1. Cellular Solutions Inc. had a very successful year in 2013. Based on a $125 average unit selling price, monthly sales during 2013 were as follows:
|
January
|
$ 75,000
|
|
February
|
60,000
|
|
March
|
100,000
|
|
April
|
150,000
|
|
May
|
60,000
|
|
June
|
50,000
|
|
July
|
40,000
|
|
August
|
85,000
|
|
September
|
65,000
|
|
October
|
95,000
|
|
November
|
35,000
|
|
December
|
50,000
|
|
Total
|
$865,000
|
Mr. James, vice president of sales, is preparing the sales budget for 2014. Increased manufacturing costs will make it necessary to increase the selling price by 12 percent. Even with this price increase, the unit volume of sales is expected to increase by 25 percent. The seasonal sales pattern shown for 2013 is expected to continue in 2014.
a. Prepare the monthly sales unit and dollar budgets for the first quarter of 2014.
b. Mr. Serene is considering the possibility of raising the average selling price by 20 percent in 2014. If this action is taken, he projects that the sales volume for the year will increase by only 10 percent. What would forecasted sales in units and dollars be in 2014 if his projection is correct?
2. A company expects to begin the coming year with 6,000 ceramic pots in finished goods inventory. It expects to sell 85,000 ceramic pots and end the year with 8,000 pots in the finished goods inventory. Four pounds of clay go into each ceramic pot. The company expects to have 4,000 pounds of clay on hand at the beginning of the coming year and wishes to end the year with 6,000 pounds in inventory.
a. Prepare a production budget showing the number ceramic pots that the company must manufacture to carry out these plans.
b. Prepare a direct materials purchases budget showing the number of pounds of clay that the company must purchase during the year.
3. The CEO of Star Coffee is interested in reviewing the May 2014 performance report for Cost Center 7-11. Prepare a brief performance report for the CEO utilizing the following information for Cost Center 7-11. Line items should be broken out between direct materials, direct labor, variable overhead, and fixed overhead.
|
Actual Results
|
Flexible Budget
|
Master Budget
|
|
Ground coffee
|
$1,350
|
$1,200
|
$1,270
|
|
Flavored syrups
|
2,300
|
2,320
|
3,000
|
|
Milk
|
850
|
800
|
950
|
|
Servers' wages
|
3,500
|
3,800
|
3,600
|
|
Supervisor's salary
|
5,000
|
5,000
|
5,000
|
|
Espresso machine repair
|
50
|
120
|
150
|
4. Using the following information, prepare a traditional income statement and a variable costing income statement:
|
Sales
|
$5,000,000
|
|
Variable cost of goods sold
|
2,100,000
|
|
Variable selling expenses
|
850,000
|
|
Fixed selling expenses
|
250,000
|
|
Fixed manufacturing costs
|
700,000
|
5. As the staff accountant for Investment Center 916, calculate the October 2014 ROI, using the following information:
|
October 2014 profit margin
|
35%
|
|
October 2014 sales
|
$2,480,000
|
|
Assets at September 30, 2014
|
1,879,500
|
|
Assets at October 31, 2014
|
1,850,000
|
Round your answers to two decimal places.
6. Nexus Star Inc. produces various kinds of oils. One of its product, Product X, is made from castor oil, beeswax, aloe vera, and a base compound.
For the next 12 months, the company's purchasing agent believes that the cost of ingredients will be as follows:
|
Ingredient
|
Standard Cost
|
|
Castor oil
|
$6.50
|
per gallon
|
|
Beeswax
|
$4.83
|
per pound
|
|
Aloe vera
|
$18.50
|
per gallon
|
|
Base compound
|
$20.00
|
per gallon
|
The direct labor time standard is 3.50 hours per unit at a standard direct labor rate of $12.00 per hour. The standard overhead rates are $15.00 per direct labor hour for the standard variable overhead rate and $13.00 per direct labor hour for the standard fixed overhead rate.
a. Using these production standards, compute the standard unit cost of direct materials per unit if it takes 0.50 gallon of castor oil, 1 pound of beeswax, 0.25 gallon of aloe vera, and 1 gallon of base compound to produce one unit of product X. Round values to two decimal places.
b. Using the standard unit cost of direct materials per case determined in (a) and the production standards given for direct labor and overhead, compute the standard unit cost of one unit of product X.
7. Rose Corporation provides you the following budgeted cost information for July, 2014.
|
Budgeted variable costs
|
Per unit
|
|
Direct materials
|
$5
|
|
Direct labor
|
$4
|
|
Overhead
|
$8
|
|
Budgeted fixed overhead
|
$90,000
|
The company has a normal capacity of producing 9,000 units. However, in July, the company produced 9,500 units by incurring the following costs.
|
Actual variable costs
|
Per unit
|
|
Direct materials
|
$57,000
|
|
Direct labor
|
$47,500
|
|
Overhead
|
$57,000
|
|
Actual fixed overhead
|
$85,000
|
Prepare a performance report for July, 2014, to compare the data from Rose's flexible budget with the actual costs incurred. Also find if costs are under or over budgeted.
8. Golf Pro Inc. makes wood drivers for the professional golfer. Because of the clientele of users, only the finest materials can be used, and the quality of craftsmanship must be high. The following cost, quantity, and time standards have been set for 2014:
Direct materials: 2 board-feet of wood @ $20 per board-foot and 2 feet of leather strip @ $5 per foot
Direct labor: Cutting Department, 0.6 hour per driver at $10 per hour; Shaping/Finishing Department, 1.4 hours per driver at $15 per hour
Overhead: variable, $5 per direct labor hour; fixed, $8 per direct labor hour
The wood is added at the beginning of the cutting process and the leather strip at the beginning of the shaping/finishing process.
Compute the standard cost per driver.
9. Regis Company has a tax rate of 25 percent and is considering a capital project that will make the following annual contribution to operating income:
|
Cash revenues
|
$130,000
|
|
Noncash revenues
|
10,000
|
|
Cash expenses
|
(30,000)
|
|
Depreciation
|
(35,000)
|
|
Operating income before income taxes
|
$75,000
|
|
Income taxes
|
(18,750)
|
|
Operating income
|
$56,250
|
Determine the net cash inflows for this project using the:
a. receipts and disbursements method (show calculations).
b. income adjustment procedure (show calculations).
10. The following data have been gathered for a capital investment decision.
Cash inflows:
|
Year 1
|
$50,000
|
|
Year 2
|
60,000
|
|
Year 3
|
40,000
|
|
Year 4
|
50,000
|
|
Year 5
|
40,000
|
The minimum rate of return for this investment is 14 percent. The present value factors for a 14 percent discount rate are as follows:
|
End of Period
|
Present Value of $1
|
Present Value of an Annuity of $1
|
|
1
|
.877
|
.877
|
|
2
|
.769
|
1.646
|
|
3
|
.675
|
2.321
|
|
4
|
.592
|
2.913
|
|
5
|
.519
|
3.432
|
|
6
|
.456
|
3.888
|
a. Compute the present value of each of the cash inflows of the investment.
b. What would have been the present value of the cash flows if they were received in equal installments over the five-year period at the same discount rate? (Assume the total cash inflows remain same.)
c. If the answers to parts (a) and (b) differ, explain the reason(s) why.