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Activity 1 –  chapters 1,2,14

Choose a major publicly traded corporation, then go to the corporate’s site and retrieve the

information needed for this assignment. Provide information about the history of the

corporation and its current product offerings. Provide a screenshot of the corporate’s latest reported income statement. Organize the income statement in an Excel file to enable you to

verify the arithmetic in the income statement, and explain your verifications. Also, explain the

nature of each item in the income statement. At least 5 scholarly references are required which

should include the corporate’s site as the source of the data. In-text citations are required

throughout the document. All submissions should be in one Word file

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1. High Country, Inc., produces and sells many recreational products. The company has just opened a new plant to produce a folding camp cot that will be marketed throughout the United States. The following cost and revenue data relate to May, the first month of the plant’s operation:

 

     
Beginning inventory   0
Units produced   44,000
Units sold   39,000
Selling price per unit $ 84
Selling and administrative expenses:    
Variable per unit $ 3
Fixed (per month) $ 559,000
Manufacturing costs:    
Direct materials cost per unit $ 14
Direct labor cost per unit $ 8
Variable manufacturing overhead cost per unit $ 3
Fixed manufacturing overhead cost (per month) $ 836,000
 

 

Management is anxious to assess the profitability of the new camp cot during the month of May.

 

Required:

1. Assume that the company uses absorption costing.

a. Calculate the unit product cost.

b. Prepare an income statement for May.

2. Assume that the company uses variable costing.

a. Calculate the unit product cost.

b. Prepare a contribution format income statement for May.

 

A. Determine the unit product cost. Assume that the company uses absorption costing.

 

B. Prepare an income statement for May. Assume that the company uses absorption costing.

 

 

C. Determine the unit product cost. Assume that the company uses variable costing.

 

D. Prepare a contribution format income statement for May. Assume that the company uses variable costing.

 
 

E.

   
 
 
High Country, Inc.
Variable Costing Income Statement
     
     
     
     
     
     
     
     
     
     
     
     
     

 

 

 

 

 

 

2. Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost.

 

Last year, the company sold 60,000 of these balls, with the following results:

 

   
Sales (60,000 balls) $ 1,500,000
Variable expenses   900,000
Contribution margin   600,000
Fixed expenses   375,000
Net operating income $ 225,000
 

 

Required:

1. Compute (a) last year’s CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year’s sales level.

2. Due to an increase in labor rates, the company estimates that next year’s variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year’s CM ratio and the break-even point in balls?

3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $225,000, as last year?

4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs?

5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls?

6. Refer to the data in (5) above.

a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $225,000, as last year?

b. Assume the new plant is built and that next year the company manufactures and sells 60,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage.

 

Compute (a) last year’s CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year’s sales level. (Round “Unit sales to break even” to the nearest whole unit and other answers to 2 decimal places.)

 
 

 

   
 
 
     
CM Ratio   %
Unit sales to break even   balls
Degree of operating leverage    

 

 

 

Due to an increase in labor rates, the company estimates that next year’s variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year’s CM ratio and the break-even point in balls? (Round “CM Ratio” to 2 decimal places and “Unit sales to break even” to the nearest whole unit.)

 
 

 

   
 
 
     
CM Ratio   %
Unit sales to break even   balls

 

 

 

Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $225,000, as last year? (Round your answer to the nearest whole unit.)

 
 

 

   
 
 
Number of balls  

 

 

 

Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs? (Round your answer to 2 decimal places.)

 
 

 

   
 
 
Selling price  

 

 

·

 

Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls? (Round “CM Ratio” to 2 decimal places and “Unit sales to break even” to the nearest whole unit.)

Show less

 
 

 

   
 
 
     
CM Ratio   %
Unit sales to break even   balls

 

 

·

If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $225,000, as last year? (Round your answer to the nearest whole unit.)

 
 

 

   
 
 
Number of balls  

 

 

·

· Assume the new plant is built and that next year the company manufactures and sells 60,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage. (Round “Degree of operating leverage” to 2 decimal places.)

 
 

·

   
 
 
Northwood Company
Contribution Income Statement
   
   
   
   
   
   
Degree of operating leverage  

 

 

 

 

3. Topper Sports, Inc., produces high-quality sports equipment. The company’s Racket Division manufactures three tennis rackets—the Standard, the Deluxe, and the Pro—that are widely used in amateur play. Selected information on the rackets is given below:

 

  Standard Deluxe Pro
Selling price per racket $ 65.00 $ 100.00 $ 145.00
Variable expenses per racket:            
Production $ 39.00 $ 42.00 $ 58.00
Selling (5% of selling price) $ 3.25 $ 5.00 $ 7.25
 

 

All sales are made through the company’s own retail outlets. The Racket Division has the following fixed costs:

 

  Per Month
Fixed production costs $ 150,000
Advertising expense   130,000
Administrative salaries   80,000
Total $ 360,000
 

 

Sales, in units, over the past two months have been as follows:

 

  Standard Deluxe Pro Total
April 2,000 1,000 5,000 8,000
May 8,000 1,000 3,000 12,000
 

 

Required:

1-a. Prepare contribution format income statements for April.

1-b. Prepare contribution format income statements for May.

3. Compute the Racket Division’s break-even point in dollar sales for April.

4. Whether the break-even point would be higher or lower with May’s sales mix than with April’s sales mix?

5. Assume that sales of the Standard racket increase by $23,000. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $23,000? Do not prepare income statements; use the incremental analysis approach in determining your answer.

Prepare contribution format income statements for April. (Round “Total percent” answers to 1 decimal place)

 
 

 

   
 
 
Topper Sports, Inc.
Income Statement for April
  Standard Deluxe Pro Total
  Amount %   Amount %   Amount %   Amount %  
      %     %     %     %
Variable expenses:                        
      %     %     %     %
      %     %     %     %
      %     %     %     %
      %     %     %     %
Total variable expenses     %     %     %     %
      %     %     %     %
Fixed expenses:                        
                         
                         
                         
                         
                         
Total fixed expenses                        
                         

 

 

 

Prepare contribution format income statements for May. (Round “Total percent” answers to 1 decimal place)

 
 

 

   
 

 

Prepare contribution format income statements for May. (Round “Total percent” answers to 1 decimal place)

 
 

 

   
 
 
Topper Sports, Inc.
Income Statement for May
  Standard Deluxe Pro Total
  Amount %   Amount %   Amount %   Amount %  
      %     %     %     %
Variable expenses:                        
      %     %     %     %
      %     %     %     %
      %     %     %     %
      %     %     %     %
Total variable expenses     %     %     %     %
      %     %     %     %
Fixed expenses:                        
                         
                         
                         
                         
                         
Total fixed expenses                        
                         

 

 

 

Compute the Racket Division’s break-even point in dollar sales for April. (Round intermediate percentage calculations to 1 decimal place and final answer to the nearest whole dollar.)

 
 

 

   
 
 
Break-even point in dollar sales  

 

 

 

 

Whether the break-even point would be higher or lower with May’s sales mix than with April’s sales mix?

Higher or lower?

 

Assume that sales of the Standard racket increase by $23,000. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $23,000? Do not prepare income statements; use the incremental analysis approach in determining your answer.

 
 

 

   
 
 
  Standard Pro
Net operating income    

 

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6. Given the following information for a​ retailer, compute the cost of goods sold.

Calculation of Cost of Goods Sold  
  Cost of goods sold:    
       
  Plus:      
         
         
       
  Less:      
  Cost of goods sold    

 

 

7. Erickson Industries is calculating its Cost of Goods Manufactured at​ year-end. Erickson’s

accounting records show the​ following: The Raw Materials Inventory account had a beginning balance of $ 12,000 and an ending balance of $ 20,000. During the​ year, the company purchased $ 62,000 of direct materials. Direct labor for the year totaled

$ 127,000​, while manufacturing overhead amounted to $ 156 ,000. The Work in Process Inventory account had a beginning balance of $ 23,000 and an ending balance of $ 19,000. Assume that Raw Materials Inventory contains only direct materials. Compute the Cost of Goods Manufactured for the year. (Hint​: The first step is to calculate the direct materials used during the​ year.)

 

Start by calculating the direct materials used during the year.

Erickson Industries
Calculation of Direct Materials Used
For Current Year
   
 

Erickson

Industries is calculating its Cost of Goods Manufactured at​ year-end.

Erickson’s

accounting records show the​ following: The Raw Materials Inventory account had a beginning balance of

$ 12 comma 000

and an ending balance of

$ 20 comma 000

.

During the​ year, the company purchased

$ 62 comma 000

of direct materials. Direct labor for the year totaled

$ 127 comma 000

​,

while manufacturing overhead amounted to

$ 156 comma 000

.

The Work in Process Inventory account had a beginning balance of

$ 23 comma 000

and an ending balance of

$ 19 comma 000

.

Assume that Raw Materials Inventory contains only direct materials. Compute the Cost of Goods Manufactured for the year.

​(Hint​:

The first step is to calculate the direct materials used during the​ year.)

Start by calculating the direct materials used during the year.

Erickson Industries
Calculation of Direct Materials Used
For Current Year
       
Plus:      
     
Less:      
Direct materials used  

 

Compute the Cost of Goods Manufactured for the year.

 

Erickson Industries
Calculation of Cost of Goods Manufactured
For Current Year
       
Plus: Manufacturing costs incurred      
         
         
         
       
Less:        
Cost of goods manufactured      

 

 

 

8. Suppose the smartphone manufacturer Orange Electronics provides the following information for its costs last month​ (in millions):

 

Requirements​ 1, 2 and 3. Classify each of these costs according to its place in the value chain. Within the production​ category, break the costs down further into three​ subcategories: Direct​ Materials, Direct​ Labor, and Manufacturing Overhead. Then calculate the total cost for each value chain category. ​(Enter amounts in millions. If a box is not used in the​ table, leave the box​ empty; do not enter a​ zero.)

Orange Electronics
Value Chain Cost Classification
      Production      
Cost R and D Design Direct Materials Direct Labor Manufacturing Overhead Marketing Distribution Customer Service
Delivery expense                
 

Salaries of salespeople

                
 

Chipset

                
 

Exterior case for phone

                
 

Assembly-line workers’

                
wages                
 

Technical support hotline

                
 

Depreciation on plant

                
and equipment                
 

Rearrange production

                
process                
 

1-800 (toll-free) line for

                
customer orders                
 

Scientists’ salaries

                
 

 

Total costs

                

 

      Production      
Cost R and D Design Direct Materials Direct Labor Manufacturing Overhead Marketing Distribution Customer Service

Requirement 4. How much are the total product​ costs?

First determine the​ formula, then calculate the total product costs. ​(Enter amounts in​ millions.)

 

______________________ + __________________ + = Total product cost

 

___________________ + _____________________ + ____________________ = __________________

 

Requirement 5. How much are the total prime​ costs?

First determine the​ formula, then calculate the total prime costs. ​(Enter amounts in​ millions.)

    +   = Total prime cost
    +   =  

Requirement 6. How much are the total conversion​ costs?

First determine the​ formula, then calculate the total conversion costs. ​(Enter amounts in​ millions.)

    +   = Total conversion cost
    +   =  

 

9. Compute the Cost of Goods Manufactured and Cost of Goods Sold for East Aquatic Company for the most recent year using the amounts described next. Assume that Raw Materials Inventory contains only direct materials.

Start the calculation for cost of goods manufactured by calculating the direct materials used.

East Aquatic Company
Calculation of Direct Materials Used
For Current Year
   
Plus:    
     
Less:    
Direct materials used  

 

 

Calculate the cost of goods manufactured.

 

 

East Aquatic Company
Calculation of Cost of Goods Manufactured
For Current Year
       
Plus: Manufacturing costs incurred      
         
         
         
       
Less:        
Cost of goods manufactured      

Now calculate the cost of goods sold.

East Aquatic Company
Calculation of Cost of Goods Sold
For Current Year
       
Plus:        
       
Less:        
Cost of goods sold      

 

 

10. Harnum Manufacturing found the following information in its accounting​ records: $ 513,500 of direct materials​ used, $ 223,500

of direct​ labor, and $ 773,175 of manufacturing overhead. The Work in Process Inventory account had a beginning balance of $ 81,300 and an ending balance of $ 91,250. Compute the​ company’s Cost of Goods Manufactured.

 

Complete the following table to determine the cost of goods manufactured.

Harnum Manufacturing
Calculation of Cost of Goods Manufactured
For Current Year
   
Plus: Manufacturing costs incurred  
     
     
     
   
Less:    
 

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Please create 3 word documents in APA format and included at least 3 references for each document. No plagiarism. Always cite your sources. INCLUDE CONCLUSION IN ALL 3 ASSIGNMENTS.

  1. Apple inc (Discussion Board)

Your Discussion should be a minimum of 250 words in length and not more than 450 words. Please include a word count. Following the APA standard, use references and in-text citations for the textbook and any other sources.

Continuing with the company Apple Inc, think about the types of financial data that would be included and excluded in differential analysis. Propose which specific revenues and costs should be considered in an evaluation to drop or keep a:

  • Customer
  • Product line

In addition, explain sunk and opportunity costs as they relate to your selected company. Should these costs be considered in differential analysis? Why or why not?

 

  1. Written Assignment

Submit a paper which is 2-3 pages in length (no more than 3-pages), exclusive of the reference page. Paper should be double spaced in Times New Roman (or its equivalent) font which is no greater than 12 points in size. The paper should cite at least two sources in APA format.  One source can be your textbook.

Please describe the circumstances of the following case study and recommend a course of action. Explain your approach to the problem, perform relevant calculations and analysis, and formulate a recommendation. Ensure your work and recommendation are thoroughly supported.

Case Study:

A vacuum manufacturer has prepared the following cost data for manufacturing one of its engine components based on the annual production of 50,000 units.

Description Cost per Month
Direct Materials $75,000
Direct Labor $100,000
Total $175,000

 

In addition, variable factory overhead is applied at $7.50 per unit. Fixed factory overhead is applied at 150% of direct labor cost per unit. The vacuums sell for $150 each. A third party has offered to make the engines for $60 per unit. 75% of fixed factory overhead, which represents executive salaries, rent, depreciation, and taxes, continue regardless of the decision. Should the company make or buy the engines?

Superior papers will:

  • Perform all calculations correctly.
  • Articulate the approach to solving the problem, including which financial information is relevant and not relevant.
  • Correctly conclude on whether the company should make or buy the engines.

Propose other factors that should be considered when making this decision and elaborate on whether or not those factors do or do not support the decision.

Be sure to use APA formatting in your paper.  Purdue University’s Online Writing LAB (OWL) is a free website that provides excellent information and resources for understanding and using the APA format and style. The OWL website can be accessed here: http://owl.english.purdue.edu/owl/resource/560/01/

  1. Portfolio Assignment

Qualitative factors are non-financial in nature but are important for management to consider when making decisions. Reflecting on a company for which you have worked (or are otherwise familiar), describe three qualitative factors that would be important for management decision-making. Then, assess each of them in order of importance. Given your assessment, justify a situation where the qualitative factors would outweigh the quantitative results. Be specific.

As portfolio activities are to be self-reflective, please make sure to connect the portfolio assignment to:

  • Your personal experiences. Reflect on how this assignment topic is applicable to and will benefit you.
  • Course readings and any external readings.
  • Discussion forum posts or other course objectives.

The Portfolio Activity entry should be a minimum of 500 words and not more than 750 words. Use APA citations and references if you use ideas from the readings or other sources.

 

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Question for CLA 2 Paper:

  1. Provide general discussion on predetermined variable overhead criterion and its possible dependence on the activity for which it is used. Provide a variable costing income statement in which variable overhead is divided among different activities, and that each activity has its own predetermined variable overhead criterion. Explain your example in detail and provide in-text citations.
  2. The following is a partially completed lower section of a departmental expense allocation for Cozy Bookstore. It reports the total amounts of direct and indirect expenses allocated to its five departments. Allocate the expenses of the two service departments (advertising and purchasing) to the three operating departments and provide the complete income statement.

Advertising and purchasing department expenses are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows.

  1. Phoenix Company’s 2019 master budget included the following fixed budget report. It is based on an expected production and sales volume of 15,000 units.

  1. Classify all items listed in the fixed budget as variable or fixed. Also determine their amounts per unit or their amounts for the year, as appropriate.
  2. Identify the unit variable costs in the format of variable costing, according to your findings in part a
  3. Organize a template for variable costing income statements in which the sales volume is a variable. Test your template for 15,000 units sales volume to see if you get the same income as stated above
  4. Find the breakeven point and provide the income statement at break even
  5. Provide income statement at sales volume 12,000, 14,000, 16,000, and 18,000

Please explain your work in detail and provide in-text citations. Include the initial situation and the initial assumptions in your answers. At least 6 references are required among which one should be the textbook as source of the data.

*Please refer to the Grading Criteria for Comprehensive Learning Assessments (CLAs) in the University Policies for specific guidelines and expectations.

Question for CLA 2 PPT:

In addition to your CLA2 report, please prepare a professional PowerPoint presentation summarizing your findings for CLA2. The presentation will consist of your major findings, analysis, and recommendations in a concise presentation of 15 slides (minimum). You should use content from your CLA2 report as material for your PowerPoint presentation. In addition, you should include learning outcomes from all your major assignments. This would include PA1, CLA1, PA2, and of course, CLA2 (unless otherwise specified by your Professor). An agenda, executive summary, and references slides should also be included.

Requirement for CLA 2 Paper:

1. At least 6 pages of the written part. (Excluding the calculations and hypothetical examples)

2. Paper needs to be formatted in APA 7th edition

3. Include the initial situation and the initial assumptions in your answers

4. At least 6 references are required among which one should be the textbook as source of data. (Recommend to find the articles from proquest.)

5. Needs to do the calculations on excel first, and then copy the data to the word as the part of paper.

6. Need to include introduction and conclusion.

7. Please find the guide of first question for CLA 2 paper in the attached.

8. Please find the class PPTs and Textbook in the attachment.

Requirement for PPT:

1. Create 15 slides PPT based on the material you write on the CLA2 paper. 

2. Please add the scripts of the presentation in the speaker note section of PPT.

3.Time Length: 8 minuets

4. Need to include in-text citations and reference page.

5. Include calculations and tables with the explanation.

6. Do not put too much words on the slides. The slides should looks simple and clear with main points. (Please write the script of the presentation on the speaker’s note section)

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1

Jeter Corporation had net income of $216,000 based on variable costing. Beginning and ending inventories were 6,400 units and 10,800 units, respectively. Assume the fixed overhead per unit was $6 for both the beginning and ending inventory. What is net income under absorption costing?

Multiple Choice

窗体顶端

$242,400

$216,000

$319,200

$268,800

$280,800

窗体底端

 

2

Alexis Co. reported the following information for May:

  Part A  
Units sold   5,600 units
Selling price per unit $ 860  
Variable manufacturing cost per unit   550  
Sales commission per unit – Part A   86  

What is the manufacturing margin for Part A?

Multiple Choice

窗体顶端

$3,080,000

$1,254,400

$4,334,400

$1,736,000

窗体底端

3

Sea Company reports the following information regarding its production cost.

       
Units produced   56,000 units
Direct labor $ 49 per unit
Direct materials $ 42 per unit
Variable overhead $ 31 per unit
Fixed overhead $ 119,000 in total

Compute the product cost per unit under variable costing.

Multiple Choice

窗体顶端

$124.13

$122.00

$49.00

$91.00

$42.00

窗体底端

 

4

Brush Industries reports the following information for May:

       
Sales $ 1,000,000  
Fixed cost of goods sold   120,000  
Variable cost of goods sold   270,000  
Fixed selling and administrative costs   120,000  
Variable selling and administrative costs   145,000  

Calculate the operating income for May under absorption costing.

Multiple Choice

窗体顶端

$585,000

$610,000

$730,000

$345,000

窗体底端

 

5

Shore Company reports the following information regarding its production cost.

       
Units produced   31,000 units
Direct labor $ 26 per unit
Direct materials $ 27 per unit
Variable overhead $ 283,000 in total
Fixed overhead $ 97,920 in total

Compute product cost per unit under absorption costing.

Multiple Choice

窗体顶端

$65.29

$27.00

$62.00

$53.00

$26.00

窗体底端

 

6

Accurate Metal Company sold 35,500 units of its product at a price of $320 per unit. Total variable cost per unit is $175, consisting of $166 in variable production cost and $9 in variable selling and administrative cost. Compute the manufacturing margin for the company under variable costing.

Multiple Choice

窗体顶端

$6,212,500

$6,532,000

$5,147,500

$11,360,000

$5,467,000

窗体底端

 

7

Decko Industries reported the following monthly data:

       
Units produced   64,000 units
Sales price $ 45 per unit
Direct materials $ 2.70 per unit
Direct labor $ 3.70 per unit
Variable overhead $ 4.70 per unit
Fixed overhead $ 235,200 in total

What is the company’s contribution margin for this month if 62,000 units were sold?

Multiple Choice

窗体顶端

$2,169,600

$2,101,800

$2,880,000

$2,393,200

$2,790,000

窗体底端

8

Alexis Co. reported the following information for May:

  Part A  
Units sold   5,800 units
Selling price per unit $ 950  
Variable manufacturing cost per unit   600  
Sales commission per unit – Part A   95  

What is the contribution margin for Part A?

Multiple Choice

窗体顶端

$2,030,000

$1,479,000

$3,480,000

$4,959,000

窗体底端

9

Given the following data, calculate product cost per unit under absorption costing.

       
Direct labor $ 13 per unit
Direct materials $ 7 per unit
Overhead      
Total variable overhead $ 26,000  
Total fixed overhead $ 96,000  
Expected units to be produced   46,000 units

Multiple Choice

窗体顶端

$24.00 per unit

$20.57 per unit

$22.09 per unit

$22.65 per unit

$20.00 per unit

窗体底端

 

10

Brush Industries reports the following information for May:

       
Sales $ 960,000  
Fixed cost of goods sold   112,000  
Variable cost of goods sold   262,000  
Fixed selling and administrative costs   112,000  
Variable selling and administrative costs   137,000  

Calculate the gross margin for May under absorption costing.

Multiple Choice

窗体顶端

$586,000

$361,000

$585,000

$698,000

窗体底端

11

Geneva Co. reports the following information for July:

       
Sales $ 783,000  
Variable costs   236,000  
Fixed costs   111,000  

Calculate the contribution margin for July.

Multiple Choice

窗体顶端

$436,000

$672,000

$783,000

$547,000

窗体底端

12

Kluber, Inc. had net income of $916,000 based on variable costing. Beginning and ending inventories were 56,600 units and 55,200 units, respectively. Assume the fixed overhead per unit was $2.05 for both the beginning and ending inventory. What is net income under absorption costing?

Multiple Choice

窗体顶端

$801,405

$910,260

$1,030,595

$913,130

$916,000

窗体底端

13

During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $6 per unit, Direct labor, $4 per unit, Variable overhead, $5 per unit, and Fixed overhead, $234,000. The company produced 26,000 units, and sold 18,000 units, leaving 8,000 units in inventory at year-end. What is the value of ending inventory under variable costing?

Multiple Choice

窗体顶端

$120,000

$234,000

$72,000

$192,000

窗体底端

14

Hayes Inc. provided the following information for the current year:

       
Beginning inventory   120 units
Units produced   770 units
Units sold   813 units
Selling price $ 170 /unit
Direct materials $ 37 /unit
Direct labor $ 18 /unit
Variable manufacturing overhead $ 17 /unit
Fixed manufacturing overhead $ 26,180 /yr
Variable selling/administrative costs $ 10 /unit
Fixed selling/administrative costs $ 17,500 /yr

What is the unit product cost for the year using absorption costing?

Multiple Choice

窗体顶端

$106

$104

$82

$72

窗体底端

15

Urban Company reports the following information regarding its production cost:

       
Units produced   33,000 units
Direct labor $ 26 per unit
Direct materials $ 31 per unit
Variable overhead $ 233,000 in total
Fixed overhead $ 123,000 in total

Compute production cost per unit under variable costing.

Multiple Choice

窗体顶端

$57.00

$60.73

$64.06

$26.00

$31.00

窗体底端

16

During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $5 per unit, Direct labor, $3 per unit, Variable overhead, $4 per unit, and Fixed overhead, $189,000. The company produced 21,000 units, and sold 15,500 units, leaving 5,500 units in inventory at year-end. What is the value of ending inventory under absorption costing?

Multiple Choice

窗体顶端

$49,500

$115,500

$189,000

$66,000

窗体底端

17

Hayes Inc. provided the following information for the current year:

       
Beginning inventory   250 units
Units produced   900 units
Units sold   957 units
Selling price $ 300 /unit
Direct materials $ 50 /unit
Direct labor $ 31 /unit
Variable manufacturing overhead $ 30 /unit
Fixed manufacturing overhead $ 42,300 /yr
Variable selling/administrative costs $ 23 /unit
Fixed selling/administrative costs $ 30,500 /yr

What is the unit product cost for the year using variable costing?

Multiple Choice

窗体顶端

$111

$134

$158

$202

窗体底端

18

Chance, Inc. sold 5,000 units of its product at a price of $172 per unit. Total variable cost per unit is $131, consisting of $92 in variable production cost and $39 in variable selling and administrative cost. Compute the manufacturing margin for the company under variable costing.

Multiple Choice

窗体顶端

$400,000

($450,000)

$460,000

$860,000

$655,000

窗体底端

 

19

Front Company had net income of $92,500 based on variable costing. Beginning and ending inventories were 2,800 units and 5,200 units, respectively. Assume the fixed overhead per unit was $8.90 for both the beginning and ending inventory. What is net income under absorption costing?

Multiple Choice

窗体顶端

$71,140

$21,300

$93,900

$163,700

$113,860

窗体底端

 

20

Sea Company reports the following information regarding its production costs:

       
Units produced   58,000 units
Direct labor $ 51 per unit
Direct materials $ 44 per unit
Variable overhead $ 33 per unit
Fixed overhead $ 145,000 in total

Compute the product cost per unit under absorption costing.

Multiple Choice

窗体顶端

$51.00

$44.00

$130.50

$128.00

$95.00

窗体底端

21

During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $5 per unit, Direct labor, $3 per unit, Variable overhead, $4 per unit, and Fixed overhead, $363,000. The company produced 33,000 units, and sold 27,000 units, leaving 6,000 units in inventory at year-end. Income calculated under variable costing is determined to be $385,000. How much income is reported under absorption costing?

Multiple Choice

窗体顶端

$319,000

$385,000

$451,000

$748,000

窗体底端

22

Reliance Corporation sold 5,100 units of its product at a price of $26 per unit. Total variable cost per unit is $14.00, consisting of $13.30 in variable production cost and $0.70 in variable selling and administrative cost. Compute the contribution margin for the company.

Multiple Choice

窗体顶端

$67,830

$74,970

$61,200

$71,400

$132,600

窗体底端

23

Required information

[The following information applies to the questions displayed below.]

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.

       
Units produced this year   42,000 units
Units sold this year   25,200 units
Direct materials $ 26 per unit
Direct labor $ 28 per unit
Variable overhead $ 126,000 in total
Fixed overhead $ 210,000 in total

Given Advanced Company’s data, compute cost per unit of finished goods under variable costing.

Multiple Choice

窗体顶端

$54.00

$59.00

$57.00

$62.00

$55.88

窗体底端

24

Required information

[The following information applies to the questions displayed below.]

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.

       
Units produced this year   42,000 units
Units sold this year   25,200 units
Direct materials $ 26 per unit
Direct labor $ 28 per unit
Variable overhead $ 126,000 in total
Fixed overhead $ 210,000 in total

Given Advanced Company’s data, compute cost per unit of finished goods under absorption costing.

Multiple Choice

窗体顶端

$62.00

$67.33

$59.00

$54.00

$57.00

窗体底端

25

Required information

[The following information applies to the questions displayed below.]

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.

       
Units produced this year   42,000 units
Units sold this year   25,200 units
Direct materials $ 26 per unit
Direct labor $ 28 per unit
Variable overhead $ 126,000 in total
Fixed overhead $ 210,000 in total

Given Advanced Company’s data, compute cost of finished goods in inventory under absorption costing.

Multiple Choice

窗体顶端

$1,562,400

$1,041,600

$957,600

$1,436,400

$2,604,000

窗体底端

26

Required information

[The following information applies to the questions displayed below.]

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.

       
Units produced this year   42,000 units
Units sold this year   25,200 units
Direct materials $ 26 per unit
Direct labor $ 28 per unit
Variable overhead $ 126,000 in total
Fixed overhead $ 210,000 in total

Given Advanced Company’s data, compute cost of finished goods in inventory under variable costing.

Multiple Choice

窗体顶端

$1,562,400

$2,604,000

$1,041,600

$1,436,400

$957,600

窗体底端

27

Required information

[The following information applies to the questions displayed below.]

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.

       
Units produced this year   42,000 units
Units sold this year   25,200 units
Direct materials $ 26 per unit
Direct labor $ 28 per unit
Variable overhead $ 126,000 in total
Fixed overhead $ 210,000 in total

Given Advanced Company’s data, and the knowledge that the product is sold for $82 per unit and operating expenses are $370,000, compute the net income under absorption costing.

Multiple Choice

窗体顶端

$134,000

$50,000

$260,000

$335,160

$84,000

窗体底端

28

Required information

[The following information applies to the questions displayed below.]

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.

       
Units produced this year   42,000 units
Units sold this year   25,200 units
Direct materials $ 26 per unit
Direct labor $ 28 per unit
Variable overhead $ 126,000 in total
Fixed overhead $ 210,000 in total

Given Advanced Company’s data, and the knowledge that the product is sold for $82 per unit and operating expenses are $370,000, compute the net income under variable costing.

Multiple Choice

窗体顶端

$50,000

$378,400

$134,000

$335,160

$84,000

窗体底端

29

Required information

[The following information applies to the questions displayed below.]

Red and White Company reported the following monthly data:

       
Units produced   3,900 units
Sales price $ 44 per unit
Direct materials $ 8 per unit
Direct labor $ 9 per unit
Variable overhead $ 10 per unit
Fixed overhead $ 8,970 in total

What is Red and White’s contribution margin for this month if 1,170 units were sold?

Multiple Choice

窗体顶端

$171,600

$51,480

$19,890

$39,780

$66,300

窗体底端

30

Required information

[The following information applies to the questions displayed below.]

Red and White Company reported the following monthly data:

       
Units produced   3,900 units
Sales price $ 44 per unit
Direct materials $ 8 per unit
Direct labor $ 9 per unit
Variable overhead $ 10 per unit
Fixed overhead $ 8,970 in total

What is Red and White’s net income under absorption costing if 1,170 units are sold and selling and administrative expenses are $14,200?

rev: 06_14_2018_QC_CS-128902

Multiple Choice

窗体顶端

$10,920

$2,999

$5,690

($1,330)

($3,280)

窗体底端

31

Required information

[The following information applies to the questions displayed below.]

Red and White Company reported the following monthly data:

       
Units produced   3,900 units
Sales price $ 44 per unit
Direct materials $ 8 per unit
Direct labor $ 9 per unit
Variable overhead $ 10 per unit
Fixed overhead $ 8,970 in total

What is Red and White’s net income under variable costing if 1,170 units are sold and operating expenses are $14,200?

Multiple Choice

窗体顶端

$5,690

($3,280)

($1,330)

$2,999

$10,920

窗体底端

 

Managerial Accounting

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Managerial Accounting

ORDER A PLAGIARISM FREE PAPER NOW

Problem 45

City Racquetball Club (CRC) offers racquetball and other physical fitness facilities to its members.

There are four of these clubs in the metropolitan area. Each club has between 1,800 and 2,500 members.

Revenue is derived from annual membership fees and hourly court fees. The annual membership fees

are as follows:

Individual………………………………………………………………………………… $ 40

Student…………………………………………………………………………………… 25

Family…………………………………………………………………………………….. 95

The hourly court fees vary from $6 to $10 depending upon the season and the time of day (prime

versus nonprime time).

The peak racquetball season is considered to run from September through April. During this

period, court usage averages 90 to 100 percent of capacity during prime time (5:00–9:00 p.m.) and 50 to

60 percent of capacity during the remaining hours. Daily court usage during the off-season (i.e., summer)

averages only 20 to 40 percent of capacity.

Most of CRC’s memberships have September expirations. A substantial amount of the cash receipts

are collected during the early part of the racquetball season due to the renewal of the annual membership

fees and heavy court usage. However, cash receipts are not as large in the spring and drop significantly

in the summer months.

CRC is considering changing its membership and fee structure in an attempt to change its cash

receipts. Under the new membership plan, only an annual membership fee would be charged, rather than

a membership fee plus hourly court fees. There would be two classes of membership as follows:

Individual ………………………………………………………………………………………………. $250

Family …………………………………………………………………………………………………… 400

The annual fee would be collected in advance at the time the membership application is completed.

Members would be allowed to use the racquetball courts as often as they wish during the year under the

new plan.

All future memberships would be sold under these new terms. Current memberships would be honored

on the old basis until they expire. However, a special promotional campaign would be instituted to attract

new members and to encourage current members to convert to the new membership plan immediately.

The annual fees for individual and family memberships would be reduced to $200 and $300,

respectively, during the two-month promotional campaign. In addition, all memberships sold or renewed

during this period would be for 15 months rather than the normal one-year period. Current members

also would be given a credit toward the annual fee for the unexpired portion of their membership fee, and

for all prepaid hourly court fees for league play that have not yet been used.

CRC’s management estimates that 60 to 70 percent of the present membership would continue with

the club. The most active members (45 percent of the present membership) would convert immediately

to the new plan, while the remaining members who continue would wait until their current memberships

expire. Those members who would not continue are not considered active (i.e., they play five or less

times during the year). Management estimates that the loss of members would be offset fully by new

members within six months of instituting the new plan. Furthermore, many of the new members would

be individuals who would play during nonprime time. Management estimates that adequate court time

will be available for all members under the new plan.

If the new membership plan is adopted, it would be instituted on February 1, well before the summer

season. The special promotional campaign would be conducted during March and April. Once the

plan is implemented, annual renewal of memberships and payment of fees would take place as each

individual or family membership expires.

 

Required: Your consulting firm has been hired to help CRC evaluate its new fee structure. Write a

letter to the club’s president answering the following questions.

  1. Will City Racquetball Club’s new membership plan and fee structure improve its ability to plan its

cash receipts? Explain your answer.

  1. City Racquetball Club should evaluate the new membership plan and fee structure completely

before it decides to adopt or reject it.

  1. Identify the key factors that CRC should consider in its evaluation.
  2. Explain what type of financial analyses CRC should prepare in order to make a complete

evaluation.

  1. Explain how City Racquetball Club’s cash management would differ from the present if the new

membership plan and fee structure were adopted.

 

 

Problem 46

Patricia Eklund, controller in the division of social services for the state, recognizes the importance of

the budgetary process for planning, control, and motivational purposes. She believes that a properly

implemented participative budgetary process for planning purposes and an evaluation procedure will

motivate the managers to improve productivity within their particular departments. Based upon this

philosophy, Eklund has implemented the following budgetary procedures.

  • An appropriation target figure is given to each department manager. This amount is the maximum

funding that each department can expect to receive in the next year.

  • Department managers develop their individual budgets within the following spending constraints as

directed by the controller’s staff.

◦ Expenditure requests cannot exceed the appropriation target.

◦ All fixed expenditures should be included in the budget. Fixed expenditures would include

such items as contracts and salaries at current levels.

◦ All government projects directed by higher authority should be included in the budget in

their entirety.

  • The controller’s staff consolidates the budget requests from the various departments into a master

budget submission for the entire division.

  • Upon final budget approval by the legislature, the controller’s staff allocates the appropriation to the

various departments on instructions from the division manager. However, a specified percentage of

each department’s appropriation is held back in anticipation of potential budget cuts and special funding

needs. The amount and use of this contingency fund is left to the discretion of the division manager.

  • Each department is allowed to adjust its budget when necessary to operate within the reduced

appropriation level. However, as stated in the original directive, specific projects authorized by

higher authority must remain intact.

  • The final budget is used as the basis of control. Excessive expenditures by account for each department

are highlighted on a monthly basis. Department managers are expected to account for all

expenditures over budget. Fiscal responsibility is an important factor in the overall performance

evaluation of department managers.

 

Eklund believes her policy of allowing the department managers to participate in the budgetary

process and then holding them accountable for their performance is essential, especially during times

of limited resources. She further believes that the department managers will be positively motivated to

increase the efficiency and effectiveness of their departments because they have provided input into the

initial budgetary process and are required to justify any unfavorable performances.

 

Required:

  1. Describe several operational and behavioral benefits that are generally attributed to a participative

budgetary process.

  1. Identify at least four deficiencies in Patricia Eklund’s participative policy for planning and performance

evaluation purposes. For each deficiency identified, recommend how it can be corrected.

Managerial Accounting

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Managerial Accounting

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1

Following is a partial process cost summary for Mitchell Manufacturing’s Canning Department.

Equivalent Units of Production Direct Materials   Conversion  
Units Completed and transferred out     56,000         15,000    
Units in Ending Work in Process:                    
Direct Materials (15,000 * 100%)     15,000              
Conversion (15,000 * 70%)               10,500    
Equivalent Units of Production     71,000         66,500    
                     
Cost per Equivalent Unit                    
Costs of beginning work in process   $ 40,800       $ 60,100    
Costs incurred this period     136,900         184,300    
Total costs   $ 177,700       $ 244,400    
Cost per equivalent unit   $ 2.50 per EUP     $ 3.68 per EUP  
 

If the units completed were transferred to the Labeling Department, what is the appropriate journal entry to transfer the direct materials?

 

  • Finished Goods—Labeling $244,400; Finished Goods—Canning $244,400.

Work in Process—Labeling $177,700; Finished Goods—Canning $177,700.

Work in Process—Labeling $177,700; Work in Process—Canning $177,700.

Work in Process—Labeling $140,000; Work in Process—Canning $140,000.

Finished Goods $140,000; Work in Process $140,000.

 

2

Sparky Corporation uses the weighted-average method of process costing. The following information is available for February in its Molding Department:

Units:
Beginning Inventory: 46,000 units, 100% complete as to materials and 60% complete as to conversion.
Units started and completed: 150,000.
Units completed and transferred out: 196,000.
Ending Inventory: 40,000 units, 100% complete as to materials and 25% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: $63,000.
Costs in beginning Work in Process – Conversion: $68,850.
Costs incurred in February – Direct Materials: $420,600.
Costs incurred in February – Conversion: $619,150.

Calculate the cost per equivalent unit of materials.

 

  • $2.36

$1.99

$1.63

$2.05

$2.63

 

 

3

At the beginning of the month, the Forming Department of Martin Manufacturing had 23,000 units in inventory, 40% complete as to materials, and 20% complete as to conversion. During the month the department started 73,000 units and transferred 81,500 units to the next manufacturing department. At the end of the month, the department had 14,500 units in inventory, 80% complete as to materials and 60% complete as to conversion. If Martin Manufacturing uses the weighted average method of process costing, compute the equivalent units for materials and conversion respectively for the Forming Department.

  • 83,900 materials; 85,600 conversion.

93,100 materials; 90,200 conversion.

83,900 materials; 90,200 conversion.

70,100 materials; 67,200 conversion.

68,400 materials; 77,600 conversion.

 

4

During March, the production department of a process operations system completed and transferred to finished goods 17,000 units that were in process at the beginning of March and 130,000 that were started and completed in March. March’s beginning inventory units were 100% complete with respect to materials and 57% complete with respect to conversion. At the end of March, 32,000 additional units were in process in the production department and were 100% complete with respect to materials and 26% complete with respect to conversion. Compute the number of equivalent units with respect to both materials and conversion respectively for March using the FIFO method.

  • 179,000 materials; 179,000 conversion.

179,000 materials; 155,320 conversion.

147,000 materials; 138,320 conversion.

155,320 materials; 155,320 conversion.

162,000 materials; 145,630 conversion.

 

 

5

 

A production department’s output for the most recent month consisted of 9,900 units completed and transferred to the next stage of production and 6,900 units in ending Work in Process inventory. The units in ending Work in Process inventory were 50% complete with respect to both direct materials and conversion costs. Calculate the equivalent units of production for the month, assuming the company uses the weighted average method.

 

 

  • 6,450 units.

11,850 units.

16,800 units.

8,400 units.

13,350 units.

6

At the beginning of the month, the Painting Department of Skye Manufacturing had 26,000 units in inventory, 70% complete as to materials, and 25% complete as to conversion. The cost of the beginning inventory, $34,650, consisted of $28,400 of material costs and $6,250 of conversion costs. During the month the department started 121,000 units and transferred 129,000 units to the next manufacturing department. Costs added in the current month consisted of $264,640 of materials costs and $517,130 of conversion costs. At the end of the month, the department had 18,000 units in inventory, 40% complete as to materials and 10% complete as to conversion. If Skye Manufacturing uses the weighted average method of process costing, compute the costs per equivalent unit of materials and conversion respectively for the Painting Department.

 

  • $2.21; $3.95.

$2.48; $4.21.

$1.91; $3.95.

$2.21; $4.10.

$2.15; $4.00.

7.

Wilturner Company incurs $77,000 of labor related directly to the product in the Assembly Department, $26,000 of labor not directly related to the product but related to the Assembly Department as a whole, and $13,000 of labor for services that help production in both the Assembly and Finishing departments. The journal entries to record the labor would include:

  • Debit Work in Process Inventory $103,000; debit Factory Overhead $13,000.

Debit Work in Process Inventory $116,000.

Debit Work in Process Inventory $103,000; debit Wages Expense $13,000.

Debit Work in Process Inventory $77,000; debit Factory Overhead $39,000.

Debit Work in Process Inventory $77,000; debit Wages Expense $39,000.

8

A company’s beginning Work in Process inventory consisted of 30,000 units that were 20% complete with respect to direct labor. These beginning units were completed and another 106,000 units were started during the current period. Of those started, 70,000 were finished and the remaining 36,000 were 40% complete at the end of the period. Using the weighted-average method, the equivalent units of production with regard to direct labor were:

  • 118,000.

70,000.

114,400.

94,000.

88,000.

9

At the beginning of the recent period, there were 960 units of product in a department, 35% completed. These units were finished and an additional 5,200 units were started and completed during the period. 880 units were still in process at the end of the period, 25% completed. Using the weighted average method, the equivalent units produced by the department were:

 

  • 5,740 units.

6,160 units.

5,200 units.

7,040 units.

6,380 units.

10

Sparky Corporation uses the weighted-average method of process costing. The following information is available for February in its Molding Department:

Units:
Beginning Inventory: 46,000 units, 100% complete as to materials and 60% complete as to conversion.
Units started and completed: 150,000.
Units completed and transferred out: 196,000.
Ending Inventory: 40,000 units, 100% complete as to materials and 25% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: $63,000.
Costs in beginning Work in Process – Conversion: $68,850.
Costs incurred in February – Direct Materials: $307,000.
Costs incurred in February – Conversion: $619,150.

Calculate the equivalent units of materials.

 

  • 150,000

236,000

206,000

110,000

154,800

11

Williams Company computed its cost per equivalent unit for direct materials to be $2.70 and its cost per equivalent unit for conversion to be $3.42. A total of 212,000 units of product were completed and transferred out as finished goods during the month, and 30,000 of equivalent units remained unfinished at the end of the month. The amount that should be reported in Finished Goods Inventory is:

 

  • $572,400.

$183,600.

$1,378,440.

$102,600.

$1,297,440.

12

Sparky Corporation uses the FIFO method of process costing. The following information is available for February in its Molding Department:

Units:
Beginning Inventory: 38,000 units, 100% complete as to materials and 55% complete as to conversion.
Units started and completed: 123,000.
Units completed and transferred out: 161,000.
Ending Inventory: 36,500 units, 100% complete as to materials and 25% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: $56,000.
Costs in beginning Work in Process – Conversion: $61,850.
Costs incurred in February – Direct Materials: $375,730.
Costs incurred in February – Conversion: $612,150.

Calculate the cost per equivalent unit of conversion.

  • $3.26

$4.10

$3.39

$5.10

$2.44

13

A company uses the weighted average method for inventory costing. At the beginning of a period the production department had 44,000 units in beginning Work in Process inventory which were 38% complete; the department completed and transferred 173,000 units. At the end of the period, 20,000 units were in the ending Work in Process inventory and are 73% complete. Compute the number of equivalent units produced by the department.

  • 190,220.

173,000.

129,000.

187,600.

193,000.

14

A company’s beginning Work in Process inventory consisted of 35,000 units that were 90% complete with respect to direct labor. A total of 105,000 were finished during the period and 40,000 remaining in Work in Process inventory were 50% complete with respect to direct labor at the end of the period. Using the weighted-average method, the equivalent units of production with regard to direct labor were:

  • 105,000.

125,000.

72,500.

156,500

98,000.

15

The following is an account for a production department, showing its costs for one month:

Work in Process Inventory
Beginning Balance 6,800 Completed and transferred out 53,610
Direct materials 23,000    
Direct labor 17,600    
Overhead 12,200    
Ending Balance 5,990    

Assume that materials are added at the beginning of the production process and that direct labor and overhead are applied uniformly. If the started and completed units cost $43,250, what was the cost of completing the units in the beginning Work in Process inventory?

  • $37,260.

$10,360.

$16,350.

$3,560.

$59,600.

16

Richards Corporation uses the FIFO method of process costing. The following information is available for October in its Fabricating Department:

Units:
Beginning Inventory: 98,000 units, 80% complete as to materials and 20% complete as to conversion.
Units started and completed: 268,000.
Units completed and transferred out: 366,000.
Ending Inventory: 39,000 units, 30% complete as to materials and 15% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: $55,200.
Costs in beginning Work in Process – Conversion: $97,700.
Costs incurred in October – Direct Materials: $844,050.
Costs incurred in October – Conversion: $1,105,390.

Calculate the cost per equivalent unit of conversion.

 

  • $2.70

$3.42

$4.12

$3.14

$2.93

17

Andrews Corporation uses the weighted-average method of process costing. The following information is available for February in its Polishing Department:

       
Equivalent units of production—direct materials   125,000 EUP
Equivalent units of production—conversion   107,800 EUP
Costs in beginning Work in Process—direct materials $ 65,700  
Costs in beginning Work in Process—conversion $ 48,300  
Costs incurred in February—direct materials $ 555,500  
Costs incurred in February—conversion $ 697,800  

The cost per equivalent unit of production for direct materials is:

 

 

  • $10.03

$4.44

$4.97

$5.58

$5.76

18

Metaline Corp. uses the weighted average method for inventory costs and had the following information available for the year. Calculate the equivalent units of production for the year:

       
Beginning Work in Process (30% complete, $3,100) 400 units  
Ending inventory of Work in Process (70% complete) 600 units  
Total units started during the year 5,200 units  
  • 5,420 units.

5,300 units.

5,620 units.

5,200 units.

6,200 units.

19

A company uses the FIFO method for inventory costing. At the beginning of a period, the production department had 36,000 units in beginning Work in Process inventory which were 48% complete; the department completed and transferred 173,000 units. At the end of the period, 30,000 units were in the ending Work in Process inventory and are 83% complete. Compute the number of equivalent units produced by the department.

 

  • 173,000.

137,000.

197,900.

180,620.

203,000.

20

During January, the production department of a process operations system completed and transferred to finished goods a total of 65,000 units. At the end of January, 13,000 additional units were in process in the production department and were 45% complete with respect to labor. The beginning inventory included labor cost of $38,700 and the production department incurred direct labor cost of $307,100 during January. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

Multiple Choice

Top of Form

$4.72.

$4.43.

$4.33.

$4.88.

$5.32.

Bottom of Form

21

Richards Corporation uses the weighted-average method of process costing. The following information is available for October in its Fabricating Department:

Units:
Beginning Inventory: 93,000 units, 70% complete as to materials and 20% complete as to conversion.
Units started and completed: 276,000.
Units completed and transferred out: 369,000.
Ending Inventory: 36,500 units, 40% complete as to materials and 15% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: $37,200.
Costs in beginning Work in Process – Conversion: $79,700.
Costs incurred in October – Direct Materials: $646,800.
Costs incurred in October – Conversion: $919,300.

Calculate the equivalent units of materials.

Multiple Choice

Top of Form

318,500

374,475

355,875

239,500

383,600

Bottom of Form

22

Sparky Corporation uses the weighted-average method of process costing. The following information is available for February in its Molding Department:

Units:
Beginning Inventory: 38,000 units, 100% complete as to materials and 55% complete as to conversion.
Units started and completed: 136,000.
Units completed and transferred out: 174,000.
Ending Inventory: 36,500 units, 100% complete as to materials and 25% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: $56,000.
Costs in beginning Work in Process – Conversion: $61,850.
Costs incurred in February – Direct Materials: $300,000.
Costs incurred in February – Conversion: $612,150.

Calculate the equivalent units of conversion.

Multiple Choice

Top of Form

183,125

141,175

99,500

136,000

210,500

Bottom of Form

23

During March, the production department of a process operations system completed and transferred to finished goods 20,000 units that were in process at the beginning of March and 170,000 units that were started and completed in March. March’s beginning inventory units were 100% complete with respect to materials and 65% complete with respect to labor. At the end of March, 37,000 additional units were in process in the production department and were 100% complete with respect to materials and 40% complete with respect to labor. The production department incurred direct materials cost of $255,000 and its beginning inventory included materials cost of $94,100. Compute the direct materials cost per equivalent unit for the department using the weighted-average method.

Multiple Choice

Top of Form

$2.05.

$1.54.

$1.50.

$1.84.

$1.37.

Bottom of Form

24

During March, the production department of a process operations system completed and transferred to finished goods 17,000 units that were in process at the beginning of March and 150,000 units that were started and completed in March. March’s beginning inventory units were 100% complete with respect to materials and 59% complete with respect to conversion. At the end of March, 34,000 additional units were in process in the production department and were 100% complete with respect to materials and 24% complete with respect to conversion. Compute the number of physical units transferred to finished goods.

Multiple Choice

Top of Form

145,000.

167,000.

201,000.

150,000.

188,000.

Bottom of Form

25

Pitt Enterprises manufactures jeans. All materials are introduced at the beginning of the manufacturing process in the Cutting Department. Conversion costs are incurred uniformly throughout the manufacturing process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Information for the Cutting Department for the month of May follows.

Work in Process, May 1 (26,000 units, 100% complete for direct materials, 80% complete with respect to conversion costs; includes $71,000 of direct material cost; $34,270 of conversion costs).

     
Units started in May 180,000  
Units completed in May 152,000  

Work in Process, May 31 (54,000 units, 100% complete for direct materials; 70% complete for conversion costs).

Costs incurred in May      
Direct materials $ 342,500  
Conversion costs $ 353,450  

If Pitt Enterprises uses the FIFO method of process costing, compute the equivalent units for direct materials and conversion respectively for May.

Multiple Choice

Top of Form

206,000 materials; 189,800 conversion.

126,000 materials; 126,000 conversion.

180,000 materials; 169,000 conversion.

169,000 materials; 169,000 conversion.

169,000 materials; 180,000 conversion.

Bottom of Form

26

During December, the production department of a process operations system completed and transferred to finished goods a total of 58,000 units of product. At the end of March, 15,000 additional units were in process in the production department and were 60% complete with respect to materials. The beginning inventory included materials cost of $60,400 and the production department incurred direct materials cost of $191,700 during December. Compute the direct materials cost per equivalent unit for the department using the weighted-average method.

Multiple Choice

Top of Form

$4.35.

$3.76.

$3.31.

$2.86.

$3.45.

Bottom of Form

27

Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations for June. The journal entry to record June production activities for overhead allocation is:

       
Direct materials used $  107,000  
Direct labor used $ 180,000  
Predetermined overhead rate (based on direct labor)   163 %
Goods transferred to finished goods $ 452,000  
Cost of goods sold $ 464,000  
Credit sales $ 1,010,000  

Multiple Choice

Top of Form

Debit Factory Overhead $293,400; credit Cash $293,400.

Debit Work in Process Inventory $293,400; credit Factory Overhead $293,400.

Debit Work in Process Inventory $180,000; credit Factory Overhead $180,000.

Debit Work in Process Inventory $180,000; credit Cash $180,000.

Debit Work in Process Inventory $180,000; credit Factory Payroll $180,000.

Bottom of Form

28

During July, the production department of a process operations system completed and transferred to finished goods 29,000 units that were in process at the beginning of July and 68,000 that were started and completed in July. July’s beginning inventory units were 100% complete with respect to materials and 50% complete with respect to labor. At the end of July, 29,000 additional units were in process in the production department and were 100% complete with respect to materials and 55% complete with respect to labor. The beginning inventory included labor cost of $54,600 and the production department incurred direct labor cost of $453,350 during July. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

Multiple Choice

Top of Form

$4.01.

$4.50.

$5.24.

$.80.

$1.88.

Bottom of Form

29

During November, the production department of a process operations system completed and transferred to finished goods 32,000 units that were in process at the beginning of November and 170,000 units that were started and completed in November. November’s beginning inventory units were 100% complete with respect to materials and 60% complete with respect to conversion. At the end of November, 29,000 additional units were in process in the production department and were 100% complete with respect to materials and 40% complete with respect to conversion. Compute the number of equivalent units with respect to materials for November using the weighted-average method.

Multiple Choice

Top of Form

231,000.

173,000.

29,000.

181,600.

202,000.

Bottom of Form

30

Richards Corporation uses the FIFO method of process costing. The following information is available for October in its Fabricating Department:

Units:
Beginning Inventory: 99,000 units, 75% complete as to materials and 20% complete as to conversion.
Units started and completed: 269,000.
Units completed and transferred out: 368,000.
Ending Inventory: 39,500 units, 40% complete as to materials and 15% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: $37,200.
Costs in beginning Work in Process – Conversion: $79,700.
Costs incurred in October – Direct Materials: $646,800.
Costs incurred in October – Conversion: $919,300.

Calculate the equivalent units of conversion.

Multiple Choice

Top of Form

413,425

354,125

324,400

423,300

269,000

Bottom of Form

31

Following is a partial process cost summary for Mitchell Manufacturing’s Canning Department.

Equivalent Units of Production Direct Materials   Conversion  
Units Completed and transferred out     72,000         72,000    
Units in Ending Work in Process:                    
Direct Materials (12,000 * 100%)     12,000              
Conversion (12,000 * 60%)               7,200    
Equivalent Units of Production     84,000         79,200    
                     
Cost per Equivalent Unit                    
Costs of beginning work in process   $ 43,200       $ 63,400    
Costs incurred this period     144,400         194,200    
Total costs   $ 187,600       $ 257,600    
Cost per equivalent unit   $ 2.23 per EUP     $ 3.25 per EUP  
 

The total conversion costs transferred out of the Canning Department equals:

Multiple Choice

Top of Form

$187,600.

$257,400.

$257,600.

$194,200.

$234,000.

Bottom of Form

32

A company uses a process costing system. Its Assembly Department’s beginning inventory consisted of 53,200 units, 75% complete with respect to direct labor and overhead. The direct labor beginning inventory costs were $9,700. The department completed and transferred out 119,500 units this period. The ending inventory consists of 43,200 units that are 25% complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $32,000 and overhead costs of $40,000 for the period. Assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is:

  • $0.32.

$0.44.

$0.20.

$0.37.

$0.22.

33

Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations and sales activities for June. The journal entry to record June sales is:

       
Direct materials used $ 90,000  
Direct labor used $ 165,600  
Predetermined overhead rate (based on direct labor)   100 %
Goods transferred to finished goods $ 434,000  
Cost of goods sold $ 446,000  
Credit sales $ 813,600  

Multiple Choice

Top of Form

Debit Accounts Receivable $813,600; credit Cost of Goods Sold $813,600.

Debit Finished Goods Inventory $446,000; debit Sales $813,600; credit Accounts Receivable $813,600; credit Cost of Goods Sold $446,000.

Debit Accounts Receivable $813,600; credit Sales $367,600; credit Finished Goods Inventory $446,000.

Debit Accounts Receivable $813,600; credit Sales $813,600; debit Cost of Goods Sold $446,000; credit Finished Goods Inventory $446,000.

Debit Cost of Goods Sold $446,000; credit Sales $446,000.

Bottom of Form

34

Metaline Corp. uses the weighted average method for inventory costs and had the following information available for the year. The number of units transferred to finished goods during the year is:

       
Beginning Work in Process (30% complete, $1,300) 220 units  
Ending inventory of Work in Process (70% complete) 420 units  
Total units started during the year 3,400 units  
 

Multiple Choice

Top of Form

3,848 units.

3,200 units.

3,392 units.

3,400 units.

3,600 units.

Bottom of Form

35

Andrews Corporation uses the weighted-average method of process costing. The following information is available for February in its Polishing Department:

       
Equivalent units of production—direct materials   113,000 EUP
Equivalent units of production—conversion   97,600 EUP
Costs in beginning Work in Process—direct materials $ 55,100  
Costs in beginning Work in Process—conversion $ 40,500  
Costs incurred in February—direct materials $ 465,800  
Costs incurred in February—conversion $ 585,100  

The cost per equivalent unit of production for conversion is:

Multiple Choice

Top of Form

$5.54

$5.34

$10.77

$5.99

$6.41

Bottom of Form

36

Wyman Corporation uses a process costing system. The company manufactured certain goods at a cost of $960 and sold them on credit to Percy Corporation for $1,395. The complete journal entry to be made by Wyman at the time of this sale is:

Multiple Choice

Top of Form

Debit Cost of Goods Sold $1,395; credit Sales $1,395.

Debit Accounts Receivable $1,395; debit Selling expense $960; credit Sales $1,395; credit Cost of Goods Sold $960.

Debit Accounts Receivable $1,395; credit Sales $1,395; debit Cost of Goods Sold $960; credit Finished Goods Inventory $960.

Debit Accounts Receivable $1,395; credit Sales $435; credit Finished Goods Inventory $960.

Debit Finished Goods Inventory $960; debit Sales $1,395; credit Accounts Receivable $1,395; credit Cost of Goods Sold $960.

Bottom of Form

37

A company uses the weighted average method for inventory costing. At the start of a period the production department had 40,000 units in beginning Work in Process inventory which were 30% complete; the department completed and transferred 165,000 units. At the end of the period, 12,000 units were in the ending Work in Process inventory and are 65% complete. The production department had conversion costs in the beginning goods is process inventory of $87,000 and total conversion costs added during the period are $726,550. Compute the conversion cost per equivalent unit.

Multiple Choice

Top of Form

$4.92.

$4.35.

$4.71.

$4.56.

$4.77.

Bottom of Form

38

Luker Corporation uses a process costing system. The company had $167,500 of beginning Finished Goods Inventory on October 1. It transferred in $844,000. of units completed during the period. The ending Finished Goods Inventory balance on October 31 was $165,200. The entry to account for the cost of goods sold in October is:

Multiple Choice

Top of Form

Debit Cost of Goods Sold $844,000; credit Finished Goods Inventory $844,000.

Debit Finished Goods Inventory $165,200; credit Cost of Goods Sold $165,200.

Debit Cost of Goods Sold $846,300; credit Work in Process Inventory $846,300.

Debit Cost of Goods Sold $846,300; credit Finished Goods Inventory $846,300.

Debit Finished Goods Inventory $844,000; credit Work in Process Inventory $844,000.

Bottom of Form

39

At the beginning of the month, the Painting Department of Skye Manufacturing had 25,000 units in inventory, 70% complete as to materials, and 20% complete as to conversion. During the month the department started 120,000 units and transferred 127,500 units to the next manufacturing department. At the end of the month, the department had 17,500 units in inventory, 40% complete as to materials and 15% complete as to conversion. If Skye Manufacturing uses the weighted average method of process costing, compute the equivalent units for materials and conversion respectively for the Painting Department.

Multiple Choice

Top of Form

117,000 materials; 125,125 conversion.

117,000 materials; 130,125 conversion.

130,125 materials; 134,500 conversion.

134,500 materials; 130,125 conversion.

134,500 materials; 125,125 conversion.

Bottom of Form

40

A company uses the weighted average method for inventory costing. During a period, Department B finished and transferred 64,000 units to Department C. Also in Department B during the period, 17,000 units were started but brought only to a stage of being 60% completed. The number of equivalent units produced by Department B during the period was:

Multiple Choice

Top of Form

81,000 units.

70,800 units.

53,800 units.

74,200 units.

64,000 units.

Bottom of Form

41

A company uses the weighted-average method for inventory costing. At the end of the period, 28,000 units were in the ending Work in Process inventory and are 100% complete for materials and 81% complete for conversion. The equivalent costs per unit are materials, $2.71, and conversion $2.35. Compute the cost that would be assigned to the ending Work in Process inventory for the period.

Multiple Choice

Top of Form

$205,156.

$129,178.

$190,739.

$128,726.

$235,480.

Bottom of Form

42

Richards Corporation uses the FIFO method of process costing. The following information is available for October in its Fabricating Department:

Units:
Beginning Inventory: 83,000 units, 70% complete as to materials and 25% complete as to conversion.
Units started and completed: 253,000.
Units completed and transferred out: 336,000.
Ending Inventory: 31,500 units, 40% complete as to materials and 10% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: $37,200.
Costs in beginning Work in Process – Conversion: $79,700.
Costs incurred in October – Direct Materials: $646,800.
Costs incurred in October – Conversion: $919,300.

Calculate the equivalent units of materials.

Multiple Choice

Top of Form

349,900

380,100

253,000

370,650

290,500

Bottom of Form

 

43

During March, the production department of a process operations system completed and transferred to finished goods 30,000 units that were in process at the beginning of March and 120,000 that were started and completed in March. March’s beginning inventory units were 100% complete with respect to materials and 70% complete with respect to labor. At the end of March, 31,000 additional units were in process in the production department and were 100% complete with respect to materials and 70% complete with respect to labor. The production department incurred direct labor cost of $580,600 and its beginning inventory included labor cost of $56,200. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

Multiple Choice

Top of Form

$4.84.

$3.38.

$3.87.

$3.71.

$4.25.

Bottom of Form

44

Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations for June. The journal entry to record June production activities for direct labor usage is:

       
Direct materials used $ 88,000  
Direct labor used   161,000  
Predetermined overhead rate (based on direct labor)   150 %
Goods transferred to finished goods   433,000  
Cost of goods sold   445,000  
Credit sales   811,000  

Multiple Choice

Top of Form

Debit Work in Process Inventory $161,000; credit Factory Payroll Payable $161,000.

Debit Cost of Goods Sold $161,000; credit Factory Payroll Payable $161,000.

Debit Work in Process Inventory $161,000; credit Raw Materials Inventory $161,000.

Debit Work in Process Inventory $161,000; credit Cash $161,000.

Debit Factory Payroll Payable $161,000; credit Cash $161,000.

Bottom of Form

45

Following is a partial process cost summary for Mitchell Manufacturing’s Canning Department.

Equivalent Units of Production Direct Materials   Conversion  
Units Completed and transferred out     72,000         72,000    
Units in Ending Work in Process:                    
Direct Materials (15,000 * 100%)     15,000              
Conversion (15,000 * 80%)               12,000    
Equivalent Units of Production     87,000         84,000    
                     
Cost per Equivalent Unit                    
Costs of beginning work in process   $ 43,500       $ 63,800    
Costs incurred this period     145,300         195,400    
Total costs   $ 188,800       $ 259,200    
Cost per equivalent unit   $ 2.17 per EUP     $ 3.09 per EUP  
 

The total materials costs transferred out of the Canning Department equals:

Multiple Choice

Top of Form

$156,240.

$188,800.

$188,790.

$222,480.

$182,280.

Bottom of Form

 

46

Richards Corporation uses the weighted-average method of process costing. The following information is available for October in its Fabricating Department:

Units:
Beginning Inventory: 90,000 units, 70% complete as to materials and 20% complete as to conversion.
Units started and completed: 270,000.
Units completed and transferred out: 360,000.
Ending Inventory: 35,000 units, 40% complete as to materials and 15% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: $37,200.
Costs in beginning Work in Process – Conversion: $79,700.
Costs incurred in October – Direct Materials: $646,800.
Costs incurred in October – Conversion: $919,300.

Calculate the equivalent units of conversion.

Multiple Choice

Top of Form

374,000

235,000

347,250

365,250

311,000

Bottom of Form

 

47

Richards Corporation uses the weighted-average method of process costing. The following information is available for October in its Fabricating Department:

Units:
Beginning Inventory: 95,000 units, 70% complete as to materials and 20% complete as to conversion.
Units started and completed: 280,000.
Units completed and transferred out: 375,000.
Ending Inventory: 37,500 units, 30% complete as to materials and 10% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: $52,200.
Costs in beginning Work in Process – Conversion: $94,700.
Costs incurred in October – Direct Materials: $802,800.
Costs incurred in October – Conversion: $1,091,050.

Calculate the cost per equivalent unit of conversion.

Multiple Choice

Top of Form

$3.13

$3.40

$3.03

$2.95

$2.94

Bottom of Form

48

Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations for June. The journal entry to record June production activities for direct material usage is:

       
Direct materials used $ 104,000  
Direct labor used   177,000  
Predetermined overhead rate (based on direct labor)   155 %
Goods transferred to finished goods   449,000  
Cost of goods sold   461,000  
Credit sales   827,000  

Multiple Choice

Top of Form

Debit Work in Process Inventory $104,000; credit Raw Materials Inventory $104,000.

Debit Cost of Goods Sold $104,000; credit Finished Goods Inventory $104,000.

Debit Raw Materials Inventory $104,000; credit Finished Goods Inventory $104,000.

Debit Work in Process Inventory $104,000; credit Cost of Goods Sold $104,000.

Debit Raw Materials Inventory $104,000; credit Accounts Payable $104,000.

Bottom of Form

49

Williams Company computed its cost per equivalent unit for direct materials to be $2.70 and its cost per equivalent unit for conversion to be $3.42. A total of 212,000 units of product were completed and transferred out as finished goods during the month. The ending Work in Process inventory consists of 30,000 equivalent units of direct materials and 30,000 equivalent units of conversion costs. The amount that should be reported in ending Work in Process Inventory is:

Multiple Choice

Top of Form

$1,378,440.

$1,297,440.

$102,600.

$183,600.

$81,000.

 

Bottom of Form

50

Sparky Corporation uses the FIFO method of process costing. The following information is available for February in its Molding Department:

Units:
Beginning Inventory: 41,000 units, 100% complete as to materials and 60% complete as to conversion.
Units started and completed: 126,000.
Units completed and transferred out: 167,000.
Ending Inventory: 38,000 units, 100% complete as to materials and 30% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: $59,000.
Costs in beginning Work in Process – Conversion: $64,850.
Costs incurred in February – Direct Materials: $394,600.
Costs incurred in February – Conversion: $615,150.

Calculate the cost per equivalent unit of materials.

Multiple Choice

Top of Form

$2.81

$1.59

$3.13

$2.41

$1.92

Bottom of Form

 

Managerial Accounting

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Managerial Accounting

ORDER A PLAGIARISM FREE PAPER NOW

Disk City, Inc. is a retailer for digital video disks. The projected net income for the current year is  $1,840,000 based on a sales volume of 230,000 video disks. Disk City has been selling the disks for $23 each. The variable costs consist of the $11 unit purchase price of the disks and a handling cost of $2 per disk. Disk City’s annual fixed costs are $460,000.
     Management is planning for the coming year, when it expects that the unit purchase price of the video disks will increase 30 percent. (Ignore income taxes.)

 

Required:

 

1. Calculate Disk city’s break-even point for the current year in number of video disks. (Round your answer to the nearest whole number.) Managerial Accounting

 

  Break-even point 46,000    units

 

2. What will be the company’s net income for the current year if there is a 15 percent increase in projected unit sales volume? (Omit the “$” sign in your response.)

 

  Net income 2,185,000   $

 

3. What volume of sales (in dollars) must Disk City achieve in the coming year to maintain the same net income as projected for the current year if the unit selling price remains at $23? (Do not round intermediate calculations and round your final answer to 2 decimal places. Omit the “$” sign in your response.)

 

  Volume of sales 7,895,522    $

 

4. In order to cover a 30 percent increase in the disk’s purchase price for the coming year and still maintain the current contribution-margin ratio, what selling price per disk must Disk City establish for the coming year? (Do not round intermediate calculations and round your final answer to 2 decimal places. Omit the “$” sign in your response.)

 

  Selling price 28.84      $

rev: 02_27_2014_QC_45987, 03_22_2014_QC_45987

references

[The following information applies to the questions displayed below.]

 

Corrigan Enterprises is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow.

 

Model no. 6754:
     Variable costs, $20.00 per unit
     Annual fixed costs, $985,900

 

Model no. 4399:
     Variable costs, $11.80 per unit
     Annual fixed costs, $1,114,200

 

Corrigan’s selling price is $64 per unit for the universal gismo, which is subject to a 10 percent sales commission. (In the following requirements, ignore income taxes.) Managerial Accounting

 

 

2.

value:

10.00 points

 

 

 

Required:

 

1. How many units must the company sell to break even if Model 6754 is selected? (Do not round intermediate calculations and round your final answer to the nearest whole number.)

 

  Break-even point 26, 221  units

references

 

3.

value:

10.00 points

 

 

 

2-a. Calculate the net income of the two systems if sales and production are expected to average 42,000 units per year. (Omit the “$” sign in your response.)

 

  Net Income
  Model 6754  683,300 $
  Model 4399 809,400 $

 

2-b. Which of the two systems would be more profitable?
   
 
Model 6754
Model 4399 is profitable

references

 

4.

value:

10.00 points

 

 

 

3. Assume Model 4399 requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $430,000 and will be depreciated over a five-year life by the straight-line method. How many units must Corrigan sell to earn $958,000 of income if Model 4399 is selected? As in requirement (2), sales and production are expected to average 42,000 units per year. (Do not round intermediate calculations and round your final answer to the nearest whole number.)

 

  Required sales 47,122  units

references

 

5.

value:

10.00 points

 

 

 

4. Ignoring the information presented in part (3), at what volume level will the annual total cost of each system be equal? (Round your answer to the nearest whole number.) Managerial Accounting

 

  Volume level                         26,622  units

references

 

     

 

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6.

value:

10.00 points

 

 

Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 41,000 speaker sets:

 

       
  Sales $ 3,280,000  
  Variable costs   820,000  
  Fixed costs   2,310,000  

 

Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $16 per set; annual fixed costs are anticipated to be $2,240,000. (In the following requirements, ignore income taxes.)

 

Required:
1. Calculate the company’s current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States. (Omit the “$” sign in your response.)

 

   
  Current income 150,000   $
  Required sales 3,480,000   $

 

2. Determine the break-even point in speaker sets if operations are shifted to Mexico.

 

  Break-even point 35,000   units

 

3. Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States.

 

a. If variable costs remain constant, by how much must fixed costs change? (Input the amount as positive value. Omit the “$” sign in your response.)

 

  Fixed costsby 210,000     $

 

b. If fixed costs remain constant, by how much must unit variable cost change? (Input the amount as positive value. Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the “$” sign in your response.)

 

  Variable costsby 6 $

 

4. Determine the impact (increase, decrease, or no effect) of the following operating changes.

 

     
a.  Effect of an increase in direct material costs on the break-even point.
b.  Effect of an increase in fixed administrative costs on the unit contribution margin.
c.  Effect of an increase in the unit contribution margin on net income.
d.  Effect of a decrease in the number of units sold on the break-even point.

rev: 10_30_2013_QC_38310, 02_27_2014_QC_46037

references

7.

value:

10.00 points

 

 

Tim’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows:

 

  Product Type Sales Price Invoice Cost Sales Commission
  High-quality $ 500   $ 275   $ 25  
  Medium-quality   300     135     15  

 

Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $65,000. (In the following requirements, ignore income taxes.)

 

Required:

 

1. Compute the unit contribution margin for each product type. (Omit the “$” sign in your response.)

 

  Bicycle Type Unit

Contribution Margin
  High-quality 200  $
  Medium-quality 150 

 

2. What is the shop’s sales mix? (Omit the “%” sign in your response.)

 

  Sales mix
  High-quality bicycles 25  %
  Medium-quality bicycles 75   %

 

3. Compute the weighted-average unit contribution margin, assuming a constant sales mix. (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

 

  Weighted-average unit contribution margin 162.50    $

 

4. What is the shop’s break-even sales volume in dollars? Assume a constant sales mix. (Round intermediate calculations to 2 decimal places. Omit the “$” sign in your response.)

 

  Break-even sales volume 140,000   $

 

5. How many bicycles of each type must be sold to earn a target net income of $48,750? Assume a constant sales mix. (Round intermediate calculations to 2 decimal places.)

 

  Number of

bicycles
  High-quality 175
  Medium-quality 525

references

8.

value:

10.00 points

 

 

A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.)

 

       
  Revenue $ 500,000  
  Less: Variable expenses   300,000  
 
  Contribution margin $ 200,000  
  Less: Fixed expenses   150,000  
 
  Net income $ 50,000  
 

 

Consider each requirement independently.

 

Required:

 

1. Show the hotel’s cost structure by indicating the percentage of the hotel’s revenue represented by each item on the income statement. (Input all amounts as positive values. Omit the “$” & “%” signs in your response.)

 

  Amount Percent
  Revenue 500,000   
  Variable expenses 300,000   
 
  Contribution margin 200,000   
  Fixed expenses 150,000   
 
  Net income 50,000   
 

 

2. Suppose the hotel’s revenue declines by 15 percent. Use the contribution-margin percentage to calculate the resulting decrease in net income. (Omit the “$” sign in your response.)

 

  Decrease in net income 30,000    $

 

3. What is the hotel’s operating leverage factor when revenue is $500,000?

 

  Operating leverage factor 4 

 

4. Use the operating leverage factor to calculate the increase in net income resulting from a 20 percent increase in sales revenue. (Omit the “%” sign in your response.)

 

  Percentage increase in net income 80   %

references

 

9.

value:

10.00 points

 

 

A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.)

 

       
  Revenue $ 500,000  
  Less: Variable expenses   300,000  
 
  Contribution margin $ 200,000  
  Less: Fixed expenses   150,000  
 
  Net income $ 50,000  
 

 

Required:

 

1. Prepare a contribution income statement if the hotel’s volume of activity increases by 20 percent, and fixed expenses increase by 40 percent. (Input all amounts as positive values. Omit the “$” sign in your response.)

 

   
  Revenue 600,000 $   
  Less: Variable expenses 360,000    
 
  Contribution margin 240,000 $   
  Less: Fixed expenses 210,000   
 
  Net income 30,000 $   
 

 

2. Prepare a contribution income statement if the ratio of variable expenses to revenue doubles. There is no change in the hotel’s volume of activity. Fixed expenses decline by $25,000. (Input all amounts as positive values except losses which should be indicated with a minus sign. Omit the “$” sign in your response.)

 

   
  Revenue                                                                    500,000 $
  Less: Variable expenses                                          600,000  
 
  Contribution margin                                              (100,000) $
  Less: Fixed expenses                                                 125,000  
 
  Net loss                                                                    (225,000) $
 

10.

value:

10.00 points

 

 

Hydro Systems Engineering Associates, Inc. provides consulting services to city water authorities. The consulting firm’s contribution-margin ratio is 20 percent, and its annual fixed expenses are $120,000. The firm’s income-tax rate is 40 percent.

 

Consider each requirement independently.

 

Required:

 

1. Calculate the firm’s break-even volume of service revenue. (Omit the “$” sign in your response.)

 

  Break-even volume  600,000  $

 

2. How much before-tax income must the firm earn to make an after-tax net income of $48,000?. (Omit the “$” sign in your response.)

 

  Before tax income 80,000    $

 

3. What level of revenue for consulting services must the firm generate to earn an after-tax net income of $48,000? (Omit the “$” sign in your response.)

 

  Service revenue 1,000 000 $

 

4. Suppose the firm’s income-tax rate rises to 45 percent. What will happen to the break-even level of consulting service revenue?
   
 
The break-even level of consulting service revenue will change.
The break-even level of consulting service revenue will not change.