23) Which of the following measures of profit is best for use in predicting the
ID: 2512459 • Letter: 2
Question
23) Which of the following measures of profit is best for use in predicting the future profits of a company? a) Net Income b) Income from Operations c) Income from Continuing Operations (after-tax) d) Gross Margin 24) The performance evaluation of an investment center is typically based on its: a) Flexible budget variance for direct materials and direct labor b) Budget variances for sales price and sales volume O ROI d) Actual net income compared to budgeted net income 25) Yellow Sneakers inc. has the following costs during their first year of business: Direct materials Direct labor Variable (unit related) factory overhead Fixed Factory overhead 55.00 per unit Variable Selling and Administrative Fixed Selling and Administrative There are 10,000 pair of sneakers produced this year but only 9,000 pair were sold at $40 each. $56,000 53.00 per unit $50,000 What is the amount of ending inventory if the company uses absorption costing per GAAP? a) $8,000 b) $14,222 c) $7,000 d) $13,600 2.5 26) Refer to information in the question above. What is the amount of ending inventory if the company uses variable costing? a) $8,000 b) $11,000 c) $7,000 d) $16,600 27) Refer to information in the question above. What is the amount of ending inventory if the company uses throughput costing? a) $3,000 b) $14,222 c) $7,000 d) $2,000 51PageExplanation / Answer
23) Gross Margin
Gross profit margin is calculated by subtracting cost of goods sold from total revenue.Gross profit margin is very useful tool for future planning.Gross margin uses just revenue and production costs which are not subjected to much variablity.Hence future profits can be predicted to the best extend using Gross margin.
24) ROI
ROI is the most common performance measure for evaluation centre as it better portrays the profitability with the formula NET INCOME/NET INVESTMENT.
25)Answer is option D
In absorption costing the cost of goods sold = Direct marerial + Direct labour + Variable factory overhead + Fixed factory overhead
= 2+ 5+ 1+ 56000/10000 = 13.6
Hence value of closing inventory = 1000 * 13.6 which is 13600.
26)Answer is option A
In Variable costing the cost of goods sold = Direct marerial + Direct labour + Variable factory overhead
= 2 + 5+ 1 = 8
Hence closing inventory is 1000 * 8 which is equal to 8000
27) Answer is option D
Thoroughput costing takes only direct material into consideration avoiding all other expenses.
Hence closing inventory = 1000 * 2 which is equal to 2000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.