Question 1:

Big Man Company gives you information from the records for the year ended December 31, 2015. (Variable costs are designated V and fixed costs are F).

Big Man has a 30% marginal Tax rate.

Sales (25,000 units @ $15)                                            $375,000

Costs:

Direct Materials                                                60,000 (100% V)

Direct Labor                                        90,000 (100% V)

Factory Overhead                            120,000 (80% F and 20% V)

Marketing Expenses                       40,000 (50% F and 50% V)

Administrative Expenses              30,000 (80% F and 20% V)

Total Costs                                                                          $340,000

Operating Income                                           35,000

Show all computations:

1) Compute the breakeven point in number of units and sales dollars.

2) Assuming Big Man has a marginal tax rate of 30%, compute the number of units required to generate an after tax profit of $35,000.

3) Compute number of units required to generate a net before tax profit of 10 percent of sales revenue.

Question 2:

Job Order Costing (one job two departments)

Lyons Inc. employs a normal costing system and has identified the following overhead costs and activity drivers for the next year.

Marketing Department (overhead allocated with direct manufacturing labor hours)

Manufacturing Overhead Costs (Budgeted)                                                $147,000

Direct manufacturing labor hours (Budgeted)                             4,200 Hours

Machine Hours (Budgeted)                                                                 9,800 Hours

Manufacturing Overhead Costs (Actual)                                        $146,500

Direct Manufacturing Labor Hours (Actual)                                   4,250 Hours

Machine hours (Actual)                                                                         9,900

Finishing Department (overhead allocated with direct machine hours)

Manufacturing Overhead Costs (Budgeted)                                                $90,000

Direct manufacturing labor hours (Budgeted)                             3,000 Hours

Machine Hours (Budgeted)                                                                 5,000 Hours

Manufacturing Overhead Costs (Actual)                                        $86,500

Direct Manufacturing Labor Hours (Actual)                                   3,150 Hours

Machine hours (Actual)                                                                         4,900

The following info is related to Job XX which consists of 300 units and was completed and sold during the year.

Job XX

Molding Department

Direct Materials                                        $2,250

Direct Labor                                                $3,000

Direct Labor Hours                                   90

Machine Hours                                         180

Finishing Department

Direct Materials                                        $2,500

Direct Labor                                                $1,875

Direct Labor Hours                                   110

Machine Hours                                         150

Required:

1) Determine the overhead application rates for both departments

2) Determine the unit cost for Job XX

3) Calculate the amount under or over allocated overhead for each department and for Lyons as a whole.