Question 1: Calamari Manufacturing produces small electric engines. Identify the following costs as direct materials (DM), direct labor (DL), manufacturing overhead (MOH), or a period cost (PC). Also indicate whether the cost is variable (V) or fixed (F) with respect to behavior.
A. Commissions paid to salespeople
B. Straight-line depreciation on the factory building
C. Salary of the plant supervisor
D. Wages of the assembly-line workers
E. Machine lubricant used in production activities
F. Engine casings used in production activities
G. Advertising placed in trade journals
H. Lease payments for the president's automobile
I. Property taxes paid on the factory facilities
Question 2. Parrish's Manufacturing had the following data for the period just ended:
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Work in process, Jan. 1
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$ 21,000
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Work in process, Dec. 31
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40,000
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Finished goods, Jan. 1
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70,000
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Finished goods, Dec. 31
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61,000
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Direct materials used
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126,000
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Direct labor
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260,000
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Factory depreciation
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80,000
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Sales
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945,000
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Advertising expense
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52,000
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Factory utilities
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27,000
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Indirect materials
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19,000
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Indirect labor
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35,000
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Required:
A. Calculate Parrish's cost of goods manufactured.
B. Calculate Parrish's cost of goods sold.
Question 3. Hamilton Company had the following inventory balances at the beginning and end of the year:
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January 1
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December 31
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|
|
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Raw material $ 50,000 $ 35,000
Work in process 130,000 170,000
Finished goods 280,000 255,000
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During the year, the company purchased $100,000 of raw material and incurred $340,000 of direct labor costs. Other data: manufacturing overhead incurred, $450,000; sales, $1,560,000; selling and administrative expenses, $90,000; income tax rate, 30%.
Required:
A. Calculate cost of goods manufactured.
B. Calculate cost of goods sold.
C. Determine Hamilton's net income.
Question 4. Lettman Corporation has provided the following partial listing of costs incurred during November:
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Marketing salaries
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$45,000
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Property taxes, factory
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$9,000
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Administrative travel
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$98,000
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Sales commissions
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$48,000
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Indirect labor
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$38,000
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Direct materials
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$165,000
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Advertising
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$138,000
|
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Depreciation of production equipment
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$39,000
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Direct labor
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$87,000
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Required:
a. What is the total amount of production/inventoriable costs listed above? Show your work.
b. What is the total amount of period costs listed above? Show your work.
Question 5. The following information summarizes the company's cost structure:
Variable cost per unit $1.30
Fixed cost per unit 4.50
Total cost per unit $5.80
Units produced and sold 48,000
Required:
Estimate the following costs at the 40,000 unit level of activity:
a. Total variable cost.
b. Total fixed cost.
c. Variable cost per unit.
d. Fixed cost per unit.
Question 6. Slonaker Inc. has provided the following data concerning its maintenance costs:
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Machine-Hours
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Maintenance Cost
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April
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5,799
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$30,379
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May
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5,782
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$30,289
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June
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5,764
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$30,237
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July
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5,761
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$30,233
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August
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5,717
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$30,078
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September
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5,795
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$30,360
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October
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5,809
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$30,388
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November
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5,801
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$30,378
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December
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5,785
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$30,318
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Management believes that maintenance cost is a mixed cost that depends on machine-hours.
Required:
Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method.
Question 7. Iron Decor manufactures decorative iron railings. In preparing for next year's operations, management has developed the following estimates:
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Total Per Unit
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Sales (20,000 units)
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$1,000,000
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$50.00
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Direct materials
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$200,000
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$10.00
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Direct labor (variable)
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$50,000
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$2.50
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Manufacturing overhead:
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|
|
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Variable
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$70,000
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$3.50
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Fixed
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$80,000
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$4.00
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Selling & administrative:
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|
|
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Variable
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$100,000
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$5.00
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Fixed
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$30,000
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$1.50
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Required:
Compute the following items:
a. Unit contribution margin.
b. Contribution margin ratio.
c. Break-even in dollar sales.
d. Margin of safety percentage.
e. If the sales volume increases by 20% with no change in total fixed expenses, what will be the change in net operating income?
f. If the per unit variable production costs increase by 15%, and if fixed selling and administrative expenses increase by 12%, what will be the new break-even point in dollar sales?
Question 8. Butremovic Corporation's contribution format income statement for the most recent month follows:
Sales $121,000
Variable expenses 60„500
Contribution margin 60,500
Fixed expenses 43,700
Net operating income $ 16,800
Required:
a. Compute the degree of operating leverage to two decimal places.
b. Using the degree of operating leverage, estimate the percentage change in net operating income that should result from an 8% increase in sales.
Question 9. Torri Inc. produces and sells two products. During the most recent month, Product C34M's sales were $25,000 and its variable expenses were $5,750. Product Y03Z's sales were $40,000 and its variable expenses were $9,850. The company's fixed expenses were $48,310.
Required:
a. Determine the overall break-even point for the company. Show your work!
b. If the sales mix shifts toward Product C34M with no change in total sales, what will happen to the break-even point for the company? Explain.
Question 10. A number of companies in different industries are listed below:
1. Elevator production and installation company
2. Cattle feedlot that fattens cattle prior to slaughter
3. Brick manufacturer
4. Architectural firm that designs custom homes
5. Winery that produces a number of varietal wines
6. Synthetic rubber manufacturer
Required:
For each company, indicate whether the company is most likely to use job-order costing or process costing.