1.
During the month of April, Cavy Company incurred factory overhead as follows:
Indirect materials
Factory Supervision Labor
Utilities
Depreciation (factory)
Small tools
Equipment rental
$11,000
$4,000
$500
$700
$300
$750
Journalize the entry to record the factory overhead incurred during April.
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2.
The Bottling Department of Mountain Springs Water Company had 5,000 liters in beginning work in process
inventory (20% complete). During the period, 58,000 liters were completed. The ending work in process
inventory was 3,000 liters (90% complete). What are the equivalent units for conversion costs under the FIFO
method?
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3.
Mia Enterprises sells a product for $90 per unit. The variable cost is $40 per unit, while fixed costs are
$75,000. Determine the (a) break-even point in sales units, and (b) break-even point if the selling price was
increased to $100 per unit.
a. SP $90 - VC $40 = CM $50 per unit
$75,000 / $50 = 1,500 units
b. SP $100 - VC $40 = CM $60 per unit
$75,000 / $60 = 1,250 units
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4.
Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in the month following
the sale. If sales are budgeted to be $150,000 for March and $200,000 for April, what are the budgeted cash
receipts from sales on account for April?
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5.
Using the data from the Ace Guitar Company, determine the divisional income from operations for the A and B
regions.
Sales
Cost of goods sold
Selling expenses
A Region
$500,000
200,000
150,000
B Region
$900,000
300,000
275,000
Service department expenses
Purchasing
$90,000
Payroll accounting
30,000
Allocate service department expenses proportional to the sales of each region.
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% of Sales Allocation:
A Region = $500,000 / $1,400,000 = 35.7%
B Region = $900,000 / $,1400,000 = 64.3%
A Region = 35.7% x $120,000 = $42,840 allocation of service
costs
A Region Income = $500,000 - $200,000 - $150,000 - $42,840 =
$107,160
B Region = 64.3% x $120,000 = $77,160 allocation of service
costs
B Region Income = $900,000 - $300,000 - $275,000 - $77,160 =
$247,840
6.
The Owl Company produces their product at a total cost of $60 per unit. Of this amount $14 per unit is selling
and administrative costs. The total variable cost is $38 per unit The desired profit is $30 per unit. Determine
the mark up percentage on total cost.
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Mark up percentage: $30 / $60 = 50%
7.
Determine the average rate of return for a project that is estimated to yield total income of $400,000 over four
years, cost $720,000, and has a $30,000 residual value.
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Estimated average annual
income:
$100,000 ($400,000 / 4 years)
Average investment: $ 375,000 ($720,000 + $30,000) / 2
Average rate of return 26.7% ($100,000 / $375,000)
8.
An 6-year project is estimated to cost $350,000 and have no residual value. If the straight-line depreciation
method is used and estimated total net income is $126,000, determine the average rate of return.
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9.
The balance of Material Q on May 1 and the receipts and issuances during May are as follows:
Balance May 1
Received May 11
Received May 25
8 at $32
23 at $34
15 at $35
Issued May 17
14
Issued May 27
18
Determine the cost of each of the issuances under a perpetual system, using the first-in, first-out method.
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May 17
issue:
8 at $32 plus 6 at $34
$460
May 27
issue:
17 at $34 plus 1 at $35
$613
10.
For the past year, Pedi Company had fixed costs of $70,000, unit variable costs of $32, and a unit selling price
of $40. For the coming year, no changes are expected in revenues and costs, except that property taxes are
expected to increase by $10,000. Determine the break-even sales (units) for (a) the past year and (b) the
coming year.
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(a) S = $70,000/$8 = 8,750 units
(b) S = $80,000/$8 = 10,000 units
11.
Perfect Stampers has collected new data over the last three months to perform an analysis of their budgeting
and cost computations:
Average production labor cost per month
$5,500
Average raw materials consumed per month
$1,475
Average utilities for the production facility per month
$500
Variable indirect manufacturing overhead costs per month
$1,950
Fixed costs per month
$2,750
Average production volume in units
1,925 hub caps
Selling price per hub cap
$9.95 each
Compute the unit variable cost, the contribution margin per unit and the break-even point in units?
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Total variable costs are:
Production labor cost is
Raw materials consumed per
month is
Utilities expense is
Indirect costs
Total variable costs (average per month)
$5,500per month
1,475
500
1,950per month
$9,425
Unit variable costs = Total (average) production costs $9,425 / 1,925
hub caps = $4.8961 per hub cap.
Contribution Margin= Selling price per unit- variable unit costs = $9.95$4.90= $5.05
Break-even point in units is $2,750 per month / ($9.95 - $4.90) = 545
units
12.
Standard and actual costs for direct materials for the manufacture of 1,000 units of product were as follows:
Actual costs
1,550 lbs. @ $9.10
Standard costs
1,600 lbs. @ $9.00
Determine the (a) quantity variance, (b) price variance, and (c) total direct materials cost variance.
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13.
Several items are missing from the following table of rate of return on investment and residual income.
Determine the missing items, identifying each item by the appropriate letter.
Invested
Assets
(a)
$850,000
$825,000
(j)
Income
from
Oper.
(b)
$153,000
(g)
$129,000
Rate of
Return
on Inv.
(c)
(d)
20%
24%
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(a) $800,000 ($128,000/16%)
(b) $138,000 ($128,000 + $10,000)
(c) 17.3% ($138,000/$800,000)
(d) 18% ($153,000/$850,000)
(e) $102,000 ($850,000 ´ 12%)
Min.
Rate of
Return
16%
12%
(h)
(k)
Min. Amt.
of Income
from
Oper.
$128,000
(e)
(i)
$ 60,000
Residual
Income
$10,000
(f)
$24,000
(l)
(f) $51,000 ($153,000 - $102,000)
(g) $165,000 ($825,000 ´ 20%)
(h) 17.1% ($141,000/$825,000)
(i) $141,000 ($165,000 - $24,000)
(j) $537,500 ($129,000/24%)
(k) 11.2% ($60,000/$537,500)
(l) $69,000 ($129,000 - $60,000)
14.
MZE Manufacturing Company has a normal plant capacity of 37,500 units per month. Because of an extra large
quantity of inventory on hand, it expects to produce only 30,000 units in May. Monthly fixed costs and
expenses are $112,500 ($3 per unit at normal plant capacity) and variable costs and expenses are $8.25 per
unit. The present selling price is $13.50 per unit. The company has an opportunity to sell 7,500 additional units
at $9.90 per unit to an exporter who plans to market the product under its own brand name in a foreign
market. The additional business is therefore not expected to affect the regular selling price or quantity of sales
of MZE Manufacturing Company.Prepare a differential analysis report, dated April 21 of the current year, on
the proposal to sell at the special price.
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15.
Sunrise Inc. is considering a capital investment proposal that costs $227,500 and has an estimated life of four
years and no residual value. The estimated net cash flows are as follows:
Year
1
2
Net Cash Flow
$97,500
$80,000
3
4
$60,000
$40,000
The minimum desired rate of return for net present value analysis is 10%. The present value of $1 at
compound interest rates of 10% for 1, 2, 3, and 4 years is .909, .826, .751, and .683, respectively. Determine
the net present value.
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