Accounting Problems

Accounting Problems

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Exercise 15-5 (Part Level Submission) Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $330,264 for the year, and machine usage is estimated at 125,100 hours. For the year, $393,740 of overhead costs are incurred and 131,000 hours are used. Warning Ok   Cancel

(a)   Compute the manufacturing overhead rate for the year. (Round answer to 2 decimal places, e.g. 1.25.) Manufacturing overhead rate   $  per machine hour Warning Ok   Cancel

The ledger of American Company has the following work in process account. Work in Process—Painting 5/1 Balance 3,890  5/31 Transferred out ? 5/31 Materials 6,590       5/31 Labor 3,230       5/31 Overhead 1,380       5/31 Balance ?       Production records show that there were 460 units in the beginning inventory, 30% complete, 1,690 units started, and 1,400 units transferred out. The beginning work in process had materials cost of $2,940 and conversion costs of $950. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process. Warning Ok   Cancel

(a)   How many units are in process at May 31? Work in process, May 31    units

Exercise 17-1 (Part Level Submission) Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations.     Standard   Custom Direct labor costs   $43,000   $102,000 Machine hours   1,310   1,270 Setup hours   110   380 Total estimated overhead costs are $303,000. Overhead cost allocated to the machining activity cost pool is $196,000, and $107,000 is allocated to the machine setup activity cost pool. Warning Ok   Cancel

(a)   Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 12.25.) Predetermined overhead rate    % of direct labor cost

P18-1A  

Determine variable and fixed costs, compute break-even point, prepare a CVP graph, and determine net income.

(LO 1, 2, 3, 4), AN

Vin Diesel owns the Fredonia Barber Shop. He employs four barbers and pays each a base rate of $1,250 per month. One of the barbers serves as the manager and receives an extra $500 per month. In addition to the base rate, each barber also receives a commission of $4.50 per haircut.

Other costs are as follows.

Vin currently charges $10 per haircut.

Instructions

(a)

Determine the variable costs per haircut and the total monthly fixed costs.

VC $5

(b)

Compute the break-even point in units and dollars.

(c)

Prepare a CVP graph, assuming a maximum of 1,800 haircuts in a month. Use increments of 300 haircuts on the horizontal axis and $3,000 on the vertical axis.

(d)

Determine net income, assuming 1,600 haircuts are given in a month.

CT19-6.  

COMMUNICATION ACTIVITY

E

Easton Corporation makes two different boat anchors—a traditional fishing anchor and a high-end yacht anchor—using the same production machinery. The contribution margin of the yacht anchor is three times as high as that of the other product. The company is currently operating at full capacity and has been doing so for nearly two years. Bjorn Borg, the company’s CEO, wants to cut back on production of the fishing anchor so that the company can make more yacht anchors. He says that this is a “no-brainer” because the contribution margin of the yacht anchor is so much higher.

Instructions

Write a short memo to Bjorn Borg describing the analysis that the company should do before it makes this decision and any other considerations that would affect the decision.