Question 1. T-Tunes, Inc. is considering the introduction of a new music player with the following price and cost characteristics:
Sales price per unit: $125
Variable cost per unit: $75
Annual fixed costs: $180,000
(a) How many units must T-Tunes sell to break even?
(b) How many units must T-Tunes sell to make an operating profit of $120,000 for the year?
(c) What will the operating profit be, assuming that the projected sales for the year are 7,500 units?
Consider requirements (b) and (c) independent of each other.
Question 2. Kramer Company has decided to use a predetermined rate to assign factory overhead to production. The following predictions have been made for 2010:
| Total factory overhead costs |
$180,000 |
| Direct labor hours |
50,000 hours |
| Direct labor costs |
$250,000 |
| Machine hours |
60,000 hours |
Compute the predetermined factory overhead rate under three different bases: (1) direct labor hours, (2) direct labor costs, and (3) machine hours.
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Question 3. The Boyceville Machining Company provided you with the following information for the fiscal year ending on December 31:
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Work-in-process inventory, 12/31
|
$28,950
|
|
Finished goods inventory, 1/1
|
153,700
|
|
Direct labor costs incurred
|
502,150
|
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Manufacturing overhead costs
|
1,364,700
|
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Direct materials inventory, 1/1
|
125,400
|
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Finished goods inventory, 12/31
|
255,500
|
|
Direct materials purchased
|
875,100
|
|
Work-in-process inventory, 1/1
|
50,500
|
|
Direct materials inventory, 12/31
|
84,700
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(a) Compute the total manufacturing costs incurred during the year.
(b) Compute the total work-in-process during the year.
(c) Compute the cost of goods manufactured during the year.
(d) Compute the cost of goods sold during the year.
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Question 4. The following information relates to a product produced by Bayfield Company:
| Direct materials |
$50 |
| Direct labor |
35 |
| Variable overhead |
30 |
| Fixed overhead |
40 |
| Unit cost |
$155
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Fixed selling costs are $1,000,000 per year. Although production capacity is 900,000 units per year, Bayfield expects to produce only 800,000 units next year. The product normally sells for $180 each. A customer has offered to buy 60,000 units for $150 each. Compute the effect on the net income if Bayfield accepts the special order.
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