Question

The following cost data pertain to the operations of Rademaker Department Stores, Inc., for the month of March.

Corporate headquarters building lease

$78,700

Cosmetics Department sales commissions--Northridge Store

$5,730

Corporate legal office salaries

$64,400

Store manager's salary-Northridge Store

$19,000

Heating-Northridge Store

$12,800

Cosmetics Department cost of sales--Northridge Store

$36,700

Central warehouse lease cost

$10,800

Store security-Northridge Store

$20,100

Cosmetics Department manager's salary--Northridge Store

$4,270



The Northridge Store is just one of many stores owned and operated by the company. The Cosmetics Department is one of many departments at the Northridge Store. The central warehouse serves all of the company's stores.

What is the total amount of the costs listed above that are direct costs of the Cosmetics Department?

a. $94,670

b. $46,700

c. $36,700

d. $42,430

3. Younger Corporation reports that at an activity level of 4,000 units, its total variable cost is $241,200 and its total fixed cost is $107,994.

Required:

For the activity level of 4,100 units, compute: (a) the total variable cost; (b) the total fixed cost; (c) the total cost; (d) the average variable cost per unit; (e) the average fixed cost per unit; and (f) the average total cost per unit. Assume that this activity level is within the relevant range. (Round your "Average cost" to 2 decimal places and other answers to the nearest dollar amount.)

(a)Total variable cost

(b)Total fixed cost

(c)Total cost

(d)Average variable costper unit

(e)Average fixed costper unit

(f)Average total costper unit

4. Gould Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products:

Activities

Activity Rate

Setting up batches

$83.00

per batch

Processing customer orders

$74.29

per customer order

Assembling products

$9.61

per assembly hour


Data concerning two products appear below:

Product V09X

Product A09X

Number of batches

71

14

Number of customer orders

22

11

Number of assembly hours

494

699

How much overhead cost would be assigned to Product V09X using the activity-based costing system?

a. $166.90

b. $135,021.92

c. $12,274.72

d. $5,893.00

6. Ofarrell Corporation, a company that produces and sells a single product, has provided its contribution format income statement for March.

Sales (6,600 units)

$455,400

Variable expenses

323,400

Contribution margin

132,000

Fixed expenses

103,500

Net operating income

$28,500



If the company sells 6,500 units, its net operating income should be closest to:

a. $27,979

b. $26,500

c. $28,500

d. $24,000

Answer 1

Answer:

Direct costs of the Cosmetics department are:

b. $46,700

comprising Cosmetics Department manager's salary--Northridge Store

$4,270

Cosmetics Department cost of sales--Northridge Store

$36,700

Cosmetics Department sales commissions--Northridge Store

$5,730.

3- (a) Total variable cost is $ 247,230 ( 241,200/4000 = 60.3*4100 = 247,230)

(b) total fixed cost $ 107,994 ( the total fixed cost does not change with the change in output)

(c) The total cost is (247,230+107994 = 355224)

(d) the average variable cost per unit 60.3

(e) the average fixed cost per unit ( 107,994/4,100 = 26.34) the FC at per unit tends to decrease with the increase in output.

(f) the average total cost per unit ( 355224/4100 = 86.64) i.e. the total cost/total units

Now, next question

4- Overhead cost assigned to product V09X is $12274.72

(83*71+74.29*22+9.61*494)

6- If the company sells 6,500 units, its net operating income should be closest to: $ 26,500

Explanation:

Answer 2

Answer: 1 $36,700, 2 TVC =$60, TFC =$ 107,994, TVC= $59, TFC =$107,994, TC = $394,194,

AVC=$58,AFC = $26, ATC = $96, A.C. = 96.14, 3 overhead cost =$12,274.72 4 Net operating income = $28,500

Explanation:

The direct cost

Add: Northridge store. $5,730

Add: Cosmetic department cost of sales $36,700

Add:Cosmetic department managers salary $4,270

---------

46,700

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Activity level of 4,000 unit

TVC÷ Quantity

= 241,400 ÷ 4000

= 60.3

= $60 to the nearest dollar

TFC it does not change with the level of activity

Activity level 4,100 unit

TVC ÷ Quantity

= 241,200 ÷ 4,100

= 58.8

= $59

TFC it does not change with the level of activity

TC = TFC + TVC

= 241,200 + 107,994

= $394,194

AVC per unit

= TVC ÷ Quantity

= 241,200 ÷ 4,100

= $58

AFC per unit

= TFC ÷ Quantity

= 107,994 ÷ 4,100

= $26

ATC per unit

TC ÷ Quantity

= 394,194 ÷ 4,100

= $96

AC

= TC ÷ Quantity

= 394,194÷ 4,100

=96.14

To assign overhead to product V09X based on cost unit

The level of activity in batches

= (83.00 × 71) + (74.29× 22) +(9.61×494)

= 5,893 + 1,634.38 + 4,747.34

=$12,747.72

$

Sales. 455,300

Less: variable cost 323,300

-----------

Contribution margin 132,000

Less : Fixed cost. 103,500

----------

Net operating income. 28,500

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