Vitex, Inc. manufactures a popular consumer product and it has provided the following data excerpts from its standard cost system:

*Applied to Work in Process during the period.

The company's manufacturing overhead cost is applied to production on the basis of direct labor-hours. All of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored.

Required:

1. How many units were produced last period?

2. How many pounds of direct material were purchased and used in production?

3. What was the actual cost per pound of material? (Round your answer to 2 decimal places.)

4. How many actual direct labor-hours were worked during the period?

5. What was the actual rate paid per direct labor-hour? (Round your answer to 2 decimal places.)

6. How much actual variable manufacturing overhead cost was incurred during the period?

Boyne University offers an extensive continuing education program in many cities throughout the state. For the convenience of its faculty and administrative staff and to save costs, the university operates a motor pool. The motor pool’s monthly planning budget is based on operating 19 vehicles; however, for the month of March the university purchased one additional vehicle. The motor pool furnishes gasoline, oil, and other supplies for its automobiles. A mechanic does routine maintenance and minor repairs. Major repairs are performed at a nearby commercial garage.

The following cost control report shows actual operating costs for March of the current year compared to the planning budget for March.

The planning budget was based on the following assumptions:

1. $0.22 per mile for gasoline.
2. $0.11 per mile for oil, minor repairs, and parts.
3. $46 per automobile per month for outside repairs.
4. $81 per automobile per month for insurance.
5. $8,610 per month for salaries and benefits.
6. $206 per automobile per month for depreciation.

The supervisor of the motor pool is unhappy with the report, claiming it paints an unfair picture of the motor pool’s performance.

Required:

1. Calculate the spending variances for March. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

7

Decision on Accepting Additional Business

Brightstone Tire and Rubber Company has capacity to produce 196,000 tires. Brightstone presently produces and sells 150,000 tires for the North American market at a price of $97 per tire. Brightstone is evaluating a special order from a European automobile company, Euro Motors. Euro is offering to buy 23,000 tires for $81.75 per tire. Brightstone's accounting system indicates that the total cost per tire is as follows:

Brightstone pays a selling commission equal to 5% of the selling price on North American orders, which is included in the variable portion of the selling and administrative expenses. However, this special order would not have a sales commission. If the order was accepted, the tires would be shipped overseas for an additional shipping cost of $5 per tire. In addition, Euro has made the order conditional on receiving European safety certification. Brightstone estimates that this certification would cost $117,300.

a. Prepare a differential analysis dated January 21 on whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors. If an amount is zero, enter zero "0". If required, round interim calculations to two decimal places.

Determine whether to reject (Alternative 1) or accept (Alternative 2) the special order from Euro Motors.

b. What is the minimum price per unit that would be financially acceptable to Brightstone? Round your answer to two decimal places.

$per unit

Q#1: As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients.

Suit Up produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses. Suit Up reports the following cost data for the past​ year:

Requirements

1. Compute the predetermined manufacturing overhead rate.

2. Calculate the allocated manufacturing overhead for the past year.

3. Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed​ of?

4. How can managers use accounting information to help control manufacturing overhead​ costs?

Budget Actual

Direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,100 hours 6,100 hours

Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400 hours 6,400 hours

Depreciation on salespeople's autos . . . . . . . . . . . . . . . .$22,000 $22,000

Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,000 $50,500

Depreciation on trucks used to deliver uniforms to customers . . . . . . . . . . . . . . . . . . . . . . . $13,500 $11,500

Depreciation on plant and equipment . . . . . . . . . . . $70,000 $71,500

Indirect manufacturing labor . . . . . . . . . . . . . . . . . . . . $42,000 $45,000

Customer service hotline . . . . . . . . . . . . . . . . . . . . . . $19,500 $21,500

Plant utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,200 $21,200

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $71,000 $85,000

Budget Actual Direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,100 hours 6,100 hours

Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400 hours 6,400 hours

Depreciation on salespeople's autos . . . . . . . . . . . $22,000 $22,000

Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,000 $50,500

Depreciation on trucks used to deliver uniforms to customers . . . . . . . . . . . . . . . . . . . . . . . $13,500 $11,500

Depreciation on plant and equipment . . . . . . . . . . . $70,000 $71,500

Indirect manufacturing labor . . . . . . . . . . . . . . . . . . . . $42,000 $45,000

Customer service hotline . . . . . . . . . . . . . . . . . . . . . . $19,500 $21,500

Plant utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,200 $21,200

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $71,000 $85,000

4

Machine Replacement Decision

A company is considering replacing an old piece of machinery, which cost $597,400 and has $350,500 of accumulated depreciation to date, with a new machine that has a purchase price of $485,900. The old machine could be sold for $62,300. The annual variable production costs associated with the old machine are estimated to be $157,000 per year for eight years. The annual variable production costs for the new machine are estimated to be $101,300 per year for eight years.

a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.

b. What is the sunk cost in this situation?

The sunk cost is $.

6

Decision on Accepting Additional Business

Down Home Jeans Co. has an annual plant capacity of 64,700 units, and current production is 44,500 units. Monthly fixed costs are $40,600, and variable costs are $25 per unit. The present selling price is $36 per unit. On November 12 of the current year, the company received an offer from Fields Company for 13,100 units of the product at $26 each. Fields Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Down Home Jeans Co.

a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Fields order. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

b. Having unused capacity available is

to this decision. The differential revenue is

than the differential cost. Thus, accepting this additional business will result in a net

.

c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.

$

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:

1. The gross margin is 25% of sales.

2. Actual and budgeted sales data:

3. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.

4. Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.

5. One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.

6. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,500 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $972 per month (includes depreciation on new assets).

7. Equipment costing $1,700 will be purchased for cash in April.

8. Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required:

Using the preceding data:

1. Complete the schedule of expected cash collections.

2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases.

3. Complete the cash budget.

4. Prepare an absorption costing income statement for the quarter ended June 30.

5. Prepare a balance sheet as of June 30.

can you please explain to me what is the meaning of cost structure and profit stability? and the operating leverage? can you give an example to these two questions of mine? thank you.

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.

The following data appear in the company records for the current period:

Required:

Use the direct method to allocate these service department costs to the operating departments.

Jacob is a member of WCC (an LLC taxed as a partnership). Jacob was allocated $90,000 of business income from WCC for the year. Jacob’s marginal income tax rate is 37 percent. The business allocation is subject to 2.9 percent of self-employment tax and 0.9 percent additional Medicare tax. (Round your intermediate calculations to the nearest whole dollar amount.)

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek produced and sold 60,500 units of B300 at a price of $19 per unit and 12,600 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $55,000 and $103,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

AT Corp. opened for business on April 1st. Listed below are the transactions for AT Corp. for the month of April:

April 1 Issued common stock in exchange for $250,000 cash.
April 1 Purchased office equipment for $17,500 cash.
April 1 Borrowed $20,000 from Venn Bank and signed a 10% note. Interest and principal to be paid in 12 months.
April 5 Paid $4,000 rent in advance for the art gallery for the next two months.
April 10 Purchased art supplies from Tacky Art Co. on account for $12,200.
April 12 Received $5,300 from a customer who commissioned a piece of custom art to be completed by the end of the year.
April 15 Paid miscellaneous office expenses totaling $285 in cash.
April 17 Billed customers $3,400 for art classes provided in March.
April 19 Paid $3,600 to Tacky Art Co.
April 25 Received $2,200 from customers on account.
April 30 Recorded $3,800 in salaries for the month of April. Paychecks will be disbursed to employees on May 2nd.

3) Prepare a statement of cash flows. Prepare closing entries.

4) In a one-page memo, provide an explanation to the management team on April's financial performance.

Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below:

Required:

1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales.

2. The president believes that a $6,200 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $81,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income?

3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $33,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)?

4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by 0.50 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,300?

5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $58,000 each month.

a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.

b. Assume that the company expects to sell 20,200 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.)

c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,200)?

      Partner revenue$4,492,000 7,900hoursStaff revenue$4,315,000 33,000hours