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Q1) Downes Consolidated Industries International utilizes standard cost system and records standards in  accounting records. Standard costs for one of its products are given below.

Direct materials, 3 lbs. @ $20 per lb.  $60.00
Direct labor, 2 hrs. @ $15 per hr. 30.00
Variable overhead, 4 machine hrs. @ $1 per hr. 4.00
Fixed overhead, 4 machine hrs. @ $2.50 per hr. 10.00
Total $104.00

Overhead is applied on the basis of machine hours. Planned level of activity (denominator level) is= 320,000 machine hours. Total budgeted fixed overhead is= $800,000.

Other budgeted items are:

Units selling price, $175.00 per unit
Variable selling & administrative expenses, $5 per unit.
Fixed selling & administrative expenses, $160,000.
Planned level of production and sales, 80,000.

ACTUAL RESULTS:

Direct materials purchased, 250,000 lbs. @ $22 per lb.
Direct materials used, 240,000
Direct labor, 150,000 hrs., total cost, $2,225,000
Variable overhead, $340,000
Fixed overhead, $810,000
Units produced, 82,000
Units soldd, 80,500
Selling price per unit, 160.00
Variable selling & administrative expenses, $410,000.
Fixed selling & administrative, $175,000.
Actual machine hours, 330,000.

problem:

Make the Income Statement of Actual Results by using Variable costing.

1. Compute the breakeven point in dollars.

2. Compute DOL.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M918706

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