Managerial Accounting

Answering the questions and compiling your answers into a word-processing document.
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 companys contribution margin ratio is 40 percent. If Rice Company desires a
profit of
$84,000, how much would sales have to total?

3.
Williams Companys 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 Companys cash and cash equivalents consist of cash and marketable securities.
Last year the companys 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 Corporations flexible budget cost formula for supplies, a variable
cost, is $2.82 per unit of output. The companys 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

7.
Atlantic Company produces a single product. For the most recent year, the companys 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 companys 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
companys 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 machinehours were actually worked during July, what is the budgeted maintenance cost per machinehour?

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 stores 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. Youve 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 Companys 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

$704,880

Processing orders
Inspection

Total Cost

44,000 machine-hours

$91,428

$117,546

Total Activity

1,900 orders

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 products 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 Companys 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 Companys 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

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?