Boat, inc. assembles custom sailboats from components supplied by

Question 3 – Classifying Manufacturing costs (L.0 – 2-1)

1.       Boat, Inc. assembles custom sailboats from components supplied by various manufacturers. The company is very small assembly shop and retail sales stores are housed in a Gig Harbor, Washington, boathouse. Below are listed some of the cost that are incurred at the company.


2.       REQUIRED:


Each cost, indicate whether it would most likely be classified direct labor, direct materials, manufacturing overhead, selling or an administrative cost.

a.       The wages of employees who build the sailboats.

b.      The cost of advertising in the local newspapers.

c.       The cost of an aluminum mast installed in a sailboat

d.      The wages of the assembly shop’s supervisor.

e.      Rent on the boathouse.

f.        The wages of the company’s bookkeeper.

g.       Sales commission paid to the company’s salespeople.

h.      Depreciation on power towels.


Question 4 – Variable cost behavior (LO 2-3)

Koffee Express operates a number of espresso coffee stands in busy suburban mall. The fixed weekly expense of a coffee stand is $1,100 and the variable cost per cup of coffee served is $.26.



a.       Fill in the following table with your estimates of the total costs and average cost per cup of coffee at the indicated levels of activity for a coffee stand. Round off of 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.




  1,900                                                   2,000

Fixed Cost                                                           ?             ?         ?

Variable Cost                                                      ?             ?        ?

Total Cost                                                           ?              ?        ?

Average cost per cup of coffee                      ?              ?        ?



Does the average cost per cup served increase, decrease, or remain the same as the number increase? Explain?




Question 5 –  Preparing a Contribution Format Income Statement. (LO 3-1) Wheeler’s Corporation’s most recent income statement following:


Per Unit

Sales (8,000)                               $208,000                                      $26.00

Variable expenses                     $244,000                                      $18.00

Contribution margin                      64.00                                          $8.00

Fixed expenses                                56.00                   

Net Operating Income             $      8,000





Prepare a Contribution format income statement under each of the following conditions (consider each case independently):

1.       The sales volume increases by 50 units.

2.       The sales volume declines by 50 units.

3.       The sales volume is 7,000 units.



Question 6 – Computing job costs (LO -4-3)


Weaver Company’s predetermined overhead rate is $18.00 per unit direct labor-hour and its direct labor wage rate is $12.00 per hour. The following information pertains to job A-200.


Direct materials………………………………..   $ 200

Direct labor……………………………………….. $ 120




1.       What is total manufacturing cost assigned to job A-200?

If Job A-200 consists of 50 units, what is average cost assigned to each unit included in the job?





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