Variable Cost and Net Operating Income Essay

600 WordsNov 30, 20113 Pages
TCO B Questions 1. (TCO C) The following overhead data are for a department of a large company. Actual costs Static Incurred budget Activity level (in units) 800 750 Variable costs: Indirect materials $6,850 $6,600 Electricity $1,312 $1,275 Fixed costs: Administration $3,570 $3,700 Rent $3,320 $3,200 Required: Construct a flexible budget performance report that…show more content…
10,000...........3,000.................2,000..............5,000 Total Fixed Expenses........................ 33,000..........13,500...............5,800.............13,700 Net Operating Income........................ $7,000..........$6,500.............$4,200............($3,700) The following additional information is available: The factory rent of $1,500 assigned to product C is avoidable if the product were dropped. The company's total depreciation would not be affected by dropping C. Eliminating product C will reduce the monthly utility bill from $1,500 to $800. All supervisors' salaries are avoidable. If product C is discontinued, the maintenance department will be able to reduce monthly expenses from $3,000 to $2,000. Elimination of product C will make it possible to cut two persons from the administrative staff. Currently, their combined salaries total $2,000. Required: Prepare an analysis showing whether product C should be eliminated. Articulate your findings. (Points : 30) 3. (TCO E) Hanks Company produces a single product. Operating data for the company and its absorption costing income statement for the last year is presented below: Units in beginning inventory...................................0 Units produced...............................................9,000 Units

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