21 Factory supplies in a manufacturing plant are most likely

21) Factory supplies in a manufacturing plant are most likely A) sunk costs B) period costs. C) variable costs. D) fixed cost. ) How much will a company\'s net income change if it undertakes an advertising campaign llowing information Cost of advertising campaign Variable expense as a percentage of sales Increase in sales $25,000 42% S60,000 A)S 200 increase B) S25,200 increase C) $15,000 increase D) S 9,800 increase 23) The folloving prodaction and average cost data for a month\'s operations have been supplied by a company that produces a single product. Production volume Direct materials Direct labor Manufacturing overhead 1,000 units2,000 units $4.00 per unit$4.00 per unit $3.50 per unit $3.50 per unit $10.00 per unit $6.20 per unit The total fixed manufacturing cost and variable manufacturing cost per unit are as foll A) $3,600; $7.50 B) $3,600; $9.90 C) $7.600: $7.50 D) $7,600; $9.90 ows 24) The King Company cost per unit manufactured is: direct materials $20; direct l manufacturing overhead $10 (60 % fixed at 3.000 normal production volum administrative costs are S6 per unit sold and $10,000 fixed. Units sell for $70 selling and Determine the sales volume (S) needed to earn an after-tax profit of $$4,000 asah a tax rate of 40 percent. each, assuming A) 1,120 units B) 2,929 units C) 4,720 units D) 6,520 units

Solution

21) B) Period Cost

Items/ Costs incidental to production such as factory supplies are mostly charged on period basis.

22) D) 9800 Increase

Change in Net Income = Sales - Variable Expense - Cost of Advertisement campaign

= 60000- (42% of 60000) - 25000

=9800

23) D) $7600;$9.9

Variable Manufacturing Overhead @ 1000 units = Manufacturing Overhead @ 2000 units ( 2000*6.2)

minus Manufacturing Overhead @ 1000 units (1000*10)

= 12400-10000

= 2400

Per unit Var. Man. Overheads = 2400 /1000

=2.4

Fixed Manufacturing Overhead = Total Man .Overheads @ 1000 units minus Variable Man. Overheads @ 1000 units

=10000-2400 =7600

Variable Manufacturing Cost per Unit = DM ($4) + DL($3.5) + Var. Man. Overhead ($2.4 )

= $9.9

24) C) 4720 units

Variable Cost = DM($20) + DL ($15) + Man Overhead ($4) + S&A Cost ($6) =$45

Fixed Cost = S&A Cost ($10000) + Man.Overhead ($18000) ($6 *3000)

After tax profit = $ 54000

Before tax profit = $ 90000($54000/.6) assuming 40% tax rate

Assuming x as units of sales

Sales = Profit + FC + VC

$70 x = $90000+ $ 28000 + $ 45x

x = 4720 units