Accounting 201

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1.The work-in-process inventory account of amanufacturing companyshowsabalanceof$3,000attheendofanaccounting period. The job-cost sheets of the twoincom-pletejobsshowchargesof$500and$300fordirectmaterials, and charges of $400 and $600 for directlabor. From this information, it appears that the companyisusing a predetermined overhead rate as a percentageofdirect labor costs. What percentage is therate?

2.The break-even point in dollar sales for Rice Companyis$480,000 and the company’s contribution marginratiois 40 percent. If Rice Company desires a profitof$84,000, how much would sales have tototal?

3.Williams Company’s direct labor cost is 25 percent ofitsconversion cost. If the manufacturing overhead forthelast period was $45,000 and the direct material costwas$25,000, how much is the direct laborcost?

4.Grading Company’s cash and cash equivalents consistofcash and marketable securities. Last year thecompany’scash account decreased by $16,000 and itsmarketablesecurities account increased by $22,000. Cashprovidedby operating activities was $24,000. Net cash usedforfinancing activities was $20,000. Based on thisinforma-tion, was the net cash flow from investing activitiesonthe statement of cash flows a net increase ordecrease?By howmuch?

5.GladstoneFootwearCorporation’sflexiblebudgetcostformula for supplies, a variable cost, is $2.82 per unitofoutput. The company’s flexible budget performancereportfor last month showed an $8,140 unfavorablespendingvariance for supplies. During that month, 21,250unitswere produced. Budgeted activity for the month had been 20,900 units. What is the actual cost per unitforindirectmaterials?

6.Lyons Company consists of two divisions, A and B.LyonsCompany reported a contribution margin of $60,000forDivision A, and had a contribution margin ratio of30percent in Division B, when sales in Division Bwere$240,000. Net operating income for the companywas$22,000 and traceable fixed expenses were $45,000.Howmuch were Lyons Company’s common fixedexpenses?

7.Atlantic Company produces a single product. For themostrecent year, the company’s net operating incomecomputed by the absorption costing method was $7,800, and itsnetoperating income computed by the variable costingmethod was $10,500. The company’s unit product cost was$15 under variable costing and $24 under absorptioncosting.If the ending inventory consisted of 1,460 units,howmany units must have been in the beginninginventory?

8.Black Company uses the weighted-average method initsprocess costing system. The company’s endingwork-in-process inventory consists of 6,000 units, 75percentcomplete with respect to materials and 50 percentcom-plete with respect to labor and overhead. If thetotaldollar value of the inventory is $80,000 and the costperequivalent unit for labor and overhead is $6.00, whatisthe cost per equivalent unit formaterials?

9.At Overland Company, maintenance cost is exclusivelya variable cost that varies directly with machine-hours.Theperformance report for July showed that actualmainte-nance costs totaled $11,315 and that the associatedratevariance was $146 unfavorable. If 7,300machine-hourswere actually worked during July, what is thebudgetedmaintenance cost permachine-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 expenseswere$420,000. If the store’s contribution margintotaled$590,000, how much were thesales?

11.Denny Corporation is considering replacing atechnologi-callyobsoletemachinewithanewstate-of-the-artnumerically controlled machine. The new machinewould cost$600,000andwouldhavea10-yearusefullife.Unfortunately, the new machine would have nosalvagevalue. The new machine would cost $20,000 per yeartooperate and maintain, but would save $125,000 peryearin labor and other costs. The old machine can be soldnow for scrap for $50,000. What percentage is thesimplerate of return on the new machine rounded to thenearesttenth of a percent? (Ignore income taxes in thisproblem.)

12.LounsberryInc.regularlyusesmaterialO55Pandcurrentlyhas in stock 375 liters of the material, for which itpaid$2,700 several weeks ago. If this were to be sold as isonthe open market as surplus material, it would fetch$6.35 perliter.Newstocksofthematerialcanbepurchasedontheopenmarketfor$7.20perliter,butitmustbepurchasedinlotsof1,000liters.You’vebeenaskedtodeterminetherelevantcostof900litersofthematerialto be used in a job for a customer. What is therelevantcost of the 900 liters of materialO55P?

13.Harwichport Company has a current ratio of 3.0andan acid-test ratio of 2.8. Current assets equal$210,000,ofwhich$5,000consistsofprepaidexpenses.Theremainder of current assets consists of cash,accountsreceivable, marketable securities, and inventory. Whatisthe amount of Harwichport Company’sinventory?

14.Tolla Company is estimating the following sales forthefirst six months of nextyear:

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 inthemonth of sale, 25 percent in the month following thesale,and the remaining 5 percent being uncollectible. Also,cus- tomers paying in the month of sale are given a 2percentdiscount. Based on this information, how muchcashshould Tolla expect to collect during the month ofApril?

15.Trauscht Corporation has provided the followingdatafrom its activity-based costingsystem:

Activity Cost Pool / TotalCost / TotalActivity
Assembly / $704,880 / 44,000machine-hours
Processingorders / $91,428 / 1,900orders
Inspection / $117,546 / 1,950inspection-hours

The company makes 360 units of product P23F ayear,requiring a total of 725 machine-hours, 85 orders, and45 inspection-hours per year. The product’s directmaterialscost is $42.30 per unit and its direct labor cost is$14.55per unit. The product sells for $132.10 per unit.Accordingto the activity-based costing system, what is theproductmargin for productP23F?

16.Williams Company’s direct labor cost is 30 percent ofitsconversion cost. If the manufacturing overhead forthelastperiodwas$59,500andthedirectmaterialscostwas $37,000, what is the direct laborcost?

17.In a recent period, 13,000 units were produced, andtherewas a favorable labor efficiency variance of$23,000.If 40,000 labor-hours were worked and thestandard wage rate was $13 per labor-hour, what would bethestandard hours allowed per unit ofoutput?

18.The balance in White Company’s work-in-processinven-tory account was $15,000 on August 1 and $18,000onAugust 31. The company incurred $30,000 in directlaborcost during August and requisitioned $25,000 inrawmaterials (all direct material). If the sum of the debitstothe manufacturing overhead account total $28,000 forthe month, and if the sum of the credits totaled $30,000,thenwas Finished Goods debited or credited? By howmuch?

19.A company has provided the followingdata:

Sales4,000units Salesprice$80 perunitVariablecost $50 perunitFixedcost $30,000

If the dollar contribution margin per unit is increased by 10 percent, total fixed cost is decreased by 15percent,and all other factors remain the same, will netoperatingincome increase or decrease? By howmuch?

20.For the current year, Paxman Companyincurred$175,000 in actual manufacturing overhead cost.Themanufacturing overhead account showed thatoverheadwasoverappliedintheamountof$9,000fortheyear.Ifthepredeterminedoverheadratewas$8.00perdirectlabor-hour,howmanyhourswereworked during theyear