9. The accounting records of Bronco Company reve the following information: Dire
ID: 2569260 • Letter: 9
Question
9. The accounting records of Bronco Company reve the following information: Direct materials Direct labor Manufacturing overhead Work-in-process inventory on 1/1/16 Finished goods inventory on 1/1/16 Work-in-process inventory on 12/31/16 Finished goods inventory on 12/31/16 $60,000 125,000 50,000 189,000 76,000 140,000 Bronco's cost of goods manufactured for 2016 is A. $519,000. B. $522,000 C. $568,000 D. $571,000. A company observed a decrease in the cost per unit. All other things being equal, which of the following is probably true? A. The company is studying a variable cost, and total volume has increased. B. The company is studying a variable cost, and total volume has decreased. C. The company is studying a fixed cost, and total volume has increased. D. The company is studying a fixed cost, and total volume has decreased. E. The company is studying a fixed cost, and total volume has remained 10. constant.Explanation / Answer
Answer 9 is A.
Total Manufacturing Costs = Direct Materials + Direct Labor + Manufacturing Overhead
Total Manufacturing Costs = $60,000 + $125,000 + $360,000
Total Manufacturing Costs = $545,000
Cost of Goods Manufactured = Work-in-process Inventory on 1/1/16 + Total Manufacturing Costs - Work-in-process Inventory on 12/31/16
Cost of Goods Manufactured = $50,000 + $545,000 - $76,000
Cost of Goods Manufactured = $519,000
Answer 10 is C.
Cost per unit consists of variable costs per unit and fixed costs per unit.
Variable costs per unit remains constant as number of units produced increases. But, fixed costs per unit decreases as number of units produced increases as total fixed costs is always constant.
So, Cost per unit decreases if number of units produced decreases because of fixed costs per unit.
So, the company is studying the effect of fixed cost over cost per unit.
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