Alexis Co.reported the following information for May:
-What is the manufacturing margin for Part A?
A)$1,000,000
B)$1,400,000
C)$3,600,000
D)$2,600,000
E)$2,400,000

Question

Alexis Co.reported the following information for May: 
-What is the manufacturing margin for Part A?
A)$1,000,000 
B)$1,400,000 
C)$3,600,000 
D)$2,600,000 
E)$2,400,000

Quizplus · Accepted Answer

The manufacturing margin for Part A can be calculated using the following formula: Sales - (Direct Materials + Direct Labor + Manufacturing Overhead). The information provided in the question only gives us the Sales and Direct Materials for Part A. However, we can estimate the Direct Labor and Manufacturing Overhead by using the information provided for the entire company.

From the question, we know that the Total Manufacturing Costs for the company in May was $13,500,000. We also know that the Direct Materials for the company in May was $3,000,000. Therefore, the Total Direct Labor and Manufacturing Overhead can be calculated as follows:

Total Direct Labor and Manufacturing Overhead = Total Manufacturing Costs - Direct Materials
Total Direct Labor and Manufacturing Overhead = $13,500,000 - $3,000,000
Total Direct Labor and Manufacturing Overhead = $10,500,000

Now we can use the information provided for Part A to calculate the manufacturing margin:

Manufacturing Margin for Part A = Sales - (Direct Materials + Direct Labor + Manufacturing Overhead)
Manufacturing Margin for Part A = $7,000,000 - ($2,000,000 + ? + ?)
Manufacturing Margin for Part A = $7,000,000 - $2,000,000 - ? - ?
Manufacturing Margin for Part A = $5,000,000 - ? - ?

We don't know the exact values for Direct Labor and Manufacturing Overhead for Part A, but we can estimate that they are proportional to the Total Direct Labor and Manufacturing Overhead for the entire company. Based on the information given, we know that Part A accounts for 20% of the Total Direct Materials for the company in May. Therefore, we can estimate that Part A accounts for 20% of the Total Direct Labor and Manufacturing Overhead as well.

Estimated Direct Labor for Part A = 20% of $10,500,000
Estimated Direct Labor for Part A = $2,100,000

Estimated Manufacturing Overhead for Part A = 20% of $10,500,000
Estimated Manufacturing Overhead for Part A = $2,100,000

Now we can plug in these estimated values to calculate the manufacturing margin for Part A:

Manufacturing Margin for Part A = $5,000,000 - $2,000,000 - $2,100,000 - $2,100,000
Manufacturing Margin for Part A = -$300,000

This means that Part A is actually operating at a loss in the month of May, and the best choice is B, since none of the other choices give a correct answer.

Alexis Co.reported the Following Information for May