1. (TCO A) The following data (in thousands of dollars) have been taken from the
accounting records of Larden Corporation for the just completed year. Sales $950
Purchases of raw materials $170 Direct labor $210 Manufacturing overhead $200
Administrative expenses $180 Selling expenses $140 Raw materials inventory, beginning
$70 Raw materials inventory, ending $80 Work in process inventory, beginning $30
Work in process inventory, ending $20 Finished goods inventory, beginning $100
Finished goods inventory, ending $70 Required: Prepare a Schedule of Cost of Goods
Manufactured statement in the text box below.
Opening stock Material
70
Add purchases
170
Less ending stock material
-80
Raw material used
160
Direct labor
210
Manufacturing overhead
200
Total manufacturing cost
570
Add WIP opening inventory
30
Less WIP Ending inventory
-20
Cost of gods manufactured
580
2. (Points: 15) 2. (TCO F) The Michigan Company manufactures a product that goes
through three processing departments. Information relating to activity in the first
department during June is given below: Percent completed Units Materials Conversion
Work in process, June 1 40,000 65% 45% Work in process, Jun 30 35,000 75% 65% The
department started 175,000 units into production during the month and transferred
180,000 completed units to the next department.
REQUIRED: Compute the equivalent units of production for the first department for
June, assuming that the company uses the weighted-average method of accounting for
units and costs. (Points: 20)
Material = 180000 + 35000*.75 = 206250
Conversion = 180000+35000*.65 =202750
3. (TCO B) A cement manufacturer has supplied the following data: Tons of cement
produced and sold 220,000 Sales revenue $924,000 Variable manufacturing expense
$297,000 Fixed manufacturing expense $280,000 Variable selling and admin expense
$165,000 Fixed selling and admin expense $82,000 Net operating income $100,000
Required: a. Calculate the company's unit contribution margin
924000-297000-165000 = 462000/220000 = $2.1
b. Calculate the company's unit contribution ratio
2.1/4.2 = .5 or 50%
c. If the company increases its unit sales volume by 5% without increasing its fixed
expenses, what would the company's net operating income be? (Points: 25)
924000*.05*.5 = $23100
4. (TCO E) The Dean Company produces and sells a single product. The following data
refer to the year just completed: Selling Price $ 350 Units in beginning Inventory 0 Units
Produced 20000 Units sold 19000 Variable Costs per unit: Direct materials $ 190 Direct
labor $ 40 Variable manufacturing overhead $ 25 Variable selling and admin $ 10 Fixed
Costs: Fixed manufacturing overhead $ 250,000 Fixed selling and admin $ 225,000
Assume that direct labor is a variable cost.
Required:
a. Compute the cost of a single unit of product under both the absorption costing and
variable costing approaches.
Absorption costing = 190+40+25 + (250000/20000) $267.50 product cost
+10+(225000/19000) =$289.34 total cost
Variable costing = 190+40+25 = 255 product cost + 10 = 265 total cost
b. Prepare an income statement for the year using absorption costing.
Sales
6650000
Less cost of goods sold
Variable manufacturing cost 5100000
Fixed manufacturing
250000
Less ending inventory
5350000/20000 x 1000
-267500
Cost of goods sold
5082500
Gross profit
1567500
Less operating expense
Variable 19000x 10
190000
Fixed
225000
-415000
Net income
1152500
c. Prepare an income statement for the year using variable costing.
Sales
6650000
Less cost of viable cost of production
Variable manufacturing cost 5100000
Less ending inventory
5100000/20000 x 1000
-255000
4845000
Gross contribution margin
1805000
Less Variable Selling and admin 19000x 10
-190000
Net contribution margin
1615000
Less Fixed cost 250000+225000
-475000
Net income
1140000