Benjamin Company had the following results of operations for the past year: Sale

ID: 2485850 • Letter: B

Question

Benjamin Company had the following results of operations for the past year:

Sales (16,000 units at $10.35) $165,600

Direct materials and direct labor $101,600

Overhead (20% variable) 21,600

Selling and administrative expenses (all fixed) 32,700 (155,900)

Operating income $9,700

A foreign company (whose sales will not affect Benjamin's market) offers to buy 4,700 units at $8.27 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $670 and selling and administrative costs by $370. If Benjamin accepts the offer, its profits will: A. Increase by $9,024 B. Increase by $38,869 C. Increase by $7,755 D. Increase by $6,715 E. Decrease by $9,024

2.Brush Industries reports the following information for May:

Sales $960,000

Fixed cost of goods sold 112,000

Variable cost of goods sold 262,000

Fixed selling and administrative costs 112,000

Variable selling and administrative costs 137,000

Calculate the operating income for May under absorption costing? A. $698,000 B. $337,000 C. $561,000 D. $586,000

Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is

Direct materials standard (3 lbs @ $2/lb) $ 6 per finished unit

Total direct materials cost variance—unfavorable $ 23,750

Actual direct materials used 120,000 lbs

Actual finished units produced 30,000 units

A. $23,750 unfavorable B. $55,750 favorable. C. $36,250 favorable D. $36,250 unfavorable E. $60,000 unfavorable

Explanation / Answer

Calculation of Impact on profits if Benjamin accepts the offer:

Incremental Sales (4700 Units * $8.27)

$ 38,869

Less: Incremental Direct materials and direct labor Costs ($101600/16000 Units )*4700 Units =

$ (29,845)

Less: Incremental Variable overhead Costs (21600*20%)/16000 Units )*4700 Units =

$ (1,269)

Less: Incremental Fixed overhead Costs

$ (670)

Less: Incremental Fixed Selling and Administrative Costs

$ (370)

Increase in Profits =

$ 6,715