All work must be shown to receive any credit
Question 26: Learned Corporation recorded the following transactions for the just completed
$80,000 in raw materials were purchased on account.
$71,000 in raw materials was requisitioned for use in production. Of this
amount, $62,000 was for direct materials and the remainder was for indirect
Total labor wages of $112,000 were incurred. Of this amount, $101,000 was
for direct labor and the remainder was for indirect labor.
Additional manufacturing overhead costs of $175,000 were incurred.
Record the above transactions in journal entries.
Question 27: Midwest Industrial Products Corporation makes two products, Product H and
Product L. Product H is expected to sell 50,000 units next year and Product L is
expected to sell 10,000 units. A unit of either product requires 0.2 direct labor
The companys total manufacturing overhead for the years is expected to be
1.Â The company currently applies manufacturing overhead to products using
direct labor-hours as the allocation base. If this is followed, how much
overhead cost would be applied to each product? Compute both the
overhead cost per unit and the total amount of overhead cost that would be
applied to each product. (In other words, how much overhead cost is appliedÂ to a unit of Product H? Product L? How much overhead cost is applied inÂ total to all the units of Product H? Product L?)
be divided in half between the two products, with $960,000 assigned toÂ Product H and $960,000 assigned to Product L.Â If this is followed, how much overhead cost per unit would be applied toÂ each product?
3.Â Explain the impact on unit product costs of the switch in costing systems.
Question 28: Data concerning a recent periods activity in the Prep Department, the firstÂ processing department in a company that uses processing costs, appear below.
Equivalent units of production in ending work in
Cost per equivalent unit
A total of 20,100 units were completed and transferred to the next processing
department during the period.
Compute the cost of the units transferred to the next department during the period
and the cost of the ending work in process inventory.
Question 29: Harris Company manufactures and sells a single product. A partially completed
schedule of the companys total and per unit costs over the relevant range of
30,000 to 50,000 units produced and sold annually is given below:
Fixed costs 300,000
Units Produced and Sold
Total cost per unit ?
Cost per unit:
1.Complete the schedule of the companys total and unit costs above.
2.Assume that the company produces and sells 45,000 units during the year at
a selling price of $16 per unit. Prepare a contribution format Income
Statement for the year.
Question 30: Whirly Corporations most recent Income Statement is shown below:
Sales (10,000 units)
Net Operating income
Prepare a new contribution format Income Statement under each of the following
conditions (consider each case independently):
1.The sales volume increases by 100 units.
2.The sales volume decreases by 100 units.
3.The sales volume is 9,000 units.
Question 31: Silver Company makes a product that is very popular as a Mothers Day gift.
Thus, peak sales occur in May of each year, as shown in the companys sales
budget for the second quarter given below:
Budgeted sales (all on account)
From past experience, the company has learned that 20% of a months sales are
collected in the month of the sale, another 70% are collected in the month
following the sale, and the remaining 10% are collected in the second month
following the sale. Bad debts are negligible and can be ignored. February sales
totaled $230,000, and March sales totaled $260,000.
1.Prepare a schedule of expected cash collections from sales, by month and in
total for the second quarter.
2.Assume that the company will prepare a budgeted balance sheet as of June
30. Compute the accounts receivable as of that date.
Question 32: Puget Sound Divers is a company that provides diving services such as
underwater ship repairs to clients in the Puget Sound area. The companys
planning budget for May appears below:
Puget Sound Divers
For the Month Ended May 31
Budgeted diving-hours (q)
Wages and salaries ($8,000 + 125.00q)..
Equipment rental ($1,800 + $32.00q).
Miscellaneous ($630 + $1.80q)..
Net operating income.
During May, the companys activity was actually 105 diving-hours. Prepare a
flexible budget for that level of activity.
Question 33: Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the
Blue Glacier. Management has identified two cost drivers the number of cruises
and the number of passengers that it uses in its budgeting and performance
reports. The company publishes a schedule of day cruises that it may supplement
with special sailings if there is sufficient demand. Up to 80 passengers can be
accommodated on the tour boat. Data concerning the companys cost formulas
Vessel operating costs..
For example, vessel operating costs should be $5,200 per month plus $480 per
cruise plus $2 per passenger. The companys sales should average $25 per
passenger. The companys planning budget for July is based on 24 cruises and
Prepare the companys planning budget for July.
Question 34: Provide the missing data in the following table for a distributor of martial arts
Net operating income.$?
Average operating assets
Return on investment (ROI)… ?
Question 35: Commercial Services.com Corporation provides business-to-business services on
the Internet. Data concerning the most recent year appear below:
Net operating income
Average operating assets..
Consider each question below independently. Carry out all computations to two
1.Â Compute the companys return on investment (ROI).
2.Â The entrepreneur who founded the company is convinced that sales will
increase next year by 50% and that net operating income will increase by
200%, with no increase in average operating assets. What would be the
3.Â The chief financial officer of the company believes a more realistic scenario
would be a $1,000,000 increase in sales, requiring a $250,000 increase in
average operating assets, with a resulting $200,000 increase in net operating
income. What would be the companys ROI?
Question 36: Delta Company produces a single product. The cost of producing and selling a
single unit of this product at the companys normal activity level of 60,000 units
per year is:
Variable manufacturing overhead
Fixed manufacturing overhead.
Variable selling and administrative expense
Fixed selling and administrative expense.
The normal selling price is $21 per unit. The companys capacity is 75,000 units
per year. An order has been received from a mail-order house for 15,000 units at a
special price of $14.00 per unit. This order would not affect regular sales.
If the order is accepted, by how much will annual profits be increased or
decreased? (The order will not change the companys total fixed costs.)
Question 37: Bed & Bath, a retailing company has two departments, Hardware and Linens.
The companys most recent monthly contribution format Income Statement
Net operating income (loss)..
A study indicates that $340,000 of the fixed expenses being charged to Linens are
sunk costs or allocated costs that will continue even if the Linens Department is
dropped. In addition, the elimination of the Linens Department will result in a
10% decrease in the sales of the Hardware Department.
If the Linens Department is dropped, what will be the effect on the net operating
income of the company as a whole?
Question 38: Information on four investment proposals is given below:
Present value of cash inflows…..
Net present value…………………..
Life of the project………………….
Compute the project profitability index for each investment proposal.
2. Â Rank the proposals in terms of preference.
Question 39: Comparative financial statement data for Carmono Company follow:
Plant and equipment.
Less accumulated depreciation.
Total Liabilities and stockholders equity
For 2009, the company reported net income as follows:
Cost of goods sold.
Selling and administrative expenses.
Dividends of $14 were declared and paid during 2009.
Using the indirect method, prepare a statement of cash flows for 2009.
Question 40: The financial statements for Castile Products, Inc. are given below:
Castile Products, Inc.
Accounts receivable, net..
Total current assets..
Property and equipment, net
Liabilities and Stockholders Equity
Bonds payable, 10%………………………………..
Common stock $5 par value..
Total stockholders equity
Total liabilities and equity
For the Year Ended December 31
Cost of goods sold..
Selling and administrative expenses.
Net operating income
Net income before taxes.
Income taxes (30%)…
Account balances at the beginning of the year were: accounts receivable $25,000,
inventory $60,000. All sales were on account.
Compute financial ratios as follows:
1.Â Gross margin percentage
2.Â Current ratio
3.Â Acid-test ratio
4.Â Debt-to-equity ratio
5.Â Average collection period
6.Â Average sale period
7.Â Times interest earned ratio
8.Â Book value per share