Question 1: Cost flows, income statemen
You own a store. Beginning inventory on January 1 was $7,000. Ending inventory on December 31 was $7,500. You purchased $23,000 of new merchandise during the year. Sales revenue for the year was $46,000. Selling, general, and administrative (SG&A) costs for the year were $4,000.
a) Compute the cost of goods sold (COGS) for the year.
b) Prepare the income statement for the year.
| Revenue | 46000 |
| COGS | |
| Gross Margin | |
| SG&A costs | 4000 |
| Profit |
____________
Question 2: Cost structure estimation
| Cost account | Amount | Fixed or variable? |
| direct labor | $8,000 | variable |
| direct materials | $8,000 | variable |
| depreciation | $8,000 | Fixed |
| rent | $9,000 | Fixed |
| administrative staff salaries | $7,000 | Fixed |
Production volume was 200 units.
a) Which cost structure estimation method should we use?
B) Estimate the cost structure parameters:
total FC=$ = _______
unit VC=$ =_________
Write down the total cost equation:
TC = + * volume
(e.g., if TC=500+2*volume, enter 500 in the first box and 2 in the second box)
d) Predict the total cost of producing 250 units:
_____________________________________________
Question 3: Cost structure estimation
| month | activity volume in units |
total costs |
| Oct | 90 | $6,230 |
| Nov | 70 | $6,300 |
| Dec | 105 | $7,700 |
a) Which cost structure estimation method should we use?
b) To identify the low and high points, we should look for lowest/highest activiti
c) Estimate the cost structure parameters:
total FC=
unit VC=
Write down the total cost equatio
TC = + * volume
d) Predict the total costs of producing 90 units:
TC =
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