1. The work-in-process inventory account of a manufacturing
company shows a balance of $3,000 at the end of an accounting period. The
job-cost sheets of the two incomplete jobs show charges of $500 and $300 for
direct materials, and charges of $400 and $600 for direct labor. From this information, it appears that the
company is using a predetermined overhead rate as a percentage of direct labor costs. What percentage is the rate?
2. The break-even point in dollar sales for Rice Company
is $480,000 and the company’s
contribution margin ratio is 40 percent. If Rice Company desires a profit
of $84,000, how much would sales have to
total?
3. Williams Company’s direct labor cost is 25 percent of its
conversion cost. If the manufacturing overhead for the last period was $45,000
and the direct material cost was $25,000, how much is the direct labor cost?
4. Grading Company’s cash and cash equivalents consist
of cash and marketable securities. Last
year the company’s cash account
decreased by $16,000 and its marketable securities account increased by
$22,000. Cash provided by operating activities was $24,000. Net cash used for
financing activities was $20,000. Based on this information, was the net cash
flow from investing activities on the statement of cash flows a net increase or
decrease? By how much?
5. Gladstone Footwear Corporation’s flexible budget
cost formula for supplies, a variable
cost, is $2.82 per unit of output. The company’s flexible budget performance
report for last month showed an $8,140 unfavorable spending variance for supplies. During that month,
21,250 units were produced. Budgeted activity for the month had been 20,900
units. What is the actual cost per unit for indirect materials?
6. Lyons Company consists of two divisions, A and B. Lyons
Company reported a contribution margin of $60,000 for Division A, and had a
contribution margin ratio of 30 percent in Division B, when sales in Division B
were $240,000. Net operating income for the company was $22,000 and traceable
fixed expenses were $45,000. How much were Lyons Company’s common fixed
expenses?
7. Atlantic Company produces a single product. For the
most recent year, the company’s net
operating income computed by the absorption costing method was $7,800, and its
net operating income computed by the variable costing method was $10,500. The
company’s unit product cost was $15 under variable costing and $24 under
absorption costing. If the ending
inventory consisted of 1,460 units, how many units must have been in the
beginning inventory.
8. Black Company uses the weighted-average method in its
process costing system. The company’s ending work-inprocess inventory consists
of 6,000 units, 75 percent complete with respect to materials and 50 percent
complete with respect to labor and overhead. If the total dollar value of the inventory is $80,000 and
the cost per equivalent unit for labor and overhead is $6.00, what is the cost
per equivalent unit for materials?
9. At Overland Company, maintenance cost is exclusively a
variable cost that varies directly with machine-hours. The performance report
for July showed that actual maintenance costs totaled $11,315 and that the
associated rate variance was $146 unfavorable. If 7,300 machine-hours were
actually worked during July, what is the budgeted maintenance cost per
machine-hour?
10. The cost of goods sold in a retail store totaled
$650,000. Fixed selling and administrative expenses totaled $115,000 and
variable selling and administrative expenses were $420,000. If the store’s contribution margin totaled $590,000, how much were the sales?
11. Denny Corporation is considering replacing a
technologically obsolete machine with a
new state-of-the-art numerically
controlled machine. The new machine would cost $600,000 and would have a
10-year useful life. Unfortunately, the new machine would have no salvage
value. The new machine would cost $20,000 per year to operate and maintain, but would save $125,000
per year in labor and other costs. The old machine can be sold now for scrap for
$50,000. What percentage is the simple rate of return on the new machine
rounded to the nearest tenth of a percent? (Ignore income taxes in this
problem.)
12. Lounsberry Inc. regularly uses material O55P and
currently has in stock 375 liters of the material, for which it paid $2,700
several weeks ago. If this were to be sold as is on the open market as surplus
material, it would fetch $6.35 per liter. New stocks of the material can be
purchased on the open market for $7.20 per liter, but it must be purchased in
lots of 1,000 liters. You’ve been asked to determine the relevant cost of 900
liters of the material to be used in a job for a customer. What is the relevant
cost of the 900 liters of material O55P?
13. Harwichport Company has a current ratio of 3.0 and an
acid-test ratio of 2.8. Current assets equal $210,000, of which $5,000 consists
of prepaid expenses. The remainder of current assets consists of cash, accounts
receivable, marketable securities, and inventory. What is the amount of
Harwichport Company’s inventory?
14. Tolla Company is estimating the following sales for the
first six months of next year:
January $350,000
February $300,000
March $320,000
April $410,000
May $450,000
June $470,000
Sales at Tolla are normally collected as 70 percent in the
month of sale, 25 percent in the month following the sale, and the remaining 5
percent being uncollectible. Also, customers paying in the month of sale are
given a 2 percent discount. Based on this information, how much cash should
Tolla expect to collect during the month of April?
15. Trauscht Corporation has provided the following data
from its activity-based costing system:
Activity Cost Pool Total
Cost Total
Activity
Assembly $704,880
44,000
machine-hours
Processing orders
$91,428 1,900
orders
Inspection $117,546
1,950
inspection-hours
The company makes 360 units of product P23F a year,
requiring a total of 725 machine-hours, 85 orders, and 45 inspection-hours per
year. The product’s direct materials cost is $42.30 per unit and its direct labor
cost is $14.55 per unit. The product sells for $132.10 per unit. According to
the activity-based costing system, what is the product margin for product P23F?
16. Williams Company’s direct labor cost is 30 percent of
its conversion cost. If the manufacturing overhead for the last period was
$59,500 and the direct materials cost was $37,000, what is the direct labor
cost?
17. In a recent period, 13,000 units were produced, and
there was a favorable labor efficiency variance of $23,000. If 40,000
labor-hours were worked and the standard wage rate was $13 per labor-hour, what
would be the standard hours allowed per unit of output?
18. The balance in White Company’s work-in-process inventory
account was $15,000 on August 1 and $18,000 on August 31. The company incurred
$30,000 in direct labor cost during August and requisitioned $25,000 in raw
materials (all direct material). If the sum of the debits to the manufacturing
overhead account total $28,000 for the month, and if the sum of the credits
totaled $30,000, then was Finished Goods debited or credited? By how much?
19. A company has provided the following data:
Sales 4,000 units
Sales price $80 per unit
Variable cost $50 per unit
Fixed cost $30,000
If the dollar contribution margin per unit is increased by
10 percent, total fixed cost is decreased by 15 percent, and all other factors
remain the same, will net operating income increase or decrease? By how much?
20. For the current year, Paxman Company incurred $175,000
in actual manufacturing overhead cost. The manufacturing overhead account
showed that overhead was overapplied in the amount of $9,000 for the year. If
the predetermined overhead rate was $8.00 per direct labor-hour, how many hours
were worked during the year?
