Contabilidad M3

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MODULE 3 - QUIZ

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate
based on direct labor-hours. The company based its predetermined overhead rate for the current year on the
following data:

The unit product cost for Job P951 is closest to: (Round your intermediate calculations to 2 decimal places.)

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated
variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) =
$174,000 + ($5.00 per direct labor-hour × 58,000 direct labor-hours) = $174,000 + $290,000 = $464,000

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the
allocation base = $464,000 ÷ 58,000 direct labor-hours = $8.00 per direct labor-hour

Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred
by the job = $8.00 per direct labor-hour × 100 direct labor-hours = $800
Harnett Corporation has two manufacturing departments--Molding and Assembly. The company used the
following data at the beginning of the period to calculate predetermined overhead rates:

During the period, the company started and completed two jobs--Job E and Job M. Data concerning those two
jobs follow:

Required:
a. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on
machine-hours. Calculate that overhead rate. (Round your answer to 2 decimal places.)
b. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on
machine-hours. Calculate the amount of manufacturing overhead applied to Job E. (Do not round intermediate
calculations.)
c. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on
machine-hours. Calculate the total manufacturing cost assigned to Job E. (Do not round intermediate calcula-
tions.)
d. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on
machine-hours and uses a markup of 20% on manufacturing cost to establish selling prices. Calculate the selling
price for Job E. (Do not round intermediate calculations.)
e. Assume that the company uses departmental predetermined overhead rates with machine-hours as the
allocation base in both departments. What is the departmental predetermined overhead rate in the Molding
department? (Round your answer to 2 decimal places.)
f. Assume that the company uses departmental predetermined overhead rates with machine-hours as the
allocation base in both production departments. What is the departmental predetermined overhead rate in the
Assembly department? (Round your answer to 2 decimal places.)
g. Assume that the company uses departmental predetermined overhead rates with machine-hours as the
allocation base in both production departments. How much manufacturing overhead will be applied to Job E?
(Do not round intermediate calculations.)
h. Assume that the company uses departmental predetermined overhead rates with machine-hours as the
allocation base in both production departments. Further assume that the company uses a markup of 20% on
manufacturing cost to establish selling prices. Calculate the selling price for Job E. (Do not round intermediate
calculations.)
a.
The first step is to calculate the estimated total overhead costs in the two departments.
Molding

Assembly

The second step is to combine the estimated manufacturing overhead costs in the two departments
($59,400 + $10,600 = $70,000) to calculate the plantwide predetermined overhead rate as follow:

b.
The overhead applied to Job E is calculated as follows:
Overhead applied to a particular job = Predetermined overhead rate × Machine-hours incurred by the job
= $7.00 per MH × (2,500 MHs + 500 MHs)
= $7.00 per MH × (3,000 MHs)
= $21,000

c.
Job E’s manufacturing cost:

d.
The selling price for Job E:
e.
Molding Department predetermined overhead rate:

f.
Assembly Department predetermined overhead rate:

g.
Manufacturing overhead applied to Job E:

h.
The selling price for Job E would be calculated as follows:
MODULE 3 - PRACTICE QUESTIONS
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000
units (the relevant range of production is 500 units to 1,500 units):

Required:
1. What is the contribution margin per unit?

EXPLANATION
The contribution margin per unit is calculated as follows:

The contribution margin per unit ($8) can also be derived by calculating the selling price per unit of $20 (=
$20,000 ÷ 1,000 units) and deducting the variable expense per unit of $12 (= $12,000 ÷ 1,000 units).

2. What is the contribution margin ratio?

EXPLANATION
The contribution margin ratio is calculated as follows:

3. What is the variable expense ratio?

EXPLANATION
The variable expense ratio is calculated as follows:
4. If sales increase to 1,001 units, what would be the increase in net operating income?

EXPLANATION
The increase in net operating income is calculated as follows:

5. If sales decline to 900 units, what would be the net operating income?

EXPLANATION
If sales decline to 900 units, the net operating income would be computed as follows:

6. If the selling price increases by $2 per unit and the sales volume decreases by 100 units, what would be the
net operating income?

EXPLANATION
The new net operating income would be computed as follows:

7. If the variable cost per unit increases by $1, spending on advertising increases by $1,500, and unit sales
increase by 250 units, what would be the net operating income?

EXPLANATION
The new net operating income would be computed as follows:
8. What is the break-even point in unit sales?

EXPLANATION
The equation method yields the break-even point in unit sales, Q, as follows:

9. What is the break-even point in dollar sales?

EXPLANATION
The equation method yields the dollar sales to break-even as follows:

The dollar sales to break-even ($15,000) can also be computed by multiplying the selling price per unit ($20) by
the unit sales to break-even (750 units).

10. How many units must be sold to achieve a target profit of $5,000?

EXPLANATION
The equation method yields the target profit as follows:
11. What is the margin of safety in dollars? What is the margin of safety percentage?

EXPLANATION
The margin of safety in dollars is calculated as follows:

The margin of safety as a percentage of sales is calculated as follows:


Olongapo Sports Corporation distributes two premium golf balls—Flight Dynamic and Sure Shot. Monthly sales
and the contribution margin ratios for the two products follow:

Fixed expenses total $183,750 per month.

Required:
1. Prepare a contribution format income statement for the company as a whole.

EXPLANATION
Total contribution margin percentage: ($210,000 ÷ $400,000) = 52.5%

Required:
2. What is the company's break-even point in dollar sales based on the current sales mix?

EXPLANATION
The break-even point for the company as a whole is:

Required:
3. What is the company's break-even point in dollar sales based on the current sales mix?

EXPLANATION
The additional contribution margin from the additional sales is computed as follows:

$100,000 × 52.5% CM ratio = $52,500


Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit and has a CM
ratio of 30%. The company’s fixed expenses are $180,000 per year. The company plans to sell 16,000 units this
year.

Required:
1. What are the variable expenses per unit?

EXPLANATION
Variable expenses: $40 × (100% – 30%) = $28

Required:
2. What is the break-even point in unit sales and in dollar sales?

EXPLANATION
The break-even points in unit sales (Q) and dollar sales are computed as follows:

In dollar sales: 15,000 units × $40 per unit = $600,000

Required:
3. What amount of unit sales and dollar sales is required to attain a target profit of $60,000 per year?
EXPLANATION
The unit sales and dollar sales needed to attain the target profit are computed as follows:

In dollar sales: 20,000 units × $40 per unit = $800,000


Required:
4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4 per
unit. What is the company’s new break-even point in unit sales and in dollar sales? What dollar sales is required
to attain a target profit of $60,000?

EXPLANATION
The new break-even points in unit sales and dollar sales are computed as follows:

The company’s new cost/revenue relation will be:

In dollar sales: 11,250 units × $40 per unit = $450,000

The dollar sales required to attain the target profit is computed as follows:
Menlo Company distributes a single product. The company’s sales and expenses for last month follow:

Required:
1. What is the monthly break-even point in unit sales and in dollar sales?

EXPLANATION

Required:
2. Without resorting to computations, what is the total contribution margin at the break-even point?

EXPLANATION
The contribution margin is $216,000 because the contribution margin is equal to the fixed expenses at the
break-even point.

Required:
3-a. How many units would have to be sold each month to attain a target profit of $90,000?

EXPLANATION
The unit sales to attain the target profit is computed as follows:
Required:
3-b. Verify your answer by preparing a contribution format income statement at the target sales level.

EXPLANATION
Sales (17,000 units × $30 per unit) = $510,000
Variable expenses (17,000 units × $12 per unit) = $204,000

Required:
4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms.

EXPLANATION
Margin of safety in dollar terms:

Margin of safety in percentage terms:

Required:
5. What is the company’s CM ratio? If sales increase by $50,000 per month and there is no change in fixed
expenses, by how much would you expect monthly net operating income to increase?

EXPLANATION
The CM ratio is 60% [= ($30 – $12) ÷ $30].

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