- Assume that Zebra Company has no opening inventory. The following purchases of inventory occurred during the year:
Date Purchases (units) Purchase Price per Unit
Jan 2 2 $3
Feb. 15 3 $5
March 30 4 $7
July 29 6 $6
October 30 5 $4
Assume Zebra sells 10 items on October 31 and uses the LIFO method of inventory valuation.
Required: What amount would appear as cost of goods sold on the income statement?
2. The following calculations have been made for Rogers Company:
Growth Rate
2012 to 2013
Net sales 10.5%
Total accounts receivable 21.3%
Allowance for doubtful accounts 2.6%
2013 2012
Allowance for doubtful accounts as a
percentage of total accounts receivable 3.8% 5.4%
Required: Analyze the accounts receivable and allowance for doubtful accounts changes and provide plausible explanations for the results.
3. Analyze the common size income statements below:
|
2013
|
2012
|
|
Net sales
|
100%
|
100%
|
|
COGS
|
54
|
63
|
|
Gross margin
|
46
|
37
|
|
Research and development
|
14
|
20
|
|
Selling, general and administrative
|
5
|
9
|
|
Restructuring, asset impairments and other charges
|
1
|
8
|
|
Income from operations
|
26
|
0
|
|
Interest expense
|
(1)
|
(2)
|
|
Income (loss) before income taxes
|
25
|
(2)
|
|
Provision for income taxes
|
8
|
0
|
|
Net income (loss)
|
17%
|
(2)%
|
|
Sales revenue increase, 2012 to 2013
|
80%
|
|
Operating expense increase, 2012 to 2013
|
31%
|
4. Yak Corporation reported the following information:
(1) Net income for the year was $52 million.
(2) Purchases of equipment were $12 million.
(3) Customer accounts receivable decreased by $6 million.
(4) Dividends paid to common shareholders were $10 million.
(5) Depreciation expense was $18 million.
(6) Income tax payable decreased by $3 million.
(7) Long-term debt decreased by $14 million.
(8) Accounts payable increased by $8 million.
(9) Inventories decreased by $5 million.
(10) Opening cash balance was $4 million.
Required: Based on the above information, calculate the ending cash balance.
4. Able Manufacturing uses departmental cost driver rates to allocate manufacturing support costs to products. Manufacturing support costs are allocated on the basis of machine hours in Department A and on the basis of direct labor hours in Department B. At the beginning of 2013, the following estimates were provided for the coming year:
Dept. A Dept. B
Direct labor cost $600,000 $1,800,000
Manufacturing overhead costs $400,000 $600,000
Direct labor-hours 25,000 60,000
Machine-hours 10,000 12,000
The accounting records of the company show the following data for Job #123:
Dept. A Dept. B
Direct labor-hours 10 20
Machine-hours 2 15
Direct material cost $100 $200
Required: Calculate the total manufacturing costs of Job #123.
6. Pete s Publishing, Inc. has excess capacity. Company management is approached by a new customer to fill a large one-time order for 1,000 books, a product similar to one offered to regular customers. The following information applies to sales to regular customers:
Sales (100,000 units) $12,000,000
Direct materials $5,000,000
Direct labor 4,000,000
Variable manufacturing support 500,000
Fixed manufacturing support 200,000
Total manufacturing costs 9,700,000
Profit $2,300,000
Required: What is the minimum acceptable price at which overall profit will not change?
7. Bob s Boots Ltd. manufactures three different products boots, slippers, and runners. Considerable market demand exists for all models. The following per unit data apply:
Boots Slippers Runners
Selling price $150 $20 $85
Direct materials 100 8 40
Direct labor ($20 per hour) 20 5 10
Variable support costs ($4 per machine hour) 10 2 12
Fixed costs 8 4 20
Gross profit 12 1 3
Required: If there is no excess capacity, what should the company do to maximize profits?
8. Engineers at Jones & Smith Ltd. developed the following standard costs for direct material and direct labor for one of their major products:
Standard quantity Standard price
Direct materials 10 kilograms $5 per kilogram
Direct labor 0.5 hours $30 per hour
During 2013, the company produced and sold 100,000 units using 990,000 kilograms of direct materials at an average cost of $4.95 per kilogram,and total direct labour costs of $1,428,000 (51,000 DLHs incurred).
Required: Calculate the 2013 price and quantity (efficiency) variances, and total variances, for direct material and direct labour.
9. Mercury Manufacturing produces a single product that sells for $30. Variable (flexible) costs per unit equal $20. Management believes that a 5% reduction in the selling price will result in a 15% increase in unit sales, currently 10,000 units. The company expects the total capacity-related costs to rise from $10,000 to $15,000 to accommodate the required increase in production if this proposed reduction in selling price is implemented.
Required: What will happen to profits?
10. Marcel s Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates have been prepared to evaluate the benefits from the reorganization:
Before the change After the change
Total annual sales $600,000 $800,000
Costs as a percentage of sales:
Direct materials 23% 20%
Direct labor 9% 7%
Manufacturing Support costs 18% 13%
Work-in-process inventory $125,000 $ 90,000
Inventory carrying costs are estimated to be 10% per year.
Required: Calculate the amount that total benefits are projected to increase annually as a result of switching to a cellular manufacturing operation.