Week 5 – Term 5 Homework
60 Points
Due June 10, 2012
1.(6 points)
At the beginning of 2010, Zuir Company's accounting department calculated the following estimates for
the coming year's production:
Estimated overhead
Direct labor hours
$441,600
9,200 hr
During the year, Zuir Company experienced $440,000 in actual overhead costs and actually worked 9,100
direct labor hours. Zuir applies overhead to production using a predetermined overhead rate based on
direct labor hours.
a. Calculate the predetermined overhead rate Zuir uses to apply overhead. (Show your computations.)
b. By what amount was overhead over- or underapplied for 2010? (Show your computations.)
c. Assuming the amount of over- or underapplied overhead is not significant, will the Cost of Goods Sold
account be increased or decreased to correct the application of overhead?
2.(10 points)
Yamishi Production had the following inventories for the first quarter of 20xx:
Materials
Work in process
Finished goods
Beginning
$606,600
312,100
416,100
Ending
$522,100
280,800
540,200
Purchases of materials during the quarter were $427,800. Total direct labor costs were incurred in the
amount of $1,482,000. Actual overhead costs were incurred as follows: operating supplies used, $17,100;
janitorial and maintenance, $87,300; employee benefits, $26,400; utilities, $162,000; depreciation of
factory, $43,200; property taxes, $24,000; factory insurance, $29,000. Net sales for the quarter were
$3,562,200. Selling and administrative expenses were $508,000. Income taxes should be computed at 40
percent.
Prepare a statement of cost of goods manufactured for the first quarter of 20xx.
3.(6 points)
The following information has been made available to you. Assume that overhead is applied on the basis
of direct labor hours.
Estimated overhead
Estimated direct labor hours
$1,638,000
390,000
Actual direct labor hours
Actual overhead
442,000
$1,862,000
a. Compute the predetermined overhead rate.
b. Compute the amount of applied overhead for the year.
c. Compute the amount of underapplied or overapplied overhead.
4.(6 points)
Job 29 consists of 300 units and has total manufacturing costs of direct materials, $4,500; direct labor,
$7,500; and overhead, $3,600.
a. What is the unit product cost?
b. What are the prime costs per unit?
c. What are the conversion costs per unit?
5.(10 points)
Cancun Company uses a FIFO process costing system.
Cancun Company
Equivalent Production
November
Physical Units
Beginning inventory
2,350
Equivalent Units
Units started this period
10,120 Direct Materials
Units to be accounted for
12,470
Beginning inventory
2,350
Units started and completed
9,120
Ending inventory
1,000
Units accounted for
12,470
The following costs relate to work in process during November:
Beginning inventory
Direct materials
Direct labor
Overhead
$7,200
380
630
Current month's costs
Direct materials
$51,612
%
Conversion
Costs
%
Direct labor
Overhead
21,562
32,342
At the end of the last period, all direct materials had been added, and the units were 40% complete for
conversion costs.
At the end of this period, all direct materials for the 1,000 units had been added, and 70% of conversion
costs had been incurred.
Prepare a process report for November, and identify the amount to be transferred.
6.(4 points)
Denapasa Manufacturing leases a vacuum cleaning system for a basic monthly fee plus an additional cost
per hour used above a given minimum for each month. Given below is the information for the most recent
six-month period on the number of machine hours of use and the total cost under this lease.
Month
7
8
9
10
11
12
Machine Hours
6,300
4,400
4,700
5,200
5,600
5,000
Total Cost
$58,200
49,935
52,390
54,440
56,620
53,800
You are to provide information for planning on the variable and fixed cost elements in this lease. Use the
high-low method to (a) determine the variable cost per machine hour and (b) compute the fixed and
variable costs for months 7 and 8.
7.(4 points)
Ditex is a manufacturer of digital cameras and is preparing production and sales forecasts for the coming
fiscal year. The company needs to determine the point at which the projected sales revenue will equal the
total of all fixed and variable costs. Fixed costs are estimated to be $314,390, and variable costs are
expected to be maintained at $150 per camera. Each camera will sell for $299. Compute (a) the breakeven
point in sales units and (b) the breakeven point in sales dollars.
8.(6 points)
A new product, an easy to store guitar stand, is being planned, with the following cost estimates: variable
cost per unit, $9, and total fixed costs, $58,000. The projected sales price is $13 each.
a. Using the contribution margin approach, compute the number of units that must be sold to break even.
b. Using the same approach and assuming that fixed costs can be reduced by $8,000, how many units
must be sold to produce a profit of $65,000?
c. Given the original information and the projection that 50,000 units can be sold, compute the selling
price that the producer must use to obtain a profit of $150,000.
9.(8 points)
Projected cost information for a new product to be produced by Kolier Manufacturing is as follows:
Expected variable unit costs:
Direct materials
Direct labor
Overhead
Selling costs
$10.90
7.18
1.92
4.00
Annual fixed costs:
Taxes on property used
Depreciation on building and equipment
Advertising
Other
$ 8,870
18,920
38,840
2,070
The product is to be sold for $49.
a. Compute the number of units that must be sold to earn a profit of $80,000.
b. Compute the number of units that must be sold if advertising costs rise by $12,000 and a targeted profit
of $120,000 is to be obtained.
c. Use the original information and sales of 10,000 units to compute the new selling price that the
company must use to obtain a profit of $200,000.
d. The most in annual sales that could be projected is 20,000 units. Determine the added amount that
could be spent on fixed advertising costs if the highest possible selling price that management believes
can be charged is $50 and if there is a targeted profit of $225,000.