 minutes)
1. Milden Company
Contribution Format Income Statement
For the Next Quarter
Sales (12,000 units × $100 per unit) ……….. $1,200,000
V
ariable expenses:
Cost of
g
oods sold
(12,000 units × $35 unit) …………………. $420,000
Sales commission (6% × $1,200,000)……. 72,000
Shippin
g
expense
(12,000 units × $9.10 per unit) …………. 109,200
g
A
T
T
A
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Solutions Manual, Chapter 1 49
Problem 1-25 (continued)
2. Milden Company
Traditional Format Income Statement
For the Next Quarter
Sales (12,000 units × $100 per unit) ………… $1,200,000
Cost of
g
oods sold
(12,000 units × $35 per unit) ……………….. 420,000
Gross mar
g
in ………………………………………. 780,000
Sellin
g
and administrative expenses:
A
dvertisin
g
…………………………………….. $210,000
Sales commissions
T
A
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50 Managerial Accounting, 16th Edition
Case 1-26 (45 minutes)
1.
Cost Behavior
Selling or
Administrative Product Cost
Cost Item Variable Fixed Cost Direct Indirect
Direct labor ………………………… $118,000 $118,000
A
dvertisin
g
…………………………. $50,000 $50,000
Factory supervision ………………. 40,000 $40,000
Property taxes, factory buildin
g
.. 3,500 3,500
Sales commissions ……………….. 80,000 80,000
Insurance, factory ………………… 2,500 2,500
Depreciation, administrative
A
A
T