Exercise Set A

LO 2.1Magio Company manufactures kitchen equipment used in hospitals. They distribute their products directly to the customer and, for the year ending 2019, they reported the following revenues and expenses. Use this information to construct an income statement for the year 2019.

LO 2.1Park and West, LLC, provides consulting services to retail merchandisers in the Midwest. In 2019, they generated $720,000 in service revenue. Their total cost (fixed and variable) per client was $2,500 and they served 115 clients during the year. If operating expenses for the year were $302,000 what was their net income?

LO 2.1Canine Couture is a specialty dog clothing boutique that sells clothing and clothing accessories for dogs. In 2019, they had gross revenue from sales totaling $86,500. Their operating expenses for this same period were $27,500. If their Cost of Goods Sold (COGS) was 24% of gross revenue, what was their net operating income for the year?

LO 2.2Hicks Contracting collects and analyzes cost data in order to track the cost of installing decks on new home construction jobs. The following are some of the costs that they incur. Classify these costs as fixed or variable costs and as product or period costs.

1. Lumber used to construct decks ($12.00 per square foot)
2. Carpenter labor used to construct decks ($10 per hour)
3. Construction supervisor salary ($45,000 per year)
4. Depreciation on tools and equipment ($6,000 per year)
5. Selling and administrative expenses ($35,000 per year)
6. Rent on corporate office space ($34,000 per year)
7. Nails, glue, and other materials required to construct deck (varies per job)

LO 2.2Rose Company has a relevant range of production between 10,000 and 25,000 units. The following cost data represents average cost per unit for 15,000 units of production.

Using the cost data from Rose Company, answer the following questions:

1. If 10,000 units are produced, what is the variable cost per unit?
2. If 18,000 units are produced, what is the variable cost per unit?
3. If 21,000 units are produced, what are the total variable costs?
4. If 11,000 units are produced, what are the total variable costs?
5. If 19,000 units are produced, what are the total manufacturing overhead costs incurred?
6. If 23,000 units are produced, what are the total manufacturing overhead costs incurred?
7. If 19,000 units are produced, what are the per unit manufacturing overhead costs incurred?
8. If 25,000 units are produced, what are the per unit manufacturing overhead costs incurred?

LO 2.2Carr Company provides human resource consulting services to small- and medium-sized companies. Last year, Carr provided services to 700 clients. Total fixed costs were $159,000 with total variable costs of $87,500. Based on this information, complete this chart:

LO 2.2Western Trucking operates a fleet of delivery trucks. The fixed expenses to operate the fleet are $79,900 in March and rose to $93,120 in April. It costs Western Trucking $0.15 per mile in variable costs. In March, the delivery trucks were driven a total of 85,000 miles, and in April, they were driven a total of 96,000 miles. Using this information, answer the following:

1. What were the total costs to operate the fleet in March and April, respectively?
2. What were the cost per mile to operate the fleet in March and April, respectively?

LO 2.2Suppose that a company has fixed costs of $18 per unit and variable costs $9 per unit when 15,000 units are produced. What are the fixed costs per unit when 12,000 units are produced?

LO 2.3The cost data for Evencoat Paint for the year 2019 is as follows:

1. Using the high-low method, express the company’s maintenance costs as an equation where x represents the gallons of paint produced. Then estimate the fixed and variable costs.
2. Predict the maintenance costs if 90,000 gallons of paint are produced.
3. Predict the maintenance costs if 81,000 gallons of paint are produced.
4. Using Excel, create a scatter graph of the cost data and explain the relationship between gallons of paint produced and equipment maintenance expenses.

LO 2.3This cost data from Hickory Furniture is for the year 2017.

1. Using the high-low method, express the company’s utility costs as an equation where X represents number of tables produced.
2. Predict the utility costs if 800 tables are produced.
3. Predict the utility costs if 600 tables are produced.
4. Using Excel, create a scatter graph of the cost data and explain the relationship between number of tables produced and utility expenses.

LO 2.3Markson and Sons leases a copy machine with terms that include a fixed fee each month plus a charge for each copy made. Markson made 9,000 copies and paid a total of $480 in January. In April, they paid $320 for 5,000 copies. What is the variable cost per copy if Markson uses the high-low method to analyze costs?

LO 2.3Markson and Sons leases a copy machine with terms that include a fixed fee each month of $500 plus a charge for each copy made. The company uses the high-low method to analyze costs. If Markson paid $360 for 5,000 copies and $280 for 3,000 copies, how much would Markson pay if it made 7,500 copies?