Assignment
1. Pelican Inc. is a manufacturing company whose total factory overhead costs fluctuate somewhat from month to month according to the number of machine-hours worked in its production facility. These costs for the last four months in 2014 are given below.
Machine-hours Total factory overhead
September 6,500 $ 108,900
October 8,500 $ 127,100
November 5,000 $ 88,000
December 10,000 $ 108,000
The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 5,000 machine-hours level of activity as follows:
Indirect materials (variable) ?
Rent (fixed) 34,000
Maintenance (mixed) 50,000
Total factory overhead costs $ 88,000
Assume that all data are within the relevant range, using the high-low method how much maintenance cost would you expect the company to incur at an operating level of 7,000 machine-hours? (Round to the nearest dollars.)
A. $ 54,400
B. $ 56,400
C. $ 62,000
D. $ 66,000
E. None of the above
2. Below is the costs related to quality of conformance for Woodpecker Company (in thousands):
a. Cost of field servicing $ 40
b. Product testing. $ 180
c. Inspection of goods. $ 65
d. Rework labor and overhead. $ 62
e. Downtime caused by defects. $ 159
f. Depreciation of test equipment. $ 40
g. Net cost of scrap $ 45
h. Quality circles. $ 83
i. Field testing at customer site $ 136
j. Statistical process control. $ 278
k. System development $ 80
l. Technical support to suppliers. $ 27
m. Warranty repairs $ 320
What is the total external failure costs?
A. $ 266
B $ 468
C $ 421
D. $ 360
E. None of the above
3. A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is paid at the beginning of the first year. A portion of the premium applies to manufacturing operations and the rest applies to selling, general, and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage? Additional information is provided below.
Premium $ 5,400 for 3 years
The % of the premium applied to manufacturing operation: 45%
Product Period
A. $5,400 $0
B. $810 $990
C. $2,430 $2,970
D. $1,800 $0
E. None of the above
4. Owl Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product.
|
Production volume
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4,500 units
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5,500 units
|
|
Direct materials
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$88.00 /unit
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$88.00 /unit
|
|
Direct labor
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$35.00 /unit
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$35.00 /unit
|
|
Manufacturing overhead
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$70.00 /unit
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$66.00 /unit
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The best estimate of the total variable manufacturing cost per unit is:
A. $171.00
B. $175.00
C. $151.00
D. $189.00
E. None of the above
5. Egret Corporation is a wholesaler that sells a single product and maintains a stable cost structure. Management has provided the following data for two months.
May June
Sales revenue $ 925,000 $ 1,295,000
Gross margin $ 474,700 $ 794,700
Net operating income (Loss) $ (141,300) $ 162,700
Selling price per unit $ 185 $ 185
Suppose the price remains the same. The best estimate of the net operating income (loss) in July at the sales volume below is:
Sales volume in July: 6,300 units.
A. $ (178,038)
B. $ 33,200
C. $ 75,200
D. $ 56,300
E. Zero
6. The Albatross Corporation sells specialized springs.
Selling price $ 6.00 /unit
Monthly fixed expenses $ 37,500
Variable expense $ 3.00 /unit
The number of units that Albatross must sell each month to realize a profit equaling 15% of sales is:
A. 12,500
B. 11,029
C. 7,353
D. 17,857
E. None of the above