10. Moccico Mocio Enterprises, Inc., .produces and sels a single product whose s

Question

10. Moccico Mocio Enterprises, Inc., .produces and sels a single product whose selling The company's monthly fixed expense is in that target unit and whose variable expense is $37.20 per unit. 5356,040. Assume the company's target profit is $14,000. The unit sales to profit is closest to: A. 3,084 units B. 4,469 units C. 5,892 units D. 5,083 units E. None of the above 11. Totomato Tires Company (TTC) uses machine hours to determine its predetermined overhead rates. At the beginning of the year, JGC estimated its 2013 machine hours to be 10,000 hours and estimated its 2013 Actual 2013 machine hours were 11,000 hours, and actual 2013 manufacturing overhead was $1,800,000. At the end of the year, TTC made an accounting entry to include the over-applied or under- manufacturing overhead to be $1,500,000. applied overhead in cost of goods sold. profit? What impact did that entry have on TTC's net operating A. Reduce net operating income by $150,000. B. Reduce net operating income by $50,000. C. Increase net operating income by $300,000. D. Reduce net operating income by $300,000. E. Increase net operating income by $150,000.

Explanation / Answer

Answer 10 - B. 4,469 units BEP (In Units + Target Profit) = (Fixed Cost + Target profit) / Contribution per Unit BEP (In Units + Target Profit) = ($356,040 + $14,000) / $82.80 BEP (In Units + Target Profit) = 4,469.082 or say 4,469 Units (Approx). Contribution per Unit = $120 (Selling Price per Unit) - $37.20 (Variable Cost) Contribution per Unit = $82.80 Answer 11-A. Reduce net operating income by $150,000 Predetermined Overhead Rate = $1,500,000 (Overhead) / 10,000 Mach Hrs Predetermined Overhead Rate = $150 per mach. Hr. Overhead Applied - 2013 - $150 X 11,000 Mach Hrs          1,650,000 Actual Overhead          1,800,000 Underapplied Overhead              150,000 Journal Entry would be: Cost of Goods Sold                                                       Dr.              150,000    To Manufacturing Overhead          150,000 This will increase the Cost of Goods Sold, hence it will decrease the Income by $150,000. Answer 12-E. $360,000 Margin of safety = Sales - BEP (In $) BEP (In $) = Fixed Cost / Contribution Margin Ratio Fixed Cost = $1,080,000 (Contribution Margin) - $180,000 (Net Operating Income) Fixed Cost = $900,000 Contribution Margin Ratio = $1,080,000 (Contribution) / $2,160,000 (Sales) Contribution Margin Ratio = 50% BEP (In $) = $900,000 / 50% BEP (In $) = $1,800,0000 Margin of safety = $2,160,000 - $1,800,000 Margin of safety = $360,000

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