# Problem 1 Using the following information find the unknown amounts. Assume each set of information is an independent case. a. Merchandise Inventory Purchases \$210,000 Cost of goods sold 223,000 Beginning balance 41,000 Ending balance ? b. Direct Materials Beginning balance \$ 7,000 Ending balance 14,000 Purchases 48,000 Direct materials used ? c. Work-in-process Inventory Ending balance \$ 22,000 Cost of goods manufactured 21,000 Beginning balance 8,000 Current manufacturing costs ? d. Finished Goods Inventory Cost of goods manufactured \$62,000 Ending balance 20,000 Cost of goods sold 61,000 Beginning balance ? Problem 2 Sprint Manufacturing Company produces two products, X and Y. The following information is presented for both products: X Y Selling price per unit \$30 \$20 Variable cost per unit 20 5 Total fixed costs are \$292,500. Required: a. Calculate the contribution margin for each product. b. Calculate breakeven point in units of both X and Y if the sales mix is 3 units of X for every unit of Y. c. Calculate breakeven volume in total dollars if the sales mix is 2 units of X for every 3 units of Y. Problem 3 Rachel’s Pet Supply Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity and cost information has been compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Standard 3 30 650 Deluxe 7 50 150 Overhead costs \$40,000 \$120,000 Assume a traditional costing system applies the \$160,000 of overhead costs based on direct labor hours. a. What is the total amount of overhead costs assigned to the standard model? b. What is the total amount of overhead costs assigned to the deluxe model? Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead. c. What is the total amount of overhead costs assigned to the standard model? d. What is the total amount of overhead costs assigned to the deluxe model? Problem 4 Clothes, Inc., has an average annual demand for red, medium polo shirts of 25,000 units. The cost of placing an order is \$80 and the cost of carrying one unit in inventory for one year is \$25. Required: a. Use the economic-order-quantity model to determine the optimal order size. b. Determine the reorder point assuming a lead time of 10 days and a work year of 250 days. c. Determine the safety stock required to prevent stockouts assuming the maximum lead time is 20 days and the maximum daily demand is 125 units. Problem 5 The following data are available for Ruggles Company for the year ended September 30, 2011. Sales: 24,000 units at \$50 each Expected and actual production: 30,000 units Manufacturing costs incurred: Variable: \$525,000 Fixed: \$372,000 Nonmanufacturing costs incurred: Variable: \$144,800 Fixed: \$77,400 Beginning inventories: none Required: a. Determine operating income using the variable-costing approach. b. Determine operating income using the absorption-costing approach. Problem 6 Jerry’s TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2011 operations. Sales (1,000 televisions) \$ 900,000 Cost of goods sold 400,000 Store manager’s salary per year 70,000 Operating costs per year 157,000 Advertising and promotion per year 15,000 Commissions (4% of sales) 36,000 Part 1. What was the variable cost per unit sold for 2011? A) \$36 B) \$436 C) \$678 D) \$400 Part 2What were total fixed costs for 2011? A) \$678,000 B) \$436,000 C) \$242,000 D) \$227,000 Part 3 What are the estimated total costs if Penny’s expects to sell 3,000 units next year? A) \$1,550,000 B) \$1,332,000 C) \$1,671,000 D) \$1,453,000 Part 4Which cost estimation method is being used by Jerry’s TV and Appliance Store? A) the industrial engineering method B) the conference method C) the account analysis method D) the quantitative analysis method

Problem 1

Using the following information find the unknown amounts. Assume each set of information is an independent case.

a. Merchandise Inventory Purchases \$210,000

Cost of goods sold 223,000

Beginning balance 41,000

Ending balance ?

b. Direct Materials Beginning balance \$ 7,000

Ending balance 14,000

Purchases 48,000

Direct materials used ?

c. Work-in-process Inventory Ending balance \$ 22,000

Cost of goods manufactured 21,000

Beginning balance 8,000

Current manufacturing costs ?

d. Finished Goods Inventory Cost of goods manufactured \$62,000

Ending balance 20,000

Cost of goods sold 61,000

Beginning balance ?

Problem 2

Sprint Manufacturing Company produces two products, X and Y. The following information is presented for both products:

X Y

Selling price per unit \$30 \$20

Variable cost per unit 20 5

Total fixed costs are \$292,500.

Required:

a. Calculate the contribution margin for each product.

b. Calculate breakeven point in units of both X and Y if the sales mix is 3 units of X for every unit of Y.

c. Calculate breakeven volume in total dollars if the sales mix is 2 units of X for every 3 units of Y.

Problem 3

Rachel’s Pet Supply Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity and cost information has been compiled:

Number of Number of Number of

Product Setups Components Direct Labor Hours

Standard 3 30 650

Deluxe 7 50 150

Assume a traditional costing system applies the \$160,000 of overhead costs based on direct labor hours.

a. What is the total amount of overhead costs assigned to the standard model?

b. What is the total amount of overhead costs assigned to the deluxe model?

Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.

c. What is the total amount of overhead costs assigned to the standard model?

d. What is the total amount of overhead costs assigned to the deluxe model?

Problem 4

Clothes, Inc., has an average annual demand for red, medium polo shirts of 25,000 units. The cost of placing an order is \$80 and the cost of carrying one unit in inventory for one year is \$25.

Required:

a. Use the economic-order-quantity model to determine the optimal order size.

b. Determine the reorder point assuming a lead time of 10 days and a work year of 250 days.

c. Determine the safety stock required to prevent stockouts assuming the maximum lead time is 20 days and the maximum daily demand is 125 units.

Problem 5

The following data are available for Ruggles Company for the year ended September 30, 2011.

Sales: 24,000 units at \$50 each

Expected and actual production: 30,000 units

Manufacturing costs incurred:

Variable: \$525,000

Fixed: \$372,000

Nonmanufacturing costs incurred:

Variable: \$144,800

Fixed: \$77,400

Beginning inventories: none

Required:

a. Determine operating income using the variable-costing approach.

b. Determine operating income using the absorption-costing approach.

Problem 6

Jerry’s TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2011 operations.

Sales (1,000 televisions) \$ 900,000

Cost of goods sold 400,000

Store manager’s salary per year 70,000

Operating costs per year 157,000

Advertising and promotion per year 15,000

Commissions (4% of sales) 36,000

Part 1. What was the variable cost per unit sold for 2011?

A) \$36

B) \$436

C) \$678

D) \$400

Part 2What were total fixed costs for 2011?

A) \$678,000

B) \$436,000

C) \$242,000

D) \$227,000

Part 3 What are the estimated total costs if Penny’s expects to sell 3,000 units next year?

A) \$1,550,000

B) \$1,332,000

C) \$1,671,000

D) \$1,453,000

Part 4Which cost estimation method is being used by Jerry’s TV and Appliance Store?

A) the industrial engineering method

B) the conference method

C) the account analysis method

D) the quantitative analysis method