Managerial MIdterm
Name:
Solution
Mid-term Quiz #2 (15 marks) - ADMS 2510 F – School of Administrative Studies Faculty of Liberal Arts & Professional Studies, York University
90 minutes, 4 to 5:30 pm, October 28, 2012
Note, this is a closed book examination. Use only simple calculators; smart calculators, smart phones and cell phones cannot be used. There are three questions. Good luck.
I-way Inc. has just organized a new division to manufacture and sell specially designed kitchen tables, using select hardwoods. The division’s monthly costs are shown in the schedule below (Solution and marking guide, based on Problem 8.12, 6 marks):
Manufacturing costs: Variable costs per unit: Direct materials $170 Variable manufacturing overhead $ 18 Fixed manufacturing overhead costs (total) $400,000
Selling and administrative costs: Variable 18 % of sales Fixed (total) $110,000 I-way Inc. regards all of its workers as full-time employees and the company has long- standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labour costs in its fixed manufacturing overhead. The tables sell for $410 each. During the first month of operations, the following activity was recorded: Units produced, 3,700; units sold, 3,300. Required:
a. Compute the unit product costs under (i) absorption costing, and (ii) variable costing. (2 marks)
Absorption
DM 170 VMOH 18 FMOH (400,000/3,700) 108.11 $296.11
Variable costing, per unit
DM 170 VMOH 18 $188
b. Prepare an income statement for the month using absorption costing. (2 marks)
Sales (3,300 units × $410 per unit)
$1,353,000
Cost of goods sold:
Beginning inventory
$ 0
Add cost of goods manufactured
(3,700 units × $296.11 per unit) 1,095,607
Goods available for sale
1,095,607
Less ending inventory
Solution
Mid-term Quiz #2 (15 marks) - ADMS 2510 F – School of Administrative Studies Faculty of Liberal Arts & Professional Studies, York University
90 minutes, 4 to 5:30 pm, October 28, 2012
Note, this is a closed book examination. Use only simple calculators; smart calculators, smart phones and cell phones cannot be used. There are three questions. Good luck.
I-way Inc. has just organized a new division to manufacture and sell specially designed kitchen tables, using select hardwoods. The division’s monthly costs are shown in the schedule below (Solution and marking guide, based on Problem 8.12, 6 marks):
Manufacturing costs: Variable costs per unit: Direct materials $170 Variable manufacturing overhead $ 18 Fixed manufacturing overhead costs (total) $400,000
Selling and administrative costs: Variable 18 % of sales Fixed (total) $110,000 I-way Inc. regards all of its workers as full-time employees and the company has long- standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labour costs in its fixed manufacturing overhead. The tables sell for $410 each. During the first month of operations, the following activity was recorded: Units produced, 3,700; units sold, 3,300. Required:
a. Compute the unit product costs under (i) absorption costing, and (ii) variable costing. (2 marks)
Absorption
DM 170 VMOH 18 FMOH (400,000/3,700) 108.11 $296.11
Variable costing, per unit
DM 170 VMOH 18 $188
b. Prepare an income statement for the month using absorption costing. (2 marks)
Sales (3,300 units × $410 per unit)
$1,353,000
Cost of goods sold:
Beginning inventory
$ 0
Add cost of goods manufactured
(3,700 units × $296.11 per unit) 1,095,607
Goods available for sale
1,095,607
Less ending inventory