Chapter 21: Q-21-10RQ (page 1167)
In the long run, all costs are controllable. Is this statement true? Why or why not?
Answer
True, all costs are controllable in the long run.
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How can variable costing be used in service companies?
Explain why the fixed manufacturing overhead cost per unit changes when there is a change in the number of units produced.
Analyzing profitability
Camden Company has divided its business into segments based on sales territories: East Coast, Midland, and West Coast. Following are financial data for 2018:
East Coast | Midland | West Coast | |
Units sold | 71 | 69 | 53 |
Sales price per unit | \(10,300 | \)13,600 | \(12,000 |
Variable cost per unit | 6,283 | 7,072 | 7,080 |
Prepare an income statement for Camden Company for 2018 using the contribution margin format assuming total fixed costs for the company were \)435,000. Include columns for each business segment and a column for the total company.
Preparing variable and absorption costing income statements Linda’s Foods produces frozen meals that it sells for \(7 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Linda’s Foods’s first month in business:
January 2018
Units produced and sold:
Sales 1,000 meals
Production 1,200 meals
Variable manufacturing cost per meal \) 3
Sales commission cost per meal 1
Total fixed manufacturing overhead 660
Total fixed selling and administrative costs 500
Requirements:
Calculating contribution margin and operating income, variable costing
Calculate the contribution margin and operating income for June using variable costing.
Use the following information for Short Exercises S21-4 and S21-5.
Dracut Company reports the following information for June:
Net Sales Revenue $ 755,000 Variable Cost of Goods Sold 240,000 Fixed Cost of Goods Sold 198,000 Variable Selling and Administrative Costs 168,000 Fixed Selling and Administrative Costs 79,000
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