Question 1 ÿDefine the following terms:1.Direct Materials.2.Indirect Materials.3.Direct Labor.4.Indirect Labor.5.Manufacturing Overhead.Question 2 ÿWhat is meant by contribution martin ratio? How is this ratio useful in planning business operations?Question 3 ÿClassifying Manufacturing Costs (LO ? 2-1)Your Boat, Inc. assembles custom sailboats from components supplied by various manufacturers.ÿ The company is very small and its assembly shop and retail sales store are housed in a Gig Harbor, Washington, boathouse.ÿ Below are listed some of the costs that are incurred at the company.Required:For each cost, indicate whether it would most likely be classified as direct labor, direct materials, manufacturing overhead, selling, or an administrative cost.1.The wages of employees who build the sailboats..2.The cost of advertising in the local newspapers..3.The cost of an aluminum mast installed in a sailboat..4.The wages of the assembly shop?s supervisor.5.Rent on the boathouse.6.The wages of the company?s bookkeeper..7.Sales commissions paid to the company?s salespeople..8.Depreciation on power towels..Question 4 ÿFixed and variable cost behavior (LO ? 2-3)Koffee Express operates a number of espresso coffee stands in busy suburban malls.ÿ The fixed weekly expense of a coffee stand is $1,100 and the variable cost per cup of coffee served is $.26.Required:1. Fill in the following table with your estimates of total costs and average costs per cup of coffee at the indicated levels of activity for a coffee stand.ÿ Round off the cost of a cup of coffee to the nearest tenth of a cent.Does the average cost per cup served increase, decrease, or remain the same as the number of cups of coffee served in a week increases? Explain.ÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿCups of Coffee Served in a Weekÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ1,800ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿÿÿÿÿ1,900ÿÿÿÿÿÿÿ ÿÿÿÿÿÿÿÿÿÿ2,000ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿFixed Costÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ?ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ?ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ?ÿVariable costsÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ? ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿ?ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿ?ÿTotal costÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ?ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ?ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿ?ÿAverage cost per cup of coffee servedÿ2. Does the average cost per cup served increase, decrease, or remain the same as the number of cups of coffee served in a week increases? Explain.Question 5 ÿPreparing a Contribution Format Income Statement. (LO ? 3-1) Wheeler Corporation?s most recent income statement follows.ÿÿÿÿÿÿÿ ÿPer Unitÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿTotalÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿSales (8,000 units)ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿ$208,000ÿÿÿÿÿÿÿ ÿÿÿ$26.00ÿVariable expensesÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿ244.000ÿÿÿÿÿÿÿÿÿÿÿ ÿ18.00ÿContribution marginÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿ64.00ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿ$8.00ÿFixed expensesÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿ56.00ÿNet Operating incomeÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ $8,000ÿRequired:Prepare a new Contribution format income statement under each of the following conditions (consider each case independently):1. The sales volume increases by 50 units2. The sales volume declines by 50 units.3. The sales volume is 7,000 units.Question 6 ÿComputing Job Costs (LO ? 4-3)Weaver Company?s predetermined overhead rate is $18.00 per direct labor-hour and its direct labor wage rate is $12.00 per hour.ÿ The following information pertains to Job A-200.Direct Materials ÿ$200ÿDirect Labor ÿ$120ÿRequired:1.What is the total manufacturing cost assigned to Job a-200?.2.If Job A-200 consists of 50 units, what is the average cost assigned to each unit included in the job?.Question 7 ÿWhat is the basic difference between absorption costing and variable costing?Question 8 ÿWhat is a segment of an organization? Give 3 examples of segments.Question 9 ÿWhat are unit-level, batch-level, product-level, customer-level, and organizational-level sustaining activities?Question 10 ÿWhy are there two stages of allocation in activity-based costing?
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