1. Xyz company has the following income statement based on absorption costing representing segment A. Using the percentage given for variable costs and fixed costs for each cost category ( production, marketing and administrative) prepare variable (contribution) costing income statement and determine the following



Absorption Income Statement
Sales revenue…… 120000
Units price= 20………….. 2400000
Less cost of goods sold (production cost)…… 1300000
Gross margin….. 1100000
Less operating expense marketing cost…. 800000
Administration costs…. 500000
Operating income ….. (200000)
Vc vs Fc:
Production…….Vc 65% , fc 42%
Marketing…….. vs 58% , fc 42%
Administrative……….. vc 20%, Fc 80%

a. Total vc and vc/unit
b. Total fixed cost
c. Total contribution margin and cm/unit
d. Should the company keep this segment or eliminate it?
e. If the company can increase the sales units by 15% as a result of spending $325000 on advertizing is it profitable to do it? Explain.

1. Draw the three graphs that depict the relationships between VC, FC, and revenue on per unit basis, aggregate basis and recovery of FC from CM basis. No explanation needed.
b. explain the contribution (variable) Income statement versus absorption costing income statement- their purposes and use.
c. explain the benefits and limitations of activity based costing.
d. explain the advantages of budgeting.
II. Revenues and costs of SDF companies are projected as follow for 20xx….
Sales revenue………. (100,000 units * 26) = 2600000
Variable costs of production (DM+DL=VFOH)………….. 1200000
Fixed production costs (FFOH)………………………………….570000
Variable marketing costs 450000
Fixed marketing costs 344000
Variable general administration 112000
Fixed Gen. Admin costs 362000
a. Total variable costs (TVC), Variable cost per unit (VC/unit) and VC % ( unit vc/price)
b. Total fixed cost
c. Total contribution Margin (TCM), Contribution per unit (CM/unit) and CM% (CM/price)
d. sales quantity needed to break even.
e. sales quantity needed to earn $440,000 target operating income.
f. sales revenue needed to earn $560,000 operating income.

2. Bnm company uses activity based costing (abc) in the allocation of overhead costs in product and in evaluating probability of its products…
a. the following data reflects the overhead activities, activity cost budgets and cost drivers…
Activities- Assembling, Testing ,Finishing/ Packaging, Cost drivers and volume
Estimated Budget
Number of parts – 74000 448000
Number of tests- 26000 140000
Number of units – 72000 134000
Q1. Compute cost allocation rates for each activity using the above given information cost budget/ volume of driver
b. the following information is about the expected use of cost drivers by the two products produced by the company standard model and deluxe model…
standard model deluxe model
Assembling 20000 54000
Testing 10000 13000
Finishing packing 32000 50000
Units completed 22000 50000
Q2. Compute the total and per unit overhead cost that should b allocated to the standard model and the deluxe model. 22000 units of standard and 50000of delux have been completed
c. the following data is about the per unit DM and DL costs of each product sales unit and price of each product…
standard model deluxe model
DM costs/unit 9 16
DL costs/ unit 5 12
FOH cost?
Total cost per unit?
# of units sold 19000 46000
Price per units is 26 and 42
Q3.determine total sales revenue cost of goods sold and gross margin for each product using the percentage of CGS and GM related to revenue of each product evaluate the comparative profamitability of each product ( gross margin ratio = gm/sales revenue)

v. The following data is about three month budgeted activities of jan feb and march of 20xx.
Jan feb mar
Sales budget (units) 58000 55000 60000
Standard cost of production per unit 90/unit…
DM…… 51lbs/unit * 6= $30
DL ….3dlhs/unit * 12 dlh= $36
FOH… 3dlhs/unit * 8slg= $24
v. target FGI and DM inventory level FGI 20% * MS current month target sales
Jan beginning FGI 12400 unit target RM ending inventory 25% *current month RM required for produced each month
Jan beginning RM inventory 62000lb
a. DLH required per employee… DLH per month/140 hr
b. Production budget each month
c. DM required for produced each month in lb
d. DM purchases budget
e. DLSH needed each month
f. Number of employee each month

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