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Managerial Accounting

Drake Company's income statement for the most recent year appears below: (attached)

15. If the company desires a net operating income of $20,000, the number of units needed to be sold is:
A) 28,500
B) 31,000
C) 31,750
D) 26,500

16. The sales manager is convinced that a $60,000 expenditure on advertising will increase unit sales by fifty percent without any other increase in fixed expenses. If the sales manager is correct, the company's net operating income would increase by:
A) $44,000
B) $34,000
C) $30,000
D) $49,000

Beanston Company, which has only one product, has provided the following data concerning its most recent month of operations:

25. What is the unit product cost for the month under variable costing?
A) $90
B) $66
C) $72
D) $84

26. What is the unit product cost for the month under absorption costing?
A) $66
B) $72
C) $90
D) $84

The controller of Kleyman Company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below:

The total materials handling cost for the year is expected to be $28,400

38. If the materials handling cost is allocated on the basis of material moves, how much of the total materials handling cost should be allocated to the specialty windows? (Round off your answer to the nearest whole dollar.)
A) $12,622
B) $13,108
C) $12,224
D) $14,200

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Solution Preview

15. If the company desires a net operating income of $20,000, the number of units needed to be sold is:
A) 28,500
B) 31,000
C) 31,750
D) 26,500

Contribution Margin per Unit (CMU) = 208,000/26,000 = 8

We will designate X to represent unit sales and $20,000 in net income to break-even.

X = total fixed costs + net income
CMU

X = $234,000 + $20,000
$8

X = 31,750 units

Answer: C

16. The sales manager is convinced that a $60,000 expenditure on advertising will increase unit sales by fifty percent without any other increase in fixed expenses. If the sales manager ...

Solution Summary

This solution is comprised of a detailed explanation to answer if the company desires a net operating income of $20,000, by how many units needed to be sold, calculate the increase in the company's net operating income, compute what is the unit product cost for the month under variable costing and under absorption costing, and answer how much of the total materials handling cost should be allocated to the specialty windows.

$2.19