Question : 113.Nader, Inc. produces e-readers that it sells for $80 each. : 1302754

 

113.Nader, Inc. produces e-readers that it sells for $80 each. Costs involved in production are:

 

Direct material                            $11 per unit

Direct labor                            15 per unit

Variable manufacturing overhead                            12 per unit

Fixed manufacturing overhead per year              $448,000

 

In addition, the company has selling and administrative costs:

 

Fixed selling costs per year$175,000

Fixed administrative costs per year                            75,000

Variable selling and administrative costs per year$6 per unit

 

During the year, Nader produced 28,000 readers and sold 29,400. Beginning inventory totaled 1,800 units. Assume the same unit costs in all years. How much is net income using variable costing?

 

 

114.Nader, Inc. produces e-readers that it sells for $80 each. Costs involved in production are:

 

Direct material              $11 per unit

Direct labor              15 per unit

Variable manufacturing overhead              12 per unit

Fixed manufacturing overhead per year              $448,000

 

In addition, the company has selling and administrative costs:

 

Fixed selling costs per year              $175,000

Fixed administrative costs per year              75,000

Variable selling and admin costs per year$6 per unit

 

During the year, Nader produced 28,000 readers and sold 29,400. Beginning inventory totaled 1,800 units. Assume the same unit costs in all years.

 

a.How much is net income using full costing?

b.How much fixed manufacturing overhead is in ending inventory under full costing?

 

 

 

115.Below is a variable costing income statement for Hops Dollar Store. The budget for 2014 follows:

 

Hops Dollar Store

Budgeted Variable Costing Income Statement

For the Year Ending December 31, 2014

Sales              $15,000,000

Less variable costs:

Cost of goods sold$5,000,000

Selling expense 4,000,000                9,000,000

Contribution margin                            6,000,000

Less fixed costs:

Manufacturing expense              2,300,000

Selling expense1,200,000

Administrative expense                2,000,000                5,500,000

Net income              $    500,000

 

For the coming year, the company is considering hiring two additional sales representatives at $80,000 each for base salary plus 5 percent of their sales for commissions. The company anticipates that each sales representative will generate $900,000 of incremental sales. Calculate the impact on profit of the proposed hiring decision. Should the company hire the two additional sales representatives?

 

 

 

116.Perfect Buy produces electronic garage door openers. Information on the first three years of business follows:

 

201420152016

Units sold20,000              20,000              20,000

Units produced              20,000              25,000              15,000

Fixed production costs              $500,000              $500,000              $500,000

Variable production costs per unit              $100              $100              $100

Selling price per unit              $200              $200              $200

Fixed selling and administrative

expense$150,000                            $150,000              $150,000

 

a.Calculate net income and the value of ending inventory for each year using variable costing.

b.Explain why, using variable costing, profit does not fluctuate from year to year.

 

 

117.The following information is available for Trailblazer, a manufacturer of four-wheel all-terrain vehicles for its first two years of operation:

2014                                                        2015

Vehicles produced              1,000              1,400

Vehicles sold              900              1,200

 

Selling price per unit              $1,200              $1,200

Direct material per unit              $350              $350

Direct labor per unit              $220              $220

 

Variable manufacturing overhead per unit              $40              $40

Fixed manufacturing overhead per year              $112,000              $112,000

Variable selling and administrative expense per unit              $20              $20

Fixed selling and administrative expense per year              $35,000              $35,000

 

Calculate net income for 2015 using full costing.