Business Accounting

Multiple Choice: Select the correct letter & compute and give the solution:
Item 1 & 2 are based on the ff. information:
Jay Manufacturing Co. produces a single product. The cost is composed of the following:
Variable Raw Material Cost 12.50
Variable Direct Labor Cost 07.50
Total Variable Cost 20.00
Fixed annual overhead & other expenses 250,000
The Company has a price policy of marketing up to 10% based on full cost.
1. The selling price to be set up if the company’s selling potential is 500,000 units.
a. 23.10 b. 22.55 c. 22.00 d. 22.50
2. the selling price to be set up if the company’s selling potential is 750,000 units.
a. 22.50 b. 22.00 c. 22.37 d. 22.55
3. Based on the following information: Volume of Production: 10,000 units; Capital employed: 60,000;
Cost to Produce and sell: 5.00 per unit. The unit selling price that will yield on 20% return on
investment is?
a. 5.10 b. 6.20 c. 7.00 d. 7.10
Items 4 to 10 are based on the following information:
Manufacturing Cost
Direct Materials 1.00
Direct Labor 1.20
V. Indirect cost 0.80
F. Indirect cost 0.50
Selling and Other costs:
Variable 1.50
Fixed 0.90
The following situations refer only to the above information. There will be no connection between
situations.
4. The company is planning to set up a selling price with a mark-up of 50% based on conversion costs.
The selling price is:
a. 5.90 b. 5.25 c. 6.90 d. 7.15
5. The company is planning to set up a selling price with a mark-up of 40% based on variable production
costs. The selling price is:
a. 7.10 b. 7.30 c. 8.26 d. 7.15
6. The company is planning to set up a selling price with a mark-up of 45% based on variable production
a. 7.25 b. 7.92 c. 8.56 d. 7.48
7. The company is planning to set up a selling price with a mark-up of 30% based on full (total) costs. The
selling price is:
a. 6.95 b. 5.90 c. 7.67 d. 6.65
8. The company is planning to set up a selling price with a mark-up of 36% based on variable (marginal)
a. 6.95 b. 6.70 c. 7.65 d. 7.48
9. The company is planning to set up a selling price with a mark-up of 60% based on prime costs. The
selling price is:
a. 7.22 b. 7.40 c. 8.00 d. 7.70
10 The company desire to enter a foreign market where the price competition is keen. An order 0f
10,000 units of this product is being sought on a minimum unit price basis. It is expected that
shipping costs for this order will amount to only 0.75 per unit, but that fixed costs of obtaining to
contact will be 4,000. Domestic business will be unaffected. The minimum basis for break-even price
is:
a. 3.50 b. 4.15 c. 4.25 d. 5.00

Solution:
1. b. 22.55
Total variable cost per unit (20.00) x 500,000 = 10,000,000
Total Fixed Cost = 250,000
Total cost = 10,250,000
Total Cost (10,250,000)/500,000 = 20.5
10% of 10,250,000 = 1,025,000
/ 500,000
2.05
20.5 + 2.05 = 22.55
2. c. 22.37
Total Variable Cost per Unit (20.00) x 750,000 = 15,000,000
Total Fixed Cost = 250,000
Total Cost = 15,250,000
15,250,000/750,000 = 20.33
10% of 15,250,000 = 1,520,000
/ 750,000
2.03
20.33 + 2.03 = 22.36 (closest is 22.37)
3. 11.20
Volume = 10,000 units
Investment = 60,000
20% ROI
Total Investment = 60,000
Total Cost = 50,000
ROI = 60,000 x 20% = 12,000
Total Cost + ROI = 50,000 + 12,000 = 62,000
Per Unit TC + ROI = 62,000/10,000 units = 6.2
Cost per Unit = 5.00 per unit
Price = Cost per unit + Per unit TC+ROI = 5.00 + 6.2 = 11.20
4. d. 7.15
Total Cost = 5.9
Conversion Cost = Direct Labor + V. Indirect Cost + F. Indirect Cost = 2.5
Mark-up = 50%
Mark-up based on Conversion Cost = 2.5 x 0.50 = 1.25
Total Cost (5.9) + 1.25 = 7.15
5. a. 7.10
Total Cost = 5.9
Variable Production Cost = Direct Materials + Direct Labor + V. Indirect Cost = 3.00
Mark-up = 40%
Total Cost (5.9) + 1.2 = 7.10
6. a. 7.25
Total Cost = 5.9
Variable Production Cost = Direct Materials + Direct Labor + V. Indirect Cost = 3.00
Mark-up = 45%
Total Cost (5.9) + 1.35 = 7.25
7. c. 7.67
Total Cost = 5.9
Mark-up = 30%
Mark-up based on Full (total) Cost = 5.9 x 0.30 = 1.77
Total Cost (5.9) + 1.77 = 7.67
8. a. 6.95
Total Cost = 5.9
Variable (Marginal) Cost = 3
Mark-up = 36%
Mark-up based on Variable (marginal) Cost = 3 x 0.36 = 1.08
Total Cost (5.9) + 1.08 = 6.98 (closest is 6.95)

9. c. 8.00
Total Cost = 5.9
Prime Cost = 3.5
Mark-up = 60%
Mark-up based on Prime Cost = 3.5 x 0.60 = 2.1
Total Cost (5.9) + 2.1 = 8.00
10. d. 5.00
Total Cost = 4.5
Fixed Cost per Unit = 4,000/10,000 = 0.40
Total Cost + Fixed Cost per Unit = 4.5 + 0.40 = 4.9 (round off to become 5)

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Multiple Choice: Select the correct letter & compute and give the solution:

Item 1 & 2 are based on the ff. information:

Variable Raw Material Cost 12.50

Variable Direct Labor Cost 07.50

Total Variable Cost 20.00

Fixed annual overhead & other expenses 250,000

a. 23.10 b. 22.55 c. 22.00 d. 22.50

a. 22.50 b. 22.00 c. 22.37 d. 22.55

a. 5.10 b. 6.20 c. 7.00 d. 7.10

Items 4 to 10 are based on the following information:

Direct Materials 1.00

Direct Labor 1.20

V. Indirect cost 0.80

F. Indirect cost 0.50

Selling and Other costs:

a. 5.90 b. 5.25 c. 6.90 d. 7.15

a. 7.10 b. 7.30 c. 8.26 d. 7.15

a. 7.25 b. 7.92 c. 8.56 d. 7.48

a. 6.95 b. 5.90 c. 7.67 d. 6.65

a. 6.95 b. 6.70 c. 7.65 d. 7.48

a. 7.22 b. 7.40 c. 8.00 d. 7.70

a. 3.50 b. 4.15 c. 4.25 d. 5.00

Total variable cost per unit (20.00) x 500,000 = 10,000,000

Total Fixed Cost = 250,000

Total cost = 10,250,000

Total Cost (10,250,000)/500,000 = 20.5

10% of 10,250,000 = 1,025,000

20.5 + 2.05 = 22.55

Total Variable Cost per Unit (20.00) x 750,000 = 15,000,000

Total Fixed Cost = 250,000

Total Cost = 15,250,000

10% of 15,250,000 = 1,520,000

20.33 + 2.03 = 22.36 (closest is 22.37)

Volume = 10,000 units

Total Investment = 60,000

Total Cost = 50,000

ROI = 60,000 x 20% = 12,000

Total Cost + ROI = 50,000 + 12,000 = 62,000

Per Unit TC + ROI = 62,000/10,000 units = 6.2

Cost per Unit = 5.00 per unit

Total Cost = 5.9

Conversion Cost = Direct Labor + V. Indirect Cost + F. Indirect Cost = 2.5

Mark-up based on Conversion Cost = 2.5 x 0.50 = 1.25

Total Cost (5.9) + 1.25 = 7.15

Total Cost = 5.9

Mark-up based on Conversion Cost = 3.00 x 0.40 = 1.2

Total Cost (5.9) + 1.2 = 7.10

Total Cost = 5.9

Mark-up based on Conversion Cost = 3.00 x 0.45 = 1.35

Total Cost (5.9) + 1.35 = 7.25

Total Cost = 5.9

Mark-up based on Full (total) Cost = 5.9 x 0.30 = 1.77

Total Cost (5.9) + 1.77 = 7.67

Total Cost = 5.9

Variable (Marginal) Cost = 3

Mark-up based on Variable (marginal) Cost = 3 x 0.36 = 1.08

Total Cost (5.9) + 1.08 = 6.98 (closest is 6.95)

Total Cost = 5.9

Prime Cost = 3.5