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    Peterson Company, Dexter Industries & MotorQueen, Inc

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    The following information is available regarding the total
    manufacturing overhead of Peterson Company for a recent four month
    period.
    Direct Labor Manufacturing
    Hours Overhead
    May 90,000 $213,000
    June 100,000 227,000
    July 70,000 185,000
    August 80,000 199,000
    1. Refer to the above information. Using the high-low method,
    compute the variable element of manufacturing overhead cost per
    direct labor hour.
    a. $0.71 per direct labor hour.
    b. $2.27 per direct labor hour.
    c. $1.40 per direct labor hour.
    d. $2.31 per direct labor hour.
    2. Refer to the above information. Using the high-low method,
    compute the fixed element of Peterson's monthly overhead cost.
    a. $185,000.
    b. $87,000.
    c. $98,000.
    d. $140,000.
    3. Refer to the above information. Peterson's projected September
    operations will require approximately 120,000 direct labor hours.
    Using the high-low method, compute total manufacturing overhead
    estimated for September.
    a. $272,400.
    b. $317,143.
    c. $255,000.
    d. $168,000.
    4. A company with an operating income of $75,000 and a contribution
    margin ratio of 60% has a margin of safety of:
    a. $45,000.
    b. $125,000.
    c. $170,000.
    d. It is not possible to determine the margin of safety from the
    information provided.
    5. A company with monthly revenue of $100,000, variable costs of
    $40,000, and fixed costs of $25,000 has a contribution margin of:
    a. $100,000.
    b. $75,000.
    c. $60,000.
    d. $35,000.
    6. If the monthly sales volume required to break even is $60,000 and
    monthly fixed costs are $18,000, the contribution margin ratio is:
    a. 30%.
    b. 70%.
    c. 42.9%.
    d. 333.33%.
    7.Dexter Industries currently manufactures and sells 20,000 power
    saws per month, although it has the capacity to produce 35,000
    units per month. At the 20,000-unit-per-month level of production,
    the per-unit cost is $40, consisting of $28 in variable costs and $12
    in fixed costs. Dexter sells its saws to retail stores for $70 each. King
    Distributors has offered to purchase 5,000 saws per month at a
    reduced price. Dexter can manufacture these additional units with
    no change in its present level of fixed manufacturing costs.
    Refer to the information above. Assume that King Distributors
    offers to purchase the additional 5,000 saws at a price of $32 per
    unit. If Dexter accepts this price, Dexter's monthly gross profit on
    sales of power saws will:
    a. Increase by $20,000.
    b. Increase by $160,000.
    c. Decrease by $40,000.
    d. Decrease by $240,000.
    8. MotorKing Corporation manufactures and sells 1,200 tractors each
    month. The primary component in each tractor is the motor.
    MotorKing has the monthly capacity to produce 1,500 motors. The
    variable costs associated with manufacturing each motor are shown
    below:

    direct materials $20
    direct labor 12
    variable manufacturing overhead 25

    Fixed manufacturing overhead per month (for up to 1,500 units of
    production) averages $24,000. MotorQueen, Inc., has offered to
    purchase 200 motors from MotorKing per month to be used in its
    own outboard motors.
    Refer to the information above. If MotorQueen's order is rejected,
    what will be MotorKing's average unit cost of manufacturing each
    motor?
    a. $75.
    b. $57.
    c. $77.
    d. Some other amount.

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    https://brainmass.com/business/accounting/peterson-company-dexter-industries-motorqueen-inc-36351

    Solution Preview

    The following information is available regarding the total
    manufacturing overhead of Peterson Company for a recent four month
    period.
    Direct Labor Manufacturing
    Hours Overhead
    May 90,000 $213,000
    June 100,000 227,000
    July 70,000 185,000
    August 80,000 199,000
    1. Refer to the above information. Using the high-low method,
    compute the variable element of manufacturing overhead cost per
    direct labor hour.
    a. $0.71 per direct labor hour.
    b. $2.27 per direct labor hour.
    c. $1.40 per direct labor hour.
    d. $2.31 per direct labor hour.
    The answer is c Construct the equation 100,000x +y = 227,000 and 90,000x +y =213,000 and solve for x. You get 1.4
    2. Refer to the above information. Using the high-low method,
    compute the fixed element of Peterson's monthly overhead cost.
    a. $185,000.
    b. $87,000.
    c. $98,000.
    d. $140,000.
    The answer is b. Solve the above equation for y.
    3. Refer to the above information. Peterson's projected September
    operations will require ...

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