Managerial Accounting Q1-20 1. The work-in-process inventory account of a manufacturing company shows a balance ..

Managerial Accounting

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 w