BEC 4 Decision Making

Question 1

What assumptions are made with a multiproduct company?

Answer 1

• The sales mix needs to remain constant.
• Sales price per unit is constant
• Variable cost per unit is constant

Question 2

How does contribution margin affect sales?

Answer 2

-Products with higher contribution margins will be sold first.

Question 3

How are production costs calculated under the variable method?

Answer 3

Production Costs = Direct Materials + Direct Labor + Variable Factory Overhead.

Question 4

When are fixed/variable selling and administrative expenses used?

Answer 4

They are recognized in the period incurred.

Question 5

How are costs allocated under the variable costing method?

Answer 5

They are allocated to units produced rather than units sold.

Question 6

How do you calculate return on sales?

Answer 6

(Amount of Sales) - (Variable Costs) - (Fixed Costs) = (Return on Sales)

Question 7

Calculate Selling Price for a Composite Unit

Answer 7

(Selling Price A x Composite Unit A) + (Selling Price B x Composite Unit B)

Question 8

Calculate Variable Cost for a Composite Unit

Answer 8

(Variable Cost A x Composite Unit A) + (Variable Cost B B x Composite Unit B)

Question 9

How do you calculate cost of sales?

Answer 9

Beginning Inventory
\+Purchases
=Cost of Goods Available for Sale
-Ending Inventory
=Cost of Goods Sold