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problem 1: The Braggs & Struttin' Company manufactures an engine for carpet cleaners called the "Snooper." Budgeted cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units.

Sales                                          $1,600,000.
Less: COGS                                 1,120,000.
Gross margin:                               $480,000.
Less: Operating expenses               100,000.
Income:                                      $380,000.

Cost of goods sold consists of $810,000 of variable costs and $310,000 of fixed costs. Operating expenses consists of $30,000 of variable costs and $70,000 of fixed costs.


A) find out the break-even point in units and sales dollars.

B) find out the safety margin (in dollars).

C) Braggs & Struttin' received an order for 6,000 units at a price of $25.00. There will be no increase in fixed costs, but variable costs will be reduced by $0.54 per unit because of cheaper packaging. Determine the projected increase or decrease in profit from the order, assuming there is no opportunity costs.

problem 2: Webster, Inc. began operations at the start of the current year, having a production target of 60,000 units. Actual production totaled 60,000 units, and the company sold 95% of its manufacturing output at $50 per unit. The following costs were incurred:

        Direct materials used                          $240,000
        Direct labor                                      480,000
        Variable manufacturing overhead          360,000
        Fixed manufacturing overhead              600,000

Selling and administrative:
        Variable                                           180,000
        Fixed                                               630,000


A) Supposing the use of variable costing, compute the cost of Webster's ending finished-goods inventory.

B) Compute the company's contribution margin. Would Webster disclose the contribution margin on a variable-costing income statement or an absorption-costing income statement?

C) Supposing the use of absorption costing, how much fixed selling and administrative cost would Webster include in the ending finished-goods inventory?

D) Compute the company's gross margin.

problem 3: Jackson Corporation uses a standard cost system, applying manufacturing overhead on the basis of machine hours. The company's overhead standards per unit are shown below.

Variable overhead: 4 hours at $9 per hour.
Fixed overhead: 4 hours at $6* per hour.
Based on planned monthly activity of 120,000 machine hours.

Actual data for May were:

Number of units produced: 29,000.
Number of machine hours worked: 125,000.
Variable overhead costs incurred: $1,085,000.
Fixed overhead costs incurred: $755,000.


A) Compute the spending and efficiency variances for variable overhead.

B) Compute the budget and volume variances for fixed overhead.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M91393

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