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    213124

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    Alexis Alipudo

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    213124

    Uploaded by

    Alexis Alipudo
    39 views4 pages

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    39 views4 pages

    213124

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    Alexis Alipudo

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    of 4

    $4 × (12,000 − 10,000) = $4 × 2,000

    = $8,000 greater than the income under variable costing since inventory increased
    Use the following to answer questions 66-68:

    Phearsum Corporation manufactures a parachute. Shown below is Phearsum's cost structure:

    Variable cost per Total fixed cost


    parachute for the year
    Manufacturing cost .................. $160 $342,000
    Selling and administrative ........ $10 $171,000

    In its first year of operations, Phearsum produced and sold 4,000 parachutes. The parachutes sold
    for $310 each.

    66. If Phearsum would have sold only 3,800 parachutes in its first year, what total amount of
    cost would have been assigned to the 200 parachutes in finished goods inventory under
    the variable costing method?
    A) $28,000
    B) $32,000
    C) $34,000
    D) $49,100

    Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting
    LO: 1 Level: Easy

    Solution:

    Unit product cost = $160


    Total cost of ending finished goods inventory = $160 × 200 = $32,000
    67. Refer back to the original data. How would Phearsum's absorption costing net operating
    income been affected in its first year if only 3,800 parachutes were sold instead of 4,000?
    A) net operating income would have been $2,350 lower
    B) net operating income would have been $10,900 lower
    C) net operating income would have been $12,900 lower
    D) net operating income would have been $28,000 lower

    Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting
    LO: 1,2 Level: Hard

    Solution:

    Unit fixed manufacturing overhead = $342,000 ÷ 4,000 = $85.50


    Unit product cost under absorption costing = $160 + $85.50 = $245.50
    Unit gross margin = $310 − $245.50 = $64.50
    Cost savings ($10 × 200).................................... $ 2,000
    Less: decrease in gross margin ($64.50 × 200) .. 12,900
    Net operating income increase (decrease) .......... ($10,900)

    68. Refer back to the original data. How would Phearsum's variable costing net operating
    income been affected in its first year if 4,500 parachutes were produced instead of 4,000
    and Phearsum still sold 4,000 parachutes?
    A) net operating income would not have been affected
    B) net operating income would have been $38,000 higher
    C) net operating income would have been $57,000 higher
    D) net operating income would have been $75,000 lower

    Ans: A AACSB: Analytic AICPA BB: Critical Thinking


    AICPA FN: Reporting LO: 1,2 Level: Medium
    Use the following to answer questions 69-72:

    Feery Company, which has only one product, has provided the following data concerning its
    most recent month of operations:

    Selling price ............................................... $110

    Units in beginning inventory...................... 0


    Units produced ........................................... 3,800
    Units sold ................................................... 3,700
    Units in ending inventory........................... 100

    Variable costs per unit:


    Direct materials ....................................... $32
    Direct labor ............................................. $34
    Variable manufacturing overhead ........... $6
    Variable selling and administrative ........ $11

    Fixed costs:
    Fixed manufacturing overhead ............... $68,400
    Fixed selling and administrative ............. $14,800

    69. What is the unit product cost for the month under variable costing?
    A) $72
    B) $90
    C) $83
    D) $101

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