Managerial Accounting 20 Problems

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 incom- plete 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 informa- tion,
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-in- process
inventory consists of 6,000 units, 75 percent complete with respect to
materials and 50 percent com- plete 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 mainte- nance 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 technologi- cally 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, cus- tomers 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 inven- tory 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?