Wiley Plus Chapter 6

Wiley Plus Chapter 6

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Problem 6-1A

Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 79,100 units of product: Net sales \$1,542,450; total costs and expenses \$1,750,700; and net loss \$208,250. Costs and expenses consisted of the following.

 Total Variable Fixed Cost of goods sold \$1,197,800 \$776,100 \$421,700 Selling expenses 427,300 79,600 347,700 Administrative expenses 125,600 53,800 71,800 \$1,750,700 \$909,500 \$841,200

Management is considering the following independent alternatives for 2014.

 1 Increase unit selling price 22% with no change in costs and expenses. 2 Change the compensation of salespersons from fixed annual salaries totaling \$200,000 to total salaries of \$36,100 plus a 5% commission on net sales. 3 Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50.

(a) Compute the break-even point in dollars for 2014. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)

Break-even point \$

Exercise 7-2 (Part Level Submission)

Gruden Company produces golf discs which it normally sells to retailers for \$6.90 each. The cost of manufacturing 20,700 golf discs is:

 Materials \$9,729 Labor 30,636 Variable overhead 22,149 Fixed overhead 40,572 Total \$103,086

Gruden also incurs 8% sales commission (\$0.55) on each disc sold.

McGee Corporation offers Gruden \$5 per disc for 4,700 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, its fixed overhead will increase from \$40,572 to \$46,294 due to the purchase of a new imprinting machine. No sales commission will result from the special order.

(a)

Prepare an incremental analysis for the special order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

 Reject Order Accept Order Net Income Increase (Decrease) Revenues \$

(b) Compute the labor price and quantity variances.

 Labor price variance \$ Labor quantity variance \$

(c) Compute the labor price and quantity variances, assuming the standard is 4.18 hours of direct labor at \$12.29 per hour.

 Labor price variance \$ Labor quantity variance \$

Problem 11-1A

Costello Corporation manufactures a single product. The standard cost per unit of product is shown below.

 Direct materials—2 pound plastic at \$6.25 per pound \$ 12.50 Direct labor—2.00 hours at \$12.00 per hour 24.00 Variable manufacturing overhead 14.00 Fixed manufacturing overhead 6.00 Total standard cost per unit \$56.50

The predetermined manufacturing overhead rate is \$10 per direct labor hour (\$20.00 ÷ 2.00). It was computed from a master manufacturing overhead budget based on normal production of 11,400 direct labor hours (5,700 units) for the month. The master budget showed total variable costs of \$79,800 (\$7.00 per hour) and total fixed overhead costs of \$34,200 (\$3.00 per hour). Actual costs for October in producing 3,100 units were as follows.

 Direct materials (6,390 pounds) \$ 40,704 Direct labor (6,030 hours) 74,048 Variable overhead 44,080 Fixed overhead 20,070 Total manufacturing costs \$178,902

The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

(a) Compute all of the materials and labor variances. (Round answers to 0 decimal places, e.g. 125.)

 Total materials variance \$ Materials price variance \$ Materials quantity variance \$ Total labor variance \$ Labor price variance \$ Labor quantity variance \$

(b) Compute the total overhead variance.

Bracewell Company reported net income of \$194,600 for 2014. Bracewell also reported depreciation expense of \$40,160 and a gain of \$5,580 on disposal of plant assets. The comparative balance sheet shows an increase in accounts receivable of \$15,210 for the year, a \$17,790 increase in accounts payable, and a \$3,400 decrease in prepaid expenses.

Prepare the operating activities section of the statement of cash flows for 2014. Use the indirect method. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).)

 BRACEWELL COMPANY Partial Statement of Cash Flows For the Year Ended December 31, 2014 \$ \$ \$

Exercise 13-7

Meera Corporation’s comparative balance sheets are presented below.

 MEERA CORPORATION Comparative Balance Sheets December 31 2014 2013 Cash \$14,270 \$10,270 Accounts receivable 20,780 23,540 Land 20,320 25,530 Buildings 69,710 69,710 Accumulated depreciation—buildings (15,020 ) (10,720 ) Total \$110,060 \$118,330 Accounts payable \$12,270 \$27,790 Common stock 74,530 72,510 Retained earnings 23,260 18,030 Total \$110,060 \$118,330

 1 Net income was \$22,338. Dividends declared and paid were \$17,108. 2 All other changes in noncurrent account balances had a direct effect on cash flows, except the change in accumulated depreciation. The land was sold for \$4,850.

(a) Prepare a statement of cash flows for 2014 using the indirect method. (Show amounts that decrease cash flow with either a – sign e.g. -15,000, or in parenthesis e.g. (15,000).)

 MEERA CORPORATION Statement of Cash Flows For the Year Ended December 31, 2014 \$ \$ \$ \$ Dividends \$

(c) Indicate where each of the cash inflows or outflows identified in (b) would be classified on the statement of cash flows.

 Common stock Dividends Click if you would like to Show Work for this question: Open Show Work

Exercise 14-3

The comparative condensed balance sheets of Garcia Corporation are presented below.

 GARCIA CORPORATION Comparative Condensed Balance Sheets December 31 2014 2013 Assets Current assets \$ 74,450 \$ 80,690 Property, plant, and equipment (net) 98,370 90,210 Intangibles 25,460 38,040 Total assets \$198,280 \$208,940 Liabilities and stockholders’ equity Current liabilities \$ 42,300 \$ 49,060 Long-term liabilities 143,930 150,570 Stockholders’ equity 12,050 9,310 Total liabilities and stockholders’ equity \$198,280 \$208,940

(a) Prepare a horizontal analysis of the balance sheet data for Garcia Corporation using 2013 as a base. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000). (20%). Round percentages to 1 decimal place, e.g. 12.3%.)

 GARCIA CORPORATION Condensed Balance Sheets December 31 2014 2013 Increase (Decrease) Percentage Change from 2013 Assets Current Assets \$74,450 \$80,690 \$ \$ \$[removed] [removed] % \$[removed] [removed] % Click if you would like to Show Work for this question: Open Show Work

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