The following information is available for Company X, with fixed costs at $640000:

Product A:

• Units sold: 16000
• Selling price: $100 /unit
• Variable costs: $40 /unit

Product B:

• Units sold: 4000
• Selling price: $200 /unit
• Variable costs: $120 /unit

Comment on the following article, extracted from the textbook (Horngren, 16th edition, page 159).

While this is an open-book exam, direct copying of content from the textbook or class notes will not earn points. Answers should demonstrate your understanding and application of the concepts.

What are two possible ways of reducing the negative aspects associated with using absorption costing to evaluate the performance of a plant manager?

Cost allocation is ________.

Company X produces and sells a single product and delivers a positive contribution margin.

If the selling price and the variable cost per unit both increase 5% and fixed costs do not change, what is the effect on the contribution margin per unit ($/unit) and the contribution margin as a percentage (%) of sales?

Company X presents the following information:

• Beginning inventory of Finished goods: $112000
• Ending inventory of Finished goods: $56000
• Beginning inventory of Work in progress: $140000
• Ending inventory of Work in progress: $84000
• Direct materials used in production: $28000
• Direct Labor and overhead costs: $168000

Based on the information above, determine the cost of goods sold (COGS) for the period.

Company X produced 3000 units and presents the following information:

Manufacturing costs

• Variable cost: $150 /unit
• Fixed cost: $145 /unit

Inventory data

• Beginning inventory: 1200 units

• Ending inventory: 2200 units

If Company X uses an absorption costing system, what is the amount of fixed manufacturing costs expensed in the Income statement assuming no variances?

Company X manufactures a single product. For each unit, $3131 of direct material is used and there is $2000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $29 per direct manufacturing labor hour.

Calculate the profit earned on 50 units if each unit sells for $9000.

The following information is available for Company

X:

• Revenue

  = $400000

• Selling

  price = $40/unit

• Fixed costs = $200000

• Operating

  income before taxes = $100000

How much is the net income after taxes if the

company sells 20000 units, assuming an income tax rate of 10% ?

Indicate whether the following sentences are TRUE or FALSE: