1-When you combine costs and cash expenses, you have four possible combinations.

Cash expenses No cash expenses

Costs 1 2

No costs 3 4

 

Give an example of each combination.

 

2-An industrial company is dealing with five groups of variable costs:

Production Volume Group A Group B Group C Group D Group E

1,000 400 400 400 400 400

2,000 700 800 500 1,200 600

4,000 1,000 1,600 600 3,600 900

8,000 1,300 3,200 700 10,800 1,300

16,000 1,600 6,400 800 32,400 1,800

 

What kind of variable costs are applicable to groups A,B,C,D and E? It may help to plot the costs on a graph.

 

3-The following data are for Marvin Department Store. The account balances (in thousands) are for 2014.

Marketing, distribution, and customer-service costs $ 37,000

Merchandise inventory, January 1, 2014 27,000

Utilities 17,000

General administrative costs 43,000

Merchandise inventory, December 31, 2014 34,000

Purchases 155,000

Miscellaneous costs 4,000

Transportation-in 7,000

Purchase returns and allowances 4,000

Purchases discounts 6,000

Revenues 280,000

 

a) Compute: 1-the cost of goods purchased 2-the cost of good sold

b) Prepare the income statement for 2014