Handy Handouts: THE ANSWERS Tenth Edition.

Handy Handouts: THE ANSWERS Tenth Edition

WEIGHTED AVERAGE METHOD
Abiqua Acres

Abiqua Acres (p. 2) FIFO METHOD E.U. WIP Units DM CC DM 100% CC 40%
50% BI IN EI 5,000 60,000 8,000 57,000 Out BI: (DM) 5,000× 0% BI: (CC) 5,000×60% Start & Finish EI: (DM) 8,000×100% EI: (CC) 8,000× 50% E.U. - 0 - 52,000 8,000 60,000 3,000 52,000 4,000 59,000 WIP - $ (FIFO) Costs to Account For Out BI DM $20,000 CC $16,000 DM $250,000 CC $450,000 DM $33,333.60 CC 30,508.40 $63,842.00 DM CC Total $ 36, from BI 22, Finished CC 5,000×60%×$7.6271 613, S&F 52,000 × $ $672,158.90 BI $ per EU $20,000 DM ÷ (5,000×100%) $16,000 CC ÷ (5,000× 40%) $4.00 $8.00 $12.00 IN IN $ per EU EI = 8,000 × 100% × $4.1667 = 8,000 × 50% × $7.6271 $250,000 DM ÷ 60,000 E.U. $450,000 CC ÷ 59,000 E.U. $4.1667 $7.6271 $ $736,000 Costs to Account For (Info we need to do problem)

Abtex Electronics 1.   SP VC CM Mix Wtd. Avg. Tape Recorders $15.00
$8.00 $7.00 1/3 $2.33 Electronic Calculators $22.50 $9.50 $13.00 2/3 $8.67 $11.00 FC $280,000+ $1,040,000 BE(units) = = = 120,000 units CM per unit $11.00   40,000 Tape Recorders 80,000 Electronic Calculators

Abtex Electronics (cont.)
2. Tape Recorders Electronic Calculators DM $4.00 × 90% = DL $2.00 × 110% = VOH Total VC per unit $3.60 2.20 2.00 $7.80 DM $4.50 × 80% = DL $3.00 × 110% = VOH Total VC per unit $3.60 3.30 2.00 $8.90 Total Fixed Costs: $ 280,000 1,040,000 57,000 $1,377,000 I made up a big number for “revenue”, likely to be divisible by both $15.00 and $20.00, the 1998 selling prices Sales Mix Calculation: $750,000 Estimated 1998 mix of revenue 20% 80% $150,000 Rev. SP $15 per unit 10,000 recorders $600,000 Rev. SP $20 per unit 30,000 calculators SALES MIX IN UNITS

Abtex Electronics (cont.)
(Continued) 2. SP VC CM Mix Wtd. Avg. Tape Recorders $15.00 $7.80 $7.20 1/4 $1.800 Electronic Calculators $20.00 $8.90 $11.10 3/4 $8.325 $10.125 FC $1,377,000 = = 136,000 units BE(units) = CM per unit $10.125 27,200 Tape Recorders 108,800 Electronic Calculators

Adams Co. Has 80,000 lbs. of RM available No more can be purchased
Bicycle Frames $40/unit CM, requires 8 lbs. of RM Set of Golf Clubs $32/unit CM, requires 4 lbs. of RM ** Everything they make can be sold!! Bike Frames $40 / 8 lbs. = $5.00 per lb. CM Golf Clubs $32 / 4 lbs. = $8.00 per lb. CM 80,000 lbs. of RM available ÷ 4 lbs. per Set of Golf Clubs = 20,000 Sets of Golf Clubs produced to maximize CM ** What if they can only sell 8,000 Sets of Golf Clubs?? Make 8,000 Sets of Golf Clubs  32,000 lbs. Make 6,000 Bicycle Frames  48,000 lbs. (= 48,000 lbs. / 8 lbs. per unit) 80,000 lbs.

Alcatraz Artifacts 1. Wtd. Avg. CM Wtd. Avg. SP SP VC CM Mix
$11.00 $39.00 BE (units) = FC = $77, = units CM per unit $11 AL CAT RAZ 20% % % = $7000 $28,000 + $105, $140,000 = $273,000 “Al” “Cat” “Raz”

Alcatraz Artifacts (cont.)
WTD. AVG. SP VC CM MIX CM Al $20 $16 $4 .40 $1.60 Cat $50 $36 $ $5.60 Raz $40 $28 $ $2.40 $9.60 2. BE (units) = FC = $77, = units CM per units $9.60 Al Cat Raz 40% % % 3, ,604 $64, $160, $64,160 = $288,740 Increased BE point because more low profit “Al’s” were sold.

Andretti Company

Andretti Company (p. 2)

Apple Appliances You should reject the offer.
$10 Variable (relevant) cost to produce the timer assemblies ($5 + $4 + $1) $12 Cost to purchase the timer assemblies $ 2 Cheaper to make the timer assemblies

Arc Light & Sound #1 Raw Materials Work in Progress Finished Goods BI
$ 32,000 BI $ 20,000 BI $ 48,000 $144,000 $ 36,000 $700,000 COGM Purch $170,000 $144,000 $700,000 $720,000 EI $22,000 $200,000 EI $28,000 $350,000 Direct Labor COGS EI $ 14,000 $720,000 $4,000 $724,000 $200,000 $200,000 - 0 - MOH IDM $ 36,000 I/S IDL $ 82,000 $350,000 COGS $724,000 $1,000,000 Sales Util. $ 65,000 S&A Adver. $100,000 Fact. Ins. $ 18,000 S&A Salary $ 90,000 Fact. Depr. $153,000 S&A Insur. $ 2,000 $ 4,000 S&A Depr. $ 27,000 $ 4,000 $ 57,000 NI - 0 -

For the Year Ended March 31
Arc Light & Sound (p.2) #2 Arc Light & Sound Income Statement For the Year Ended March 31 Sales $1,000,000 Less cost of goods sold ($720,000 + $4,000) 724,000 Gross Margin $ 276,000 Less selling and administrative expenses: Salary expense $90,000 Advertising expense 100,000 Insurance expense 2,000 Depreciation expense 27,000 219,000 Net Operating Income $ 57,000

Archer Company

Astoria Company RM WIP FG BI Purch EI $ 9,000 $40,000 $11,000
$ 9,000 $40,000 $11,000 $32,300 (85%) $ 5,700 (15%) BI EI $ 20,000 32,300 45,000 64,200 $ 21,500 $ 32,000 140,000 $ 42,000 BI EI $ 130,000 COGS COGM $140,000 DL COGS $ 45,000 - 0 - $ 45,000 $ 130,000 $ 130,000 - 0 - MOH IDM Mfg Utilities Mfg Depr IDL Prepd Insur $ 5,700 19,100 27,000 10,000 2,400 64,200 I/S COGS Depr. Exp. Adv. Exp. Admin. Salaries Prepaid Ins. Misc. S&A $ 130,000 9,000 48,000 30,000 600 9500 $ 250,000 Sales $ 64,200 - 0 - $ 22,900 NI BT Inc. Tax $ 4,580 $ 18,320 NI AT (to R/E) $ 18,320 - 0 -

Astoria Co. (p. 2) Assets (aka: “Pete”)
CASH A/R Property, Plant & Equip $ 7,000 245,000 $34,820 Beg End $ 19,100 48,000 9,500 2,000 41,000 84,000 9,000 4,580 Util Advertsng Misc S&A Prepd Ins A/P W/P Purch PPE Inc Tax $ 18,000 250,000 $ 23,000 Beg End Beg End $ 290,000 9,000 $ 219,000 Purch of Equip Cash from Customers ((A/R)) (Sales) $ 245,000 (to Cash) Prepaid Insurance Accum. Depr. $ 4,000 2,000 $ 3,000 Beg End $ 3,000 $ 53,000 36,000 $ 89,000 Beg End (Depr. Exp.) Liabilities & Owners’ Equity (aka: “Re-Pete”) Accounts Payable Wages Payable $ 41,000 $ 38,000 40,000 $ 37,000 Beg End $ 45,000 10,000 30,000 $ 1,000 Beg. (implied) DL IDL Admin Salaries End OUT (from Cash) DM Purch (from Cash) $ 84,000 Capital Stock R/E $ 160,000 $ 160,000 Beg End $ 49,000 18,320 $ 67,320 Beg End (Net Income)

Cannon Beach Sand Company
Astoria Company (p. 3) Cannon Beach Sand Company Balance Sheet As of December 31, 2001 Assets Cash A/R Prepd Insur PPE Accum Depr RM WIP FG Total $ 34,820 23, ,000 219,000 (89,000) 11,000 21,500 42,000 $265,320 Liabilities & Owners’ Equity A/P W/P C/S R/E Total $ 37,000 1,000 160,000 67,320 $265,320

Astoria Company (p. 4) Calculation of Free Cash Flows
Statement of Cash Flows (Indirect Method) For the Year-Ended December 31, 2001 Operating Activities Net Income Depr. Exp ↑ A/R (use) ↓ Prepd Ins (source) ↑ DM (use) ↑ WIP (use) ↑ FG (use) ↓ A/P (use) ↑ W/P (source) Net Cash provided by Operating Activities Purch of Equipment Net Cash used by Investing Activities Net increase in cash Beg. Cash End Cash $ 18,320 + 36,000 - 5,000 + 1,000 - 2,000 - 1,500 - 10,000 - 1,000 + 1,000 $ 36,820 $ - 9,000 $ (9,000) $ 27,820 7,000 $ 34,820 Calculation of Free Cash Flows Cash from Operations Less: Capital Expenditures (net) Free Cash Flows $36,820 9,000 $27,820 Investing Activities

Audio Basics Corporation
ACTIVITY: “N” Number of production runs : $400,000 / 50 = $8000 per… “Q” Quality tests performed : $360,000 / 300 = $1200 per… “S” Shipping orders processed : $120,000 / 150 = $800 per… 1. ----- ABC Standard High Grade “N” “Q” “S” 40 × $8,000 = 180 × $1,200 = 100 × $ = $ 320,000 $ 216,000 $ ,000 $ 616,000 $ 250,000 $ 348,000 $1,214,000 “N” “Q” “S” 10 × $8,000 = 120 × $1,200 = 50 × $ = $ 80,000 $ 144,000 $ 40,000 $ 264,000 $ 228,000 $ 132,000 $ 624,000 $ 616,000 + 264,000 $ 880,000 a. MOH DM DL Total MFG MOH DM DL Total MFG ÷ 320,000 units ÷ 100,000 units b. $ per unit $6.24 per unit 2. ----- Allocated MOH Est. MOH Activity $880,000 $480,000 = $ per DL$ Standard High Grade MOH DM DL Total MFG $ 638,000 (= $348,000 × $ ) $ 250,000 $ 348,000 $1,214,000 MOH DM DL Total MFG $ 242,000 (= $132,000 × $ ) $ 228,000 $ 132,000 $ 602,000 ÷ 320,000 units ÷ 100,000 units $ per unit $6.02 per unit

Manufacturing Overhead
Axiom Products 1. Predetermined Overhead rate Estimated total manufacturing overhead cost Estimated total amount of the allocation base = $170,000 85,000 machine-hours = = $2.00 per machine-hour The amount of overhead cost applied to Work in Process for the year would be: 80,000 machine-hours × $2.00 per machine hour = $160,000. This amount is shown in entry (a) below: 2. Manufacturing Overhead Work in Process (Utilities) (Insurance) (Maintenance) (Indirect materials) (Indirect labor) (Depreciation) Balance $14,000 9,000 33,000 7,000 65,000 40,000 $ 8,000 (Direct materials) (Direct labor) (Overhead) (a) $530,000 85,000 160,000 $160,000 (a) $ 8,000 - 0 -

Axiom Products (p. 2) 3. Overhead is underapplied by $8,000 for the year, as shown in the Manufacturing Overhead account above. The entry to close out his balance to Cost of Goods Sold would be: Cost of Goods Sold………………………………... Manufacturing Overhead ……………………….. 8,000 4. When overhead is applied using a predetermined rate based on machine-hours, it is assumed that overhead cost is proportional to machine-hours. So when the actual level of activity turns out to be 80,000 machine-hours, the costing system assumes that the overhead will be 80,000 machine-hours × $2.00 per machine hour, or $160,000. This is a drop of $10,000 from the initial estimated total manufacturing overhead cost of $170,000. However, the actual total manufacturing overhead did not drop by this much. The actual total manufacturing overhead was $168,000—a drop of only $2,000 from the estimate. The manufacturing overhead did not decline by the full $10,000 because of the existence of fixed costs and/or because overhead spending was not under control.

The Baize Company MOH a. Estimated MOH $403,200 PDOR = = =
$19.20 per DLH Estimated Activity 21,000 DLH b. Applied MOH = Actual Activity × PDOR 20,000 DLH × $ = $384,000 MOH c. $378,000 $384,000 $6,000 Overapplied $6,000 to COGS - 0 -

Bags and More 1. Variable expenses (per unit) = Unit cost * (1-CMR)
$60 * (100% - 40%) Variable expenses (per unit) = $36 Contribution margin (per unit) = $60 - $36 = $24 2a. BE (units) = FC + NI CMU = $360,000 $24 15,000 units = FC + NI CMR = $360,000 0.40 BE ($) = $900,000 =

Bags and More (p.2) 2b. 2c. BE (units) = FC + NI CMU =
$360,000 + $90,000 $24 18,750 units = FC + NI CMR $360,000 + $90,000 0.40 = BE ($) = = $1,125,000 2c. BE (units) = FC + NI CMU $360,000 $27 13,334 units (rounded) = = FC + NI CMR BE ($) = $360,000 0.45 = = $800,000

Ballycanally Corporation
1. DM Price Qty AQ × AC 14,000 × $1.80 $25,200 AQ × SC 14,000 × $1.75 $24,500 SQ × SC × $1.75 (6300)(2) $700 U AQ × SC 13,250 × $1.75 $23,187.50 SQ × SC 12,600 × $1.75 $22,050 $ U Rate Efficiency 2. DL AQ × AC 4,100 × $9.05 $37,105 AQ × SC 4,100 × $9.00 $36,900 SQ × SC (2000)(2) × $9.00 $36,000 $205 U $900 U

Ballycanally Corp. (p. 2) 3. 4. Spending Efficiency VOH SQ × SC
AQ × AC 27,750 × $1.22 $33,855 SQ × SC (Applied) 28,000 × $1.20 $33,600 AQ × SC 27,750 × $1.20 $33,300 $555 U $300 F $255 U 4. FOH Spending Volume Actual $155,500 Budget $144,000 Applied (SQ × SC) 60,000 × $2.50 $150,000 $11,500 U $6,000 F $5,500 U

Barber Company

Barefoot Books 1 & 2 & 3 #1 #2 #3 Wtd. Avg. CMU Wtd. Avg. CMR SPU VCU
Mix Hardbacks $18.00 $12.00 $ /10 $ Paperbacks $ $ 2.40 $ /10 $ Magazines $ $ 2.00 $ /10 $ $ #1 FC $97, ,000 units (rounded) CM per unit $4.440 Fixed Costs: BE (units) = = = Rent Utilities Salaries Overhead Advertising Prof. Services Total $19,200 7,680 56,000 11,500 900 2,400 $97,680 HB PB Mag 70% % % 15, , ,200 = ,000 $277, $13, $7,040 = $297,440 HB PB Mag #2 #3

Barefoot Books (p.2) 4 NIAT (1- Tax Rate) $40,000 (1- .33) NIBT =
$59,701 BE ($) = FC + NIBT Weighted CMR $97,680 + $59,701 0.3106 BE ($) = BE ($) ≈ $506,700

Beale Street Blues, Inc. 1 2 4 3 DM Price Usage AQ × AC 25,000 × $2.60
$65,000 AQ × SC 25,000 × $2.50 $62,500 SQ × SC (7800 units)(3lbs) $2,500 U 1 AQ × SC 23,100 × $2.50 $57,750 SQ × SC 23,400 × $2.50 $58,500 DL $750 F 2 Rate Efficiency (7800 units)(5 hrs) AQ × AC 40,100 × $7.50 $300,750 AQ × AC 40,100 × $7.30 $292,730 SQ x SC 39,000 × $7.50 $292,500 $8020 F $8250 U 3 4 $230 U

Beale Street Blues (p. 2) 5 7 6 VOH Spending Efficiency Actual AQ × AC
$130,000 SQ × SC (7800)(5) 39,000 × $3.00 $117,000 AQ × SC 40,100 × $3.00 $120,300 $9,700 U $3,300U 5 FOH Spending Volume Applied SQ x SC (7800)(5) 39,000 × $4.00 $156,000 Actual AQ × AC $170,000 Budgeted BQ × SC 40,000 × $4.00 $160,000 $10,000 U $4,000 U 6 7

Bee-Cee’s Guitar Emp. (A)
JAN FEB MAR Total JAN Dec. Jan. Feb. Mar. $100,000×20% $ 60,000×80% $ 60,000×20% $ 80,000×80% $ 80,000×20% $ 90,000×80% $20,000 48,000 $68,000 FEB $12,000 64,000 $76,000 MAR $16,000 72,000 $88,000 $232,000

Bee-Cee’s Guitar Emp. (B)
JAN FEB MAR Total JAN Dec. Jan. Feb. Mar. $70,000×90% $42,000×10% $42,000×90% $56,000×10% $56,000×90% $63,000×10% $63,000 4,200 $67,200 FEB $37,800 5,600 $43,400 MAR $50,400 6,300 $56,700 $167,300

Bee-Go Company FG – Jan. FG – Feb. FG – Mar. FG – Apr. 16,500 15,650
1,650 1,650 16,450 1,600 1,600 16,250 1,850 15,600 16,500 16,000 18,500 (10%×16,500) (10%×16,000) (10%×18,500) Units Produced Jan. Feb. Mar. Total 15,650 16,450 16,250 48,350

Bee-Kill Chemical (A) RM – Q1 RM – Q2 RM – Q3 RM – Q4 RM – Q1 (2007)
45,000 189,400 50,400 50,400 177,600 60,000 60,000 186,800 46,800 46,800 166,800 57,600 57,600 (46,000×4 lbs.) (42,000×4 lbs.) (50,000×4 lbs.) (39,000×4 lbs.) (48,000×4 lbs.) 184,000 168,000 200,000 156,000 192,000 (30%×168,000) (30%×184,000) (30%×156,000) (30%×192,000) RM Purchased Q1 Q2 Q3 Q4 189,400 177,600 186,800 166,800 720,600 Total pounds of raw materials purchased × $4 Cost per pound of raw material $2,882,400 Total cost of raw materials purchased

Bee-Kill Chemical (B) 2006 Units DLH Quarter 1 Quarter 2 Quarter 3
46,000 42,000 50,000 48,000 × 2.5 DLH per unit = 115,000 105, ,000 97,500 442,500 Q1 Q2 Q3 Q4 DLH worked during 2006 × $20 DL cost per hour $8,850,000 Cost of DLH worked during 2006

Bee-Kill Chemical (C) Production Information Variable Costs
Fixed Costs per Quarter Quarter 1, 2006 Quarter 2 Quarter 3 Quarter 4 Total 46,000 42,000 50,000 39,000 177,000 Units Indirect material Indirect labor Utilities Total $2.25 1.50 1.00 $4.75 Per unit Supervisor salaries Factory depreciation Other Total $80,000 30,000 4,100 $114,100 1. Variable MOH by Qtr. Quarter 1, 2006 Quarter 2 Quarter 3 Quarter 4 Total $218,500 199,500 237,500 185,250 $840,750 ( = 46,000 units × $4.75) ( = 42,000 units × $4.75) ( = 50,000 units × $4.75) ( = 39,000 units × $4.75) 2. Total MOH for 2006 Variable costs Fixed costs Total mfg. overhead $ 840,750 456,400 $1,297,150 ( = $114,100 × 4 Qtrs.)

Bee-Safe Company 2004 2005 First quarter Second quarter Third quarter
Fourth quarter 21,000 26,000 25,000 30,000 × 130% = 27,300 33,800 32,500 39,000 132,600 Unit sales during 2005 × $40 Selling price per unit $5,304,000 Sales revenue during 2005

Belly Rub Productions BELLY RUB PRODUCTIONS Unit Product Cost Data
Years 2001 through 2004 Year Variable manufacturing costs: Direct materials………………………….. $ 6 $ 6 $ 7 $ 8 Direct labor……………………………… Variable MOH…………………………… Product cost using variable costing………… $11 $12 $14 $17 Add prorated fixed MOH cost……………… Product cost using absorption costing……… $16 $18 $21 $25 BELLY RUB MANUFACTURING Absorption Costing Income Statement For Years 2001 through 2004 Year Sales………………………………… $200,000 $243,000 $390,000 $350,000 Cost of goods sold………………… , , , ,000 Underapplied (overapplied) overhead (12,000) ,000 Gross margin……………………… , , , ,000 Variable selling and administrative , , , ,000 Fixed selling and administrative…… , , , ,000 Total operating expenses…………… , , , ,000 Net income………………………… $18, $35,000 $40,000 $ (8,000)

Belly Rub Productions (p. 2)
BELLY RUB MANUFACTURING Variable Costing Income Statement For Years 2001 through 2004 Year Sales ……………………………………….. $200,000 $243,000 $390,000 $350,000 Variable product cost …………………… , , , ,000 Manufacturing contribution margin ……… , , , ,000 Variable selling and administrative ……… , , , ,000 Contribution margin ……………….……… , , , ,000 Fixed manufacturing overhead …………… , , , ,000 Fixed selling and administrative…………… , , , ,000 Total fixed cost …………………………… , , , ,000 Net income ……………………………….. $ 8,000 $ 15,000 $ 56,000 $ 6,000 Belly Rub Productions Schedule of Product Costs with Absorption Costing Years 2001 through 2004 Belly Rub Productions Schedule of Product Costs using Variable Costing Years 2001 through 2004 Total Product Cost $128,000 $158,000 $258,000 $242,000 Total Product Cost $ 88,000 $106,000 $172,000 $164,000 Beginning Inventory - 0 - 2,000 $16 5,000 $18 2,000 $21 Current Year Production 8,000 $16 7,000 $18 8,000 $21 8,000 $25 Beginning Inventory - 0 - 2,000 $11 5,000 $12 2,000 $14 Current Year Production 8,000 $11 7,000 $12 8,000 $14 8,000 $17 Year 2001 2002 2003 2004 Year 2001 2002 2003 2004 + +

Belly Rub Productions (p. 3)
Schedule of Fixed Overhead Costs Included In Beginning and Ending Inventory Under Absorption Costing Year Units in beginning inventory … Applied fixed MOH per unit … Equals ………………………. Units in ending inventory …… Fixed MOH per unit …………. Causes absorption costing NI to be ………………………… - 0 - 2,000 $ $10,000 Higher 2,000 $ $10,000 5,000 $ $30,000 $20,000 Higher 5,000 $ $30,000 2,000 $ $14,000 $16,000 Lower 2,000 $ $14,000 - 0 - Lower

Benton Company Spend Eff. N/A VOH AQ × AC $25,150 SQ × SC AQ × SC
3,010 × $8 $24,080 SQ × SC (310) (9) × $8 $22,320 $1,070 U $1,760 U N/A Spend N/A Vol. FOH Budget BQ × SC 2,700 × $9 $24,300 Actual $23,800 Budget $24,300 Applied SQ × SC (310) (9) × $9.00 $25,110 $500 F N/A $810 F Spend Eff. Vol. TOTAL $48,950 $47,430 $570 U $1760 U $810 F $1520 U $20,769 / $6.90 = 3010 DLH 310 units actual x 9 hrs. = 2790 hrs. $63 / 9 hrs. = $7 / hr. = DL cost per hr. $45,900 $8 + $9 = 2,700 budgeted DL hrs.

B.G. Wip Company Weighted Average Method FIFO Method Step 1 WIP DM CC
100% % 100% /3 2,000 9,000 3,300 7,700 Weighted Average Method FIFO Method Step 2 Step 2 Wtd. Avg. Equivalent Units FIFO Equivalent Units DM CC 7,700 7,700 3,300 1,100 11,000 8,800 DM CC - 0 - 800 5,700 5,700 3,300 1,100 9,000 7,600 OUT EI × 100% 3300 × 1/3 E.U. BI ,000 × 0% 2,000 × 40% S&F EI × 100% 3300 × 1/3 E.U.

Big Dog Foods Price Quantity / Usage AQ × AC AQ × SC SQ × SC
Standard Allowed for Actual Output pounds Price Quantity / Usage AQ × AC AQ × SC SQ × SC 24,500 × $0.19 $4,655 24,500 × $0.20 $4,900 (30)(800) × $0.20 24,000 × $0.20 $4,800 $245 F $100 U $145 F DIRECT MATERIALS – Ground Brown Rice

Big Dog Foods (p. 2) Price Quantity / Usage AQ × AC AQ × SC SQ × SC
Standard Allowed for Actual Output pounds Price Quantity / Usage AQ × AC AQ × SC SQ × SC 5,900 × $0.41 $2,419 5,900 × $0.40 $2,360 (30)(200) × $0.40 6,000 × $0.40 $2,400 $59 U $40 F $19 U DIRECT MATERIALS – Chicken Meal

Big Dog Foods (p. 3) Rate Efficiency AQ × AC AQ × SC SQ × SC
Standard Allowed for Actual Output DLH Rate Efficiency AQ × AC AQ × SC SQ × SC 300 × $16.00 $4,800 300 × $15.00 $4,500 (30)(8) × $15.00 240 × $15.00 $3,600 $300 U $900 U $1,200 U DIRECT LABOR

Bob’s Beef Boy DM WIP FG Meat $54,000 Lettuce $6,750 Tomatoes $7,500
Meat $54,000 Lettuce $6,750 Tomatoes $7,500 Kaiser rolls $9,250 $77,500 66,400 66,350 $210,250 $210,250 COGM $210,250 $77,500 DL COGS $66,400 $66,400 $210,250 $210,250 MOH I/S Condiments $2,650 Paper $2,400 Utilities $22,500 Grill Depr $7,000 Rent $25,000 Cleaning $6,800 $66,350 $210,250 Servers $53,000 Mgr. $41,000 Depr. Signs $3,250 Adv $3,500 $311,000 $478,800 $167,800 $66,350

Billy’s Boat Bonanza, Inc.
Direct Labor Materials Manufacturing Overhead Marketing & Selling Admin. Cost 1. The wages of employees who build the sailboats. X 2. The cost of advertising in the local newspapers. 3. The cost of an aluminum mast installed in a sailboat. 4. The wages of the assembly shop’s supervisor. 5. Rent on the boathouse. (Prorated on the basis of space occupied.) 6. The wages of the company’s bookkeeper. 7. Sales commissions paid to the company’s salespeople. 8. Depreciation on power tools.

Bohr, Inc. The total costs of producing the product are as follows:
Costs Per Unit: Direct materials Direct labor Variable overhead Total $28 18 6 $52 (Cost per unit * Quantity) + Retooling costs = Total cost to produce ( $ * 2,000 ) $8, = $112,000 The total cost to purchase the units is $124,000. Since the purchase price is greater than the production price, Bohr Inc. should make the units. Since there is some urgency to the order Mr. Bohr may opt for the alternative which will allow him to deliver the product as quickly as possible. Quality, reliability, and capacity utilization are other considerations.

Bojangle Dance Shoes Absorption Costing Income Statement
For the Year Ended Dec. 31, 2002 Rev. $630,000 COGS: Prime (252,000) V.MOH (84,000) F.MOH (100,000) GM $194,000 S&A: V.Sell (54,000) F.Sell (45,000) F.Adm (90,000) NI $5,000 Variable Costing Income Statement For the Year Ended Dec. 31, 2002 Rev. $630,000 VC: Prime (252,000) V.MOH (84,000) V.Sell (54,000) CM $240,000 FC: F.MOH (100,000) F.Sell (45,000) F.Adm (90,000) NI $5,000

Bosna Corporation

Bowly Company Bowly Company Absorption Costing I/S
For the Y/E Dec. 31, 2005 Rev CoGS GM - S&A NI Bowly Company Variable Costing I/S For the Y/E Dec. 31, 2005 Rev VC CM - FC NI $100,000 (60,000) $ 40,000 (15,000) (10,000) $ 15,000 = 5,000 × $20 = 5,000 × $12 = 5,000 × $3 $100,000 (50,000) $ 50,000 (30,000) (10,000) $ 10,000 = 5,000 × $20 = 5,000 × $10 MOH S&A The difference in NI equals the change in FG Inventory times the fixed MOH per unit (1,000 × $5 = $5,000)

Brötchen Bakery DIRECT MATERIALS Price Usage DIRECT LABOR Rate
Standard Allowed for Actual Output Pounds Price Usage AQ × AC Qty purch = Qty used AQ × SC SQ × SC 30,000 × $2.20 $66,000 30,000 × $2.00 $60,000 (1,450)(20) × $2.00 $58,000 $6,000 U $2,000 U $8,000 U DIRECT LABOR DLH Rate Efficiency AQ × AC AQ × SC SQ × SC 8,000 × $18.90 $151,200 8,000 × $18.00 $144,000 (1,450)(5) × $18.00 $130,500 $7,200 U $13,500 U $20,700 U

Brötchen Bakery (p. 2) VARIABLE OVERHEAD Spending Efficiency
DLH Spending Efficiency AQ × AC AQ × SC SQ × SC $150,000 ÷ 100,000 DLH 8,000 × $1.375 $11,000 8,000 × $1.50 $12,000 (1,450)(5) × $1.50 $10,875 $1,000 F $1,125 U Standard Allowed for Actual Output SQ = $125 U $300,000 ÷ 100,000 DLH FIXED OVERHEAD DLH Spending Volume Actual Budgeted AQ × SC Applied SQ × SC 8,000 × $3.25 $26,000 8, × $3.00 $25,000 (1,450)(5) × $3.00 $21,750 $1,000 U $3,250 U 100,000 DLH ÷ 12 months $4,250 U

Buffalo Broilers PDOR = Est. MOH / Est. Activity
$500,000 / 100,000 DLH = $5.00 per DLH $500,000 / $800,000 = $0.625 per DL$ $500,000 / 80,000 MH = $6.25 per MH 1.

Buffalo Broilers (cont.)
MOH (DLH) Actual Applied $5.00 * 120,000 $576, = $600,000 $24,000 overapplied 2. MOH (DL$) Actual Applied .625 * $930,000 $576, = $581,250 $5250 overapplied MOH (MH) Actual Applied $6.25 * 90,000 $576, = $562,500 $13,500 underapplied 3. $576,000 / 120,000 DLH = $4.80 Actual MOH per Actual DLH

California Textbooks (A)
Relevant Benefit so better to MAKE than BUY

California Textbooks (B)
Best choice is to buy textbook covers and use facilities for other products

Candlelight Candles Co.
WEIGHTED AVERAGE METHOD E.U. WIP Units WIP - $ (Wtd. Avg.) DM 100% CC 40% 80% DM CC Out BI IN EI 25,000 510,000 12,000 523,000 BI DM $42,650 CC $17,152 DM $433,500 CC $339,690 DM $10,680 CC $ 6,432 $17,112 Out 523,000 9,600 532,600 523,000 * $1.56 = $815,880 OUT EI: (DM) * 100% EI: (CC) * 80% E.U. 523,000 12,000 535,000 IN Costs to Account For EI = * 100% * $0.89 = * 80% * $0.67 DM CC $42,650 $433,500 $476,150 $17,152 $339,690 $356,842 BI IN Total $/EU DM CC I have chosen to round to 2 decimal places $476,150 / 535,000 = $0.89 $356,842 / 532,600 = $0.67 $1.56

Candlelight Candles Co. (p. 2)
FIFO METHOD E.U. DM CC WIP Units DM 100% CC 40% 80% BI: (DM) 25,000× 0% BI: (CC) 25,000×60% Start & Finish EI: (DM) 10,000×100% EI: (CC) 10,000× 40% E.U. - 0 - 498,000 12,000 510,000 15,000 498,000 9,600 522,600 BI IN EI 25,000 510,000 12,000 523,000 Out WIP - $ (FIFO) Costs to Account For Out BI DM $ 42,650 CC $ 17,152 DM $433,500 CC $339,690 DM $10,200 CC $ 6,240 $16,440 DM CC Total $ 59,802 from BI 9,750 Finished CC 25,000×60%×$0.65 747,000 S&F 498,000 × $1.50 $816,552 BI $ per EU $42,650 DM ÷ (25,000×100%) $17,150 CC ÷ (25,000× 40%) $1.706 $1.715 $3.421 IN IN $ per EU EI = 12,000 × 100% × $0.85 = 10,000 × 80% × $0.65 $433,500 DM ÷ 510,000 E.U. $339,690 CC ÷ 522,600 E.U. $0.85 $0.65 $1.50 $773,190 Costs to Account For (Info we need to do problem)

Cannon Beach Sand Co. DM WIP FG BI Purch EI $ 30,000 $205,000 $20,000
$ 30,000 $205,000 $20,000 $ 80,000 215,000 350,000 289,000 $ 50,000 BI EI $ 110,000 884,000 $ 120,000 BI EI $215,000 $ 874,000 COGS $884,000 DL COGS $ 350,000 - 0 - $ 350,000 $ 874,000 $ 874,000 - 0 - MOH IDM Fact Mgr Sal Fact Ins Ptty Tax IDL Mach Rent Fact Util Fact Bldg Depr $ 15,000 35,000 14,000 6,000 90,000 40,000 65,000 24,000 $ 289,000 I/S COGS Sales Comm Admin Exp Delivery Exp Interest Exp Loss on Sale of Equip $ 874,000 150,000 300,000 100,000 17,500 3,000 $ 1,700,000 Sales $ 289,000 - 0 - $ 255,500 NI BT Inc. Tax $ 34,100 $ 221,400 NI AT (to R/E) $ 221,400 - 0 -

Short Term Investments
Cannon Beach (p. 2) Assets (aka: “Pete”) CASH A/R Factory Assets Accum. Depr. Beg End $ 37,000 1,707,220 40,000 $245,020 $ 350,000 35,000 90,000 150,000 17,500 34,100 743,400 119,200 DL Fact Mgr IDL Sales Comm Int Exp Tax Exp A/P Purch of Equip $ 127,220 1,700,000 $ 120,000 Beg End Beg End $720,000 119,200 $790,200 $49,000 $ 6,000 Beg End $ 264,000 24,000 $ 282,000 Purch of Equip (Depr. Exp.) Cash from Customers ((A/R)) (Sales on Acct.) $1,707,220 (to Cash) Sale of Equip Sale of Equip Short Term Investments $ 39,000 Beg End Liabilities & Owners’ Equity (aka: “Re-Pete”) Notes Payable A/P Beg End $ 350,000 $ 350,000 $ 38,500 205,000 15,000 14,000 6,000 40,000 65,000 300,000 100,000 $ 40,100 Beg. DM IDM Fact Ins Ppty Taxes Mach Rent Fact Util Admin Exp Delivery Exp End (to Cash) $ 743,400 Common Stock R/E Beg End $ 250,000 $ 250,000 Beg End $ 240,720 221,400 $ 462,120 (Net Income)

Cannon Beach Sand Company
Cannon Beach (p. 3) Cannon Beach Sand Company Balance Sheet As of December 31, 2005 Assets Cash A/R S/T Investmts Plant Assets Accum Depr DM WIP FG Total $ 245,020 120, ,000 790,200 (282,000) 20,000 50,000 120,000 $1,102,220 Liabilities & Owners’ Equity N/P A/P C/S R/E Total $ 350,000 40,100 250,000 462,120 $1,102,220

Cannon Beach (p. 4) Calculation of Free Cash Flows
Cannon Beach Sand Company Statement of Cash Flows (Indirect Method) For the Year-Ended December 31, 2005 Operating Activities Net Income Depr. Exp ↓ A/R (source) ↑ A/P (source) ↓ DM (source) ↓ WIP (source) ↑ FG (use) Loss on Equip Sale Net Cash provided by Operating Activities Sale of Equipment Purch of Equipment Net Cash used by Investing Activities Net increase in cash Beg. Cash End Cash $ 221,400 + 24,000 + 7,220 + 1,600 + 10,000 + 30,000 - 10,000 + 3,000 $ 287,220 $ 40,000 - 119,200 $ (79,200) $ 208,020 37,000 $ 245,020 Calculation of Free Cash Flows Cash from Operations Less: Capital Expenditures (net) Free Cash Flows $287,220 (79,200) $208,020 Investing Activities Not specifically requested by problem; already calculated CF using Direct Method.

Carwash Company (A) < $0   Present Year 1 Year 2 Year 3 Year 4
Year 1 Year 2 Year 3 Year 4 Year 5 Investment Savings Total PV Factor NPV Calc. $(100,000) $ 40,000 $(60,000) × $15,000 × $56,862 From PV of Annuity Table + = $(3,138) < $0  

Carwash Company (B) The higher the interest rate, the lower the Present Value Correct Answer: 12% YES, the investment should be made. Present Year 1 Year 2 Year 3 Year 4 Investment Savings Total PV Factor NPV Calc. $(15,403) × $4,000 × $3,571.60 $4,000 × $3,188.80 $5,000 × $3,559.00 $8,000 × $ ≈ $0 difference $15,403.40

Cass Company 1. 2. 3. 5. 6. DM $210,000 DL 140,000 Sales $500,000
VOH ,000 $380,000 2. Sales $500,000 Loss: COGS: DM $210,000 DL 140,000 VOH , FOH $50,000 ($430,000) GM $ 70,000 VS&A ( 20,000) FS & A ( 60,000) Profit $( 10,000) 3. Sales $500,000 Less: VC: DM $210,000 DL 140,000 VOH ,000 VS & A $20,000 (400,000) CM $100,000 5. BE ($) = FC BE ($) = $110, = $110,000 CM Ratio $100,000/$500, /5 = $550,000 6. Operating Leverage = CM/NI = $100,000/10,000 = 10

Cattle Company (1997) FG $45,000 $445,000 $408,000 $82,000 COGS
$445,000 $408,000 $82,000 COGS $408,000 $408,000 I/S $408,000 $566,000 $135,000 $23,000 Inventory Accounts Product Costs BI + In = EI + Out DM $96,000 $202, $190,000 $108,000 DL $130, $130,000 MOH $15,000 104,000 $119, $119, WIP $71,000 190,000 130, $445,000 119,000 $65,000 COGM COGS Purch ACOGS Rev. Period Costs Admin. NI

Cattle Company 1998 DM $108,000 $229,000 $235,000 $102,000 DL
$229,000 $235,000 $102,000 DL $170,000 $170,000 MOH $18,000 158,000 $176,000 $176,000 Inventory Accounts Product Costs BI + In = EI + Out FG $82,000 $562,000 $575,000 $69,000 COGS $575,000 $575,000 I/S $575,000 $812,000 $161,000 $76,000 WIP $65,000 235,000 170,000 $562,000 176,000 $84,000 COGM COGS Purch ACOGS Rev. Period Costs Admin. NI

Chain Saw Company 1. Y= a + bx b = hi-low $ hi-low Activity
986 – 486 b = $70.50 per testing hour $80,630 = a + $70.50 (986) $80,630 = a + $69,513 a = $11,117 Cost Formula y = $11,170 + $70.50x 2. y = $ $70.50 (800) y= $ $56,400 y= $67,517

Chain Saw Company (cont.)
Cost Function: y = $61.50 x + $17,431.74 when x = y = $66,631.74

Clair’s Toys 1. 2. NO 3. 4. NO Before After
CM Ratio = CM = % VC = 40% of sales Sales 1. $12,000 x .60 = $7,200 2. Sales $9,000 x .60 CM $5,400 FC (6,000) NI ($600) NO 3. BE ($) = FC = $3, = $5, = $5,000 CM Ratio 4. Before After Rev. $120,000 [12,000 x $10] x (VCU = $4) CM $72,000 FC ,000 NI $54,000 Rev. $144,000 [18,000 X $8] 72, (18,000 x $4 from “Before”) CM $72,000 FC (20,000) NI $52,000 NO

The Costume Company $800,000 ÷ $8.00 = 100,000 expected (budgeted) DLH
$800,000 ÷ $8.00 = 100,000 expected (budgeted) DLH … 4 DLH per unit FIXED OVERHEAD Spending Volume Actual FOH Budgeted FOH Applied FOH BQ × SP SQ × SP $802, $800, (25,250)(4) × $8 $808,000 $2,000 U $8,000 F $6,000 F Flexible Budget Variance = $2,000 U WHERE: BQ = Budgeted Qty. × Std. Allowed

Cowboy Boots Co. Price Quantity / Usage AQ × AC AQ × SC SQ × SC
Standard Allowed for Actual Output yards Price Quantity / Usage AQ × AC AQ × SC SQ × SC 10,000 × $8.00 $80,000 10,000 × $9.00 $90,000 $10,000 F 11,000 × $9.00 $99,000 (7,000)(1.5) × $9.00 10,500 × $9.00 $94,500 $4,500 U CAN’T! DIRECT MATERIALS DM Purchased ≠ DM Used

Cowboy Boots Co. (p.2) Rate Efficiency AQ × AC AQ × SC SQ × SC
Standard Allowed for Actual Output DLH Rate Efficiency AQ × AC AQ × SC SQ × SC 3,800 × $15.50 $58,900 3,800 × $15.00 $57,000 (7,000)(0.5) × $15.00 3,500 × $15.00 $52,500 $1,900 U $4,500 U $6,400 U DIRECT LABOR

Cox Company

The Cutters (A) Est. MOH 780,000,000 PDOR = = = 78,000 per DLH
Est. Activity 10,000 DLH 78,000 per DLH × 80 DLH = 6,240,000 pesos applied to The Hunter 78,000 per DLH × 400 DLH = 31,200,000 pesos applied to The Carver

Manufacturing Overhead Pool
The Cutters (B) Use these rates to assign overhead to The Hunter and to The Carver Manufacturing Overhead Pool Cost Driver Allocation Base Application Rate Pool 1: 75,000,000 pesos 750,000 Number of parts 75,000,000 ÷ 750,000 = 100 pesos per part Pool 2: 100,000,000 pesos 25 Number of production runs 100,000,000 ÷ 25 = 4,000,000 pesos per production run Pool 3: 350,000,000 pesos 2,000 Number of machine hours 350,000,000 ÷ 2,000 = 175,000 pesos per machine hour Pool 4: 100,000,000 pesos 25,000 Number of components tested 100,000,000 ÷ 25,000 = 4,000 pesos per component tested Pool 5: 155,000,000 pesos 10,000 Number of direct labor hours 155,000,000 ÷ 10,000 = 15,500 pesos per direct labor hour

The Cutters (B) (p. 2) THE HUNTER THE CARVER Allocation Rate
Pool 1: 100 pesos per part Pool 2: 4,000,000 pesos per production run Pool 3: 175,000 pesos per machine hour Pool 4: 4,000 pesos per component tested Pool 5: 15,500 pesos per direct labor hour Activity 15,000 units × 3 parts per unit 1 production run 16 machine hours 1,000 components tested 80 direct labor hours Cost (pesos) 4,500,000 4,000,000 2,800,000 1,240,000 16,540,000 1,203 (Rounded) Allocation Rate Pool 1: 100 pesos per part Pool 2: 4,000,000 pesos per production run Pool 3: 175,000 pesos per machine hour Pool 4: 4,000 pesos per component tested Pool 5: 15,500 pesos per direct labor hour Activity 100,000 units × 1 part per unit 1 production run 48 machine hours 100 components tested 400 direct labor hours Cost (pesos) 10,000,000 4,000,000 8,400,000 400,000 6,200,000 29,000,000 290 Total mfg. overhead for 15,000 Hunters Manufacturing overhead per cutter Total mfg. overhead for 100,000 Carvers Manufacturing overhead per cutter

The Cutters (B) (p. 3) PROFIT PER ACTIVITY-BASED COSTING
PROFIT PER JOB-ORDER COSTING The Cutters (A)

Cutting Edge Skis WEIGHTED AVERAGE METHOD E.U. WIP Units
WIP - $ (Wtd. Avg.) DM 50% 40% CC 30% 25% DM CC Out BI IN EI 200 5000 400 4800 BI DM $3000 CC $1,000 DM $74,000 CC 70,000 DM $2,483.84 CC $1,449.00 $3,932.84 Out 4800 100 4900 4800 * = $144,067.20 OUT EI: (DM) 400 * 40% EI: (CC) 400 * 25% E.U. 4800 160 4960 IN Costs to Account For EI = 400 * 40% * $15.524 = 400 * 25% * $14.490 DM CC $3,000 $74,000 $77,000 $1,000 $70,000 $71,000 BI IN Total $/EU Shaping and Milling Dept. November 1997 (Round to 3 decimal places) DM CC $77,000 / 4960 = $15.524 $71,000 / 4900 = $14.490 $30.014

Cutting Edge Skis (p. 2) FIFO METHOD E.U. DM CC WIP Units DM 50% 40%
30% 25% BI: (DM) 200 × 50% BI: (CC) 200 × 70% Start & Finish EI: (DM) 400 × 40% EI: (CC) × 25% E.U. 100 4,600 160 4,860 140 4,600 100 4,840 BI IN EI 200 5000 400 4800 Out WIP - $ (FIFO) Costs to Account For BI DM $3,000 CC $1,000 DM $74,000 CC $70,000 DM $2,436.16 CC $1,446.30 $3,882.46 $ 4, from BI 1, Finished DM 200×50%×$15.226 2, Finished CC 200×70%×$14.463 136, S&F 4,600 × $29.689 $144,116.82 Out DM CC Total BI $ per EU $3,000 DM ÷ (200×50%) $1,000 CC ÷ (200×30%) $30 $16.667 $46.667 IN IN $ per EU EI = 400 × 40% × $15.226 = 400 × 25% × $14.463 $74,000 DM ÷ 4,860 E.U. $70,000 CC ÷ 4,840 E.U. $15.226 $14.463 $29.689 $148,000 Costs to Account For (Info we need to do problem)

Deering Banjo Company 1. 2. WTD. WTD. AVG. AVG. SP VC CM MIX CM SP
Boston $1200 $700 $500 60% $300 $720 Deluxe $ $ % $1200 $2000 $1500 $2720 1. BE (units) = FC = $3,000, = ,000 units BE CM per unit $1500 60% Boston = Boston = Boston 40% Deluxe = Deluxe = Deluxe 2000 units total @ BE 2,000 units 2. BE ($) = FC = $3,000, = $3,000,000 CM Ratio $1500/$ = $5,440,000 BE($) -- OR --- 1200 x $1200 = $1,440,000 800 x $5000 = 4,000,000 $5,440,000

Duncan’s Avionics Product Period
1. The cost of the memory chips used in a radar set. X 2. Factory heating costs. 3. Factory equipment maintenance costs. 4. Training costs for new administrative employees. 5. The cost of the solder that is used in assembling the radar sets. 6. The travel costs of the company’s salespersons. 7. Wages and salaries of factory security personnel. 8. The cost of air-conditioning executive offices.

Duncan’s Avionics (p. 2) Product Period
9. Wages and salaries in the department that handles billing customers. X 10. Depreciation on the equipment in the fitness room used by factory workers. 11. Telephone expenses incurred by factory management. 12. The costs of shipping completed radar sets to customers. 13. The wages of the workers who assemble the radar sets. 14. The president’s salary. 15. Health insurance premiums for factory personnel.

Duo Company = Rate Eff 2. $4.00 $900,000 (SP) 1,500,000 × 150/1000
$ $900,000 (SP) 1,500,000 × 150/1000 = Q=DLH Rate Eff 1,200,000 x 150/1000 = $760,000 ÷ 190,000 180,000 AQ x SP AQ x AP 190,000 x $4.00 $760,000 190,000 × $4.00 $760,000 SQ x SP 180,000 X $4.00 $720,000 GIVEN $40,000 U $0 1. FC $150,000 VC $720,000 $870,000

Earl Corporation A B C Additional costs if processed further
Increase in sales value if processed further Differential benefit (cost) $28,000 40,000 $ 12,000 $20,000 20,000 $ 0 $12,000 20,000 $ 8,000 Earl Corporation is indifferent about the further processing for B since the net benefit is zero. There would be a positive benefit for further processing of A ($12,000) and C ($8,000).

East Meets West (A)

East Meets West (B)

East Meets West (C)

East Meets West (D)

East Meets West (E) Current BE ($) = FC + NI = $20,000 + $12,000 = $80,000 CMR 0.4 This seems better because EMW does not need earn as much revenue to achieve its target profit New BE ($) = FC + NI = $27,500 + $12,000 = $79,000 CMR 0.5 BUT! Current BE ($) = FC + NI = $20, = $50,000 CMR 0.4 New BE ($) = FC + NI = $27, = $55,000 CMR 0.5 Current MS Ratio = Actual Rev. – BE Rev. = $80,000 - $50,000 = Actual Rev. $80,000 New MS Ratio = Actual Rev. – BE Rev. = $79,000 - $55,000 = MORE RISKY Actual Rev. $79,000

Everything Incorporated
Job-Order Costing Process Costing Custom yacht builder x Golf course designer Potato chip manufacturer Business consultant Plywood manufacturer* Soft-drink bottler* Film studio Bridge construction company Manufacturer of fine custom jewelry Made-to-order garment factory Factory making one personal computer model Fertilizer factory * Some of the listed businesses might user either process costing or a job-order costing system, depending on how operations are carried out and how homogeneous the final product is. For example, a plywood manufacturer might use job-order costing if plywoods are constructed of different woods or come in markedly different sizes.

Fabulous Furniture Case 1 Case 2 Relevant Not Relevant
a. Sales revenue X b. Direct materials c. Direct labor d. Variable manufacturing overhead e. Book value-Model A3000 machine f. Disposal value-Model A3000 machine g. Depreciation-Model A3000 machine h. Market value-Model B3800 machine (cost) i. Fixed manufacturing overhead (general) j. Variable selling expense k. Fixed selling expense l. General administrative overhead

Fast Company VARIABLE-COSTING INCOME STATEMENTS 2002 2003 2004 Sales
Less variable expenses: Variable cost of goods sold a Variable selling and administrative b Contribution margin Less fixed expenses: Fixed overhead Fixed selling and administrative Net income $1,500,000 (900,000) (37,500) $ 562,500 (150,000) (50,000) $ 362,500 $1,000,000 (600,000) (25,000) $ 375,000 (150,000) (50,000) $ 175,000 $2,000,000 (1,200,000) (50,000) $ 750,000 (150,000) $ 550,000 a 2002: $6.00 × 150,000 = $ 900,000 2003: $6.00 × 100,000 = $ 600,000 2004: $6.00 × 200,000 = $1,200,000 b $0.25 per unit × Units sold $ $ $0.50 = $6.00

Fast Company (p. 2) ABSORPTION-COSTING INCOME STATEMENTS 2002 2003
2004 Sales Less cost of goods sold: Variable manufacturing expense a Fixed manufacturing expense b Gross margin Less selling and admin. expenses: Variable selling and admin.c Fixed selling and admin. Net income $1,500,000 (900,000) (150,000) $ 450,000 (37,500) (50,000) $ 362,500 $1,000,000 (600,000) (100,000) $ 300,000 (25,000) (50,000) $ 225,000 $2,000,000 (1,200,000) (200,000) $ 600,000 (50,000) $ 500,000 a 2002: $6.00 × 150,000 = $ 900,000 2003: $6.00 × 100,000 = $ 600,000 2004: $6.00 × 200,000 = $1,200,000 b 2002: $1.00 × 150,000 = $ 150,000 2003: $1.00 × 100,000 = $ 100,000 2004: $1.00 × 200,000 = $ 200,000 c $0.25 per unit × Units sold Est. FOH Normal volume $150,000 150,000 FOH per unit = = = $1.00 per unit $ $ $0.50 = $6.00

Fools Gold Jewelry Price Quantity / Usage AQ × AC AQ × SC SQ × SC
Standard Allowed for Actual Output ounces Price Quantity / Usage AQ × AC AQ × SC SQ × SC 663 × $300 $198,900 663 × $295 $195,585 (1,300)(0.5) × $295 650 × $295 $191,750 $3,315 U $3,835 U $7,150 U DIRECT MATERIALS

Foster’s Bar-B-Que Variable cost of each meal
Fixed costs per meal ($1,200/600) Cost per meal $2 $4 $4 is a reasonable cost basis for long term pricing and Foster is getting a $1.00 margin on each meal. However, in a special order situation the fixed costs are irrelevant, and Foster should be willing to accept a customer for any price above the variable cost of $2. Thus, the tour operator’s deals is a good one for Barry. As long as there is space for the additional meals, and since daily fixed costs are unaffected by the additional patrons, any price about $2.00 should be acceptable. Regular Patrons Bus Patrons Selling price for each meal Variable cost for each meal Margin per meal Number of patrons gained/(lost) Revenue gained (lost) $5 $2 $3 × (100) ($300) $3 $2 $1 × 200 $200 The idea of agreeing to serve 200 patrons on any given day presents a problem with limited capacity. In this case, 100 of the regular customers would have to look elsewhere for lunch on the days, at a loss of $3.00 per meal or a total of $300 per day. The additional new patrons at $3.00 each would bring in a contribution of only $1.00 per meal or a total of $200. It turns out the single bus load is a better deal.

Frodo Company There are two ways students can approach this problem. 
 Costs Keep Old Buy New Operating costs ($75,000) ($20,000) Depreciation (NOT RELEVANT) ($30,000) ($30,000) Resale of old $ 2,000 Purchase of new ($40,000) _______ _______ ($105,000) ($88,000) $17,000 savings!  Incremental Change in operating cost $11,000 × 5 years = $ 55,000 Resale of old machine $ 2,000 Cost of new machine ($40,000) (Cost) or Savings $ 17,000

Funk and Wagnall Relevant Irrelevant Opportunity Outlay Outlay Sunk
X (1.) X (2.) X (3.) X (4.) X (5.) X (6.) X (7.) X (8.) X X (9.) X (10.) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Gamers Inc. BASH GASH Selling price per unit Variable cost per unit
Contribution margin per unit Relative use of labor hours (GASH requries ½ as many as Bash) Contribution margin per labor hr. $200.00 164.00 $ ÷ $ $140.00 121.00 $ ÷ Since GASH requires ½ the labor time, and since labor capacity is a constraint, and since GASH’s relative contribution per labor hour is greater, as much production as possible should be devoted to GASH.

Gee-Whiz Shoes Rate Efficiency AQ × AC AQ × SC SQ × SC 9,500 × $18.20
Standard Allowed for Actual Output DLH Rate Efficiency AQ × AC AQ × SC SQ × SC 9,500 × $18.20 $172,900 9,500 × $18.00 $171,000 (20,000)(0.5) × $18.00 650 × $295 $180,000 $1,900 U $9,000 F $7,100 F DIRECT LABOR

Gilligan’s Boat Rentals
Replace Rebuild New boat Deduct current disposal price Rebuild of existing boat Margin $92,000 9,000 $ 83,000 $ $ 75,000 The difference is in favor of rebuilding. The $90,000 purchase cost is irrelevant.

Global, Inc. Cost Behavior Cost Variable Fixed
1. Small glass plates used for lab tests in a hospital. X 2. Straight-line depreciation of a building. 3. Top-management salaries. 4. Electrical costs of running machines 5. Advertising of products and services* 6. Batteries used in manufacturing trucks * This particular item may cause some debate. Hopefully, advertising results in more demand for products and services by customers. So advertising costs are correlated with the amount of products and services provided. However, note the direction of causality. Advertising causes an increase in the amount of goods and services provided, but an increase in the amount of goods and services demanded by customers does not necessarily result in a proportional increase in advertising costs. Hence, advertising costs are fixed in the classical sense that the total amount spent on advertising is not proportional to what the unit sales turn out to be.

Global, Inc. (p. 2) Cost Behavior Cost Variable Fixed
7. Commissions to salepersons X 8. Insurance on a dentist’s office 9. Leather used in manufacturing footballs 10. Rent on a medical center

Green Soda 1. BE (units) = FC + NI CMU = $316,600 $1.80 = 175,889
Act. Rev. = (SP)(Units Sold) FC + NI CMU BE ($) = = $316,600 0.40 = $791,500 AR = ($4.50)(200,000) AR = $900,000 MS ($) = Actual Revenue - BE Revenue MS ($) = $900, $791,500 MS ($) = $108,500 MS ($) = $108,500

Green Soda (p.2) 2. 3. NI = (SPU – VCU)(Units Sold) - FC
Operating leverage ratio * Increase in Sales = Increase in NI NI = ($ $2.70)(200,000) – 316,600 * % = % NI = $43,400 Proof using income statement approach: Sales ($4.50 * 200,000 units * 130%) $1,170,000 Var. Costs ($2.70 * 200,000 units * 130%) (702,000) CM $ 468,000 Fixed Costs (316,600) Net Income $ 151,400 (New NI – Old NI) ÷ Old NI = Increase in NI ($151,400 - $43,400) ÷ $43,400 = 249% CM = (SPU – VCU)(Units Sold) CM = ($ $2.70)(200,000) CM = $360,000 Operating leverage = CM/NI Operating leverage = $360,000 ÷ $43,400 =

Green Soda (p.3) 4. FC + NI CMU $316,600 + $41,200 $1.80 BE (units) =
198,778 FC + NI CMR $316,600 + $41,200 0.40 = $894,500 BE ($) = = Income Statement: Sales ($4.50 * 200,000 * 115%) VC ($2.70 * 200,000 * 115%) CM FC ($316,600 + $41,200) NI $1,035,000 (621,000) $ 414,000 (357,800) $ ,200 CM Operating leverage = NI $414,000 Operating leverage = = $56,200

Halo Products Company A. B. C. D. $200,000 32,000 Est. MOH
Est. Activity $6.25 PDOR = = = Applied MOH = PDOR * Actual Activity = $ * 36, = $227,500 MOH Actual $256,200 Applied $227,500 Underapplied $28,700 $7.04 $256,200 / 36,400 =

Hannibal Company WIP DM FG $6,520 150,000 100,000 76,978 $7,498
BI $23,400 Purch $160,000 $33,400 $40,000 326,000 57,050 308,950 150,000 326,000 DL COGS $100,000 $100,000 308,950 308,950 MOH IDL $20,000 Rent ,000 Depr ,000 Util ,978 76,978 I/S $308,950 Sales Sp;amoes $55,000 Sales Comm ,000 Admin ,000 $600,000 Sales Rev $137,050 NI 76,978

Hassett Company 1998 budget requires 20,000 handles for use in the production of pots. Costs to manufacture the handles is as follows: DM $.60 DL $.40 VOH $.10 FOH $.20 Total $1.30 R&M Steel Co. has offered to supply handles for $1.25 each. Should Hassett MAKE or BUY? MAKE! $1.10 < $1.25 DM, DL, VOH = relevant costs that change

The Hat Source FC + NI $150,000 + $0 1. BE(units) = = = 12,500 units
CM per unit $30 - $18 $150,000 +$0 FC + NI BE($) = = = $375,000 CM Ratio 40% $150,000 + $30,000 FC + NI 2. BE(units) = = = ,000 units CM per unit $30 - $18 $150,000 +$30,000 FC + NI BE($) = = = $450,000 CM Ratio 40%

Herd Company

Herman Company VOH Spending Efficiency N/A AQ x AP $131,000 SQ x SP
$57,500 AQ x SP 121,000 x $.50 $60,500 SQ x SP 115,000 x $.50 $3,000U FOH Spending N/A Volume Budgeted $110,000 Applied SQ x SP ($1) 115,000 Budgeted $110,000 Actual $5,000 F TOTAL Spending Efficiency Volume $178,500 $179,500 $172,500 $8000 U $3,000U $5,000 F

Holland Company

Holland Company (p. 2)

Holman Company 1. 2. Predetermined overhead rate
Estimated total manufacturing overhead cost Estimated total amount of the allocation base = $170,000 71,000 direct labor-hours = = $4.00 per direct labor-hour 2. Applied Overhead = Direct labor-hours × Predetermined overhead rate 75,000 DL hours × $4.00 = $300,000

Manufacturing Overhead
Holman Company (p. 2) 3. Manufacturing Overhead Utilities Depreciation Insurance Indirect labor Indirect material Salary $ 75,400 58,000 25,000 54,600 53,000 55,000 $300,000 Applied overhead from problem 2 Balance $21,000 $21,000 underapplied

Home Quality Products 1. Prevention Costs:
b. Seminar costs for “Vendor Day”. Appraisal Costs: c. Costs of conformance tests at Charlotte plant. e. Costs of inspection tests at the Raleigh packaging plant. Internal Failure Costs: a. Labor and materials costs of reworking a batch of steam-iron handles. External Failure Costs: d. Replacement cost of 1,000 steam-irons sold in the Pittsburgh are. The cost of customer ill-will created by the sale of defective products has two components: The volume of future lost sales, The contribution margin on lost sales. Customer surveys and interviews with distributors and retailers can provide a way to estimate (a); (b) can be estimated using internal accounting information. 2.

Houghton’s Limited 1. 2. 3. 4. BE (units) = FC = $30,000 = 2000 units
CM per unit $35-$20 BE ($) = FC = $30, = $70,000 CM ratio $35-$20 $35 1. 2. BE ($) = FC + NI = ($30,000 X 12) + $510, = $2,030,000 CM ratio $35-$20 $35 3. MS ($) = Actual Rev. – BE Rev. = $2,030,000 – ($70,000 x 12) = $2,030,000 - $840,000 = $1,190,000 MS Ratio = Actual Rev. – BE Rev. Actual Rev. = $2,030,000 - $840, = % $2,030,000 4. Operating Income = NIAT = $864, = $1,440,000 I – TR = BE (units) = FC + NI = $360,000 + $1,440, = ,000 units annually, CM per unit $35-$20 10,000 units monthly

The Hour Record Distance traveled is the ‘score,’ determining who wins and who doesn’t, and seems to be best considered a financial measure. Net income or cash flow if you will. This is a historical measure; at any point in time this measure only tells you what has occurred in the past. Bicycle speed is the predictive of what ‘score’ will be achieved. Measures that do this can be both financial (expected sales in dollars) and nonfinancial (expected sales in units). Heart Rate is a measure of current effort, such as the amount (in units or dollars) of materials, labor and/or overhead being used in production. In general, with heart rate and with materials usage, lower is better. Again, this is a historical measure but is predictive to the degree that heart rate this minute will be the same as heart rate the next minute. Human body efficiency decreases over time, so heart rate will increase over time, but business efficiency should increase over time, and the corresponding efficiency measures should improve. Can a target (or budgeted) distance be useful in this scenario? Or at least knowledge of the last record set? If after 30 minutes the rider is less than halfway toward the old record, someone should determine if the record can realistically be equaled or broken. If the record is unrealistic, the rider might as well cut his or her losses and save the energy for another task.

Howdy Company A – machine hours B – DL$ 1. 2. 3. 4.
$602,000 / 70,000 = $8.60 / hr $735,000 / $420,000 = 1.75% 1. 2. 3. 4. 110 * $8.60 = $946.00 $680 * 1.75 = $1,190.00 $946 + $1190 = $2,136 DM DL MOH 332 680 1190 $2,202 DM DL MOH $470 290 946 $1,706 $ $2202 = $3908 / 50 units = $78.16 MOH MOH $570,000 $11,000 underapplied (65,000 * $8.60) 559,000 $4,000 $750,000 $13,000 ($436,000 * 1.75) $763,000 $13,000 overapplied COGS COGS $13,000 $11,000

J.B. Goode Company 1. PDOR = Est. MOH = $135,000 = $13.50 per DLH
Est. Activity ,000 Standard [Applied MOH = Actual Activity × PDOR] 900 units × 10 DLH = 9000 DLH ×$13.50 $121,500 Applied MOH Custom [Applied MOH = Actual Activity × PDOR] 100 units × 10 DLH = 1000 DLH ×$13.50 $13,500 Applied MOH  This part of the calculation is a little unusual because we are using actual MOH in the calculation rather than estimated MOH

J.B. Goode Company (p. 2) STANDARD [Applied MOH = Actual Activity × PDOR] 2. Depr. Maint. Purch. Insp. IDM Super. Supplies 3,000 9,000 1,500 400 900 × $10.00 $ 1.50 $11.00 $12.00 $15.00 $28.00 $ 3.00 = $30,000 13,500 16,500 4,800 11,200 2,700 $92,200 Applied MOH ÷ 900 Guitars = $ each CUSTOM [Applied MOH = Actual Activity × PDOR] Depr. Maint. Purch. Insp. IDM Super. Supplies 1,000 500 600 100 × $10.00 $ 1.50 $11.00 $12.00 $15.00 $28.00 $ 3.00 = $10,000 1,500 5,500 7,200 16,800 300 $42,800 Applied MOH ÷ 100 Guitars = $428 each

J.B. Goode Company (p. 3) 3. Custom OLD WAY Custom NEW WAY DM
DL MOH TOTAL $375 $240 $135 $750 DM DL MOH TOTAL $ 375 $ 240 $ 428 $1,043 NO ... $1,000 Revenue does not cover the manufacturing expense The single biggest reason for the higher overhead cost is the supervision required for the custom guitars.

Joe Slow 1.__________ The cost of traveling the 250 miles to Finding Foodstore. 2.__________ The time he will spend on the road. 3.__________ The time he will spend visiting with Finding Foodstore executives. 4.__________ The amount of time already devoted to Finding Foodstore. 5.__________ The revenue potential from Finding Foodstore. 6.__________ The cost of his last visit to Finding Foodstore. 7.__________ The probability that his visit will result in new sales. 8.__________ The cost of lunch for himself if he visits Finding Foodstore. 9.__________ The cost of lunch he would buy for Finding Foodstore executives. R R R I R I R I R

The John Company WEIGHTED AVERAGE METHOD E.U. WIP Units DM CC DM 100%
60% 40% BI IN EI 5,000 40,000 10,000 35,000 Out OUT EI: (DM) 10,000 × 100% EI: (CC) 10,000 × 40% E.U. 35,000 10,000 45,000 35,000 4,000 39,000 Costs to Account For DM CC WIP - $ (Wtd. Avg.) $5,050 $44,000 $49,050 $3,270 $48,600 $51,870 BI IN Total Out BI DM $5,050 CC $3,270 DM $44,000 CC $48,600 DM $10,900 CC ,320 $16,220 35,000 × $2.42 = $84,700 $/EU IN DM CC $49,050 / 45,000 = $1.09 $51,870 / 39,000 = $1.33 EI = 10,000 × 100% × $1.09 = 10,000 × 40% × $1.33 $ 2.42

The John Company (p.2) FIFO METHOD E.U. WIP Units DM CC DM 100% CC 60%
40% BI IN EI 5,000 40,000 10,000 35,000 Out BI: (DM) 5,000× 0% BI: (CC) 5,000×40% Start & Finish EI: (DM) 10,000×100% EI: (CC) 10,000× 40% E.U. - 0 - 30,000 10,000 40,000 2,000 30,000 4,000 36,000 WIP - $ (FIFO) Costs per EU Out BI DM $5,050 CC $3,270 DM $44,000 CC $48,600 DM $11,000 CC ,400 $16,400 DM CC Total $ 8,320 from BI 2,700 Finished CC 5,000×40%×$1.35 73,500 S&F 30,000 × $2.45 $84,520 BI $ per EU $5,050 DM ÷ (5,000×100%) $3,270 CC ÷ (5,000× 60%) $1.01 $1.09 $2.10 IN IN $ per EU EI = 10,000 × 100% × $1.10 = 10,000 × 40% × $1.35 $44,000 DM ÷ 40,000 E.U. $48,600 CC ÷ 36,000 E.U. $1.10 $1.35 $2.45 $100,920 Costs to Account For (Info we need to do problem)

Johnson County Senior Services
1. No, the housekeeping program should not be discontinued. It is actually generating a positive program segment margin and is, of course, providing a valuable service to seniors. Computations to support this conclusion follow: Contribution margin lost if the housekeeping program is dropped Fixed costs that could be avoided: Liability insurance Program administrator’s salary Decrease in net operating income for the organization as a whole $15,000 37,000 $(80,000) 52,000 $(28,000) Depreciation on the van is a sunk cost and the van has no salvage value since it would be donated to another organization. The general administrative overhead is allocated and none of it would be avoided if the program were dropped; thus it is not relevant to the decision.

Johnson County Senior Svcs (p.2)
2. To give the administrator of the entire organization a clearer picture of the financial viability of each of the organization’s programs, the general administrative overhead should not be allocated. It is a common cost that should be deducted from the total program segment margin. Following the format introduced in Chapter 12 for a segmented income statement, a better income statement would be: Revenues Less variable expenses Contribution margin Less traceable fixed expenses: Depreciation Liability insurance Program administrators’ salaries Total traceable fixed expenses Program segment margins General admin overhead Net operating income (loss) $900,000 490,000 $410,000 $ 68,000 42,000 115,000 225,000 185,000 180,000 $ 5,000 $260,000 120,000 $140,000 $ 8,000 20,000 40,000 68,000 $72,000 $400,000 210,000 $190,000 $ 40,000 7,000 38,000 85,000 $105,000 $240,000 160,000 $ 80,000 $20,000 15,000 37,000 72,000 $ 8,000

Jolly Candies FC + NI $400 + $300 BE(units) = = = 700 units
CM per unit $1 FC + NI $400 + $0 2. BE(units) = = = 400 units 400 units × 120% = 480 units (volume 20% above breakeven volume) CM per unit $1 Rev (480 units × $4) - VC (480 units × $3) CM - FC NI $1,920 1,440 $ 480 400 $ NIAT $300 3. NIBT = = = $500 1- TR 1 – 40% FC + NI $400 + $500 BE(units) = = = 1,800 units CM per unit $ $3.50

Jude Law & Associates If the new system is purchased, what will occur?? $180,000 Labor cost savings on old system ($36,000 × 5 years) 10,000 Sale of old system (76,000) Cost of new system (90,000) Labor cost of new system ($18,000 × 5 years) 500 Higher residual value of new system $24,500 SAVINGS BY PURCHASING NEW SYSTEM

Judge Ely Jeans WIP $49,600 95,600 118,400 340,400 139,200 $62,400 DM
118, ,400 139,200 $62,400 DM $29,500 98, ,600 $32,300 DL $118,400 $118,400 MOH $ 7,200 44,800 4,800 $21,600 10,400 15,200 35,200 $139,200 $139,200 FG $37,600 340, ,000 $52,000 COGS $326,000 $326,000 I/S $326,000 $715,200 $7,200 $14,400 4,000 2,640 123,200 15,300 166,740 492,740 $222,460 COGM COGS ACOGS 40% * $36,000 = 60% * = S&A NI

Kaitlyn Korporation CASH Beg. Collections Borrow End $15,000 $90,000
$32,000 $12,000 $125,000 Disbursements

Kennedy Company

Landis Playhouses NIAT 1. NIBT = = 2.
After-tax equivalent of 20% increase: 1 – TR 20% ÷ (1 – .35) = 30.77% $495,014 NIBT = = Let TR = the level of revenue that generates a pretax return of 30.77% 1 – 35% NIBT = $761,560 TR = VC FC NI CM per unit = Selling Price – all variable costs TR = .6 TR + $280, TR .0923 TR = $280,420 TR = $3,038,137 CM per unit = $3,000 – $1,200 – $400 – $150 – $50 CM per unit = $1,200 (Rounded) FC + NI BE(units) = CM per unit $280,420 + $761,560 BE(units) = = units $1,200

Lands End Men’s Suits Price Qty/Usage AQ × AC AQ × SC SQ × SC
10,000 × $ ,000 × $6.00 $50, $60,000 $10,000 F AQ × SC SQ × SC (2700)(4) × $ (2700)(3.5) × $6.00 $64,800 $56,700 $8,100 U CAN’T! Actual Cost < Standard Cost = FAVORABLE Actual Quantity < Standard Quantity = FAVORABLE Standard Allowed for Actual Output (in units)

Mango Motors Absorption Costing Income Statement
For the Year Ended Dec. 31, 1996 Rev. $810,000 COGS (540,000) (60,000) GM $210,000 S&A (67,500) (50,000) NI $92,500 Variable Costing Income Statement For the year Ended Dec. 31, 1996 Rev. $810,000 VC (540,000) (67,500) CM $202,500 FC (60,000) (50,000) NI $92,500

Marie Manufacturing Company
DM WIP FG BI $ 84,000 $844,000 $820,000 $765,000 $ 124,000 $2,420,000 BI (a.) (d.) BI $ 42,000 Purch. $850,000 EI $ 48,000 $844,000 $2,411,000 $2,420,000 EI $ 133,000 COGS EI $93,000 $2,411,000 $2,370,800 $ 40,200 DL (e.) $820,000 $820,000 $2,370,800 I/S MOH $2,370,800 $ 4,000 $ 3,000 $120,000 $ 22,200 $3,335,000 Sales IDM Supplies Fact Depr Security Equip Dep $ 4,000 $ 6,200 $ 60,000 $ 12,000 $ 82,600 $560,000 Office Depr. Adm. Depr. Sales Sal. Applied MOH = Actual Activity × PDOR 51,000 DLH × $15 = $765,000 (b.) $2,520,000 $724,800 $765,000 $815,000 (f.) $40,200 OverappliedMOH $40,200 (c.) $750,000 Estimated MOH PDOR = = = $15 per DLH Estimated Activity 50,000 DLH

Marshall Props Unlimited
1. & 2. DM WIP FG BI Purch EI $25,000 80,000 $15,000 85,000 5,000 BI EI $30,000 85,000 120,000 96,000 $21,000 $45,000 310,000 $55,000 BI EI $300,000 COGS COGM 310,000 DL $120,000 COGS $120,000 $300,000 $297,000 3,000 $297,000 Adj. COGS MOH - 0 - IDM IDL Util. Depr Insurance Other 5,000 30,000 12,000 25,000 4,000 17,000 $93,000 I/S COGS S&A Salaries Depr Insurance Shipping $297,000 75,000 5,000 800 40,000 $450,000 $32,200 Sales Est.OH $120,000 * .8 = $96,000 $ 3,000 PDOR = Est Activity $80,000 = overapplied $100,000 DL cost NI $ 3,000 = 80% of DL 2.

Marshall Props Unlimited (p. 2)
Schedule of Cost of Goods Manufactured For the Year Ended December 31, 2006 3. Raw material: Raw materials inventory, 1-1 Add: Purchases of raw materials Total materials available Deduct: Raw materials inventory, 12-31 Raw materials used in production Less: Indirect Materials Direct Labor Manufacturing overhead: Utilities Indirect Labor Indirect Materials Depreciation Other……… Insurance…………………………………………………….. Actual overhead costs Add: Overapplied overhead Manufacturing overhead applied to WIP Total manufacturing costs Add: Beginning work in process inventory Deduct: Ending work in process inventory Cost of Goods Manufactured $25,000 80,000 $105,000 (15,000) 90,000 (5,000) $85,000 120,000 $12,000 30,000 5,000 25,000 17,000 4,000 $93,000 3,000 $96,000 $301,000 30,000 $331,000 (21,000) $310,000

3. Marshall Props Unlimited Schedule of Cost of Goods Sold For the year ended December 31, 2006 Finished goods inventory, 1-1 Add: Cost of goods manufactured Goods available for sale Less: Ending finished goods inventory Cost of goods sold Deduct: Overapplied overhead Adjusted cost of goods sold $45,000 310,000 355,000 (55,000) $300,000 (3,000) $297,000

3. Marshall Props Unlimited Income Statement For the Year Ended December 31, 2006 Sales Less: Cost of Goods Sold Gross Margin Less: Selling and administrative expenses: Salaries expense Depreciation expense Insurance expense Shipping expense Net Income $450,000 (297,000) $153,000 $120,800 $32,000 $ 75,000 5,000 800 40,000

McKay Mills 1. 2. PDOR = Est. OH / Est. Activity = $1,335,000 / 1645
= $1,335,000 / 1645 ( ) PDOR = $ per DLH Actuals: Yarn 455 * $ = $369,255.25 Fabric 420 * $ = $340,851.00 Clothing 750 * $ = $608,662.50 $1,318,768.75 MOH Actual $1,372,000.00 Applied $1,318,768.75 $53, underapplied

Mesa Verde Company MESA VERDE COMPANY Balance Sheet December 31, 2005
Assets Current Assets: Cash ………………………… Accounts receivable ………… Inventories ………………….. Total current assets ………… Noncurrent assets ……………. Total assets …………………… $ 10,250 46,000 86,250 Where? How? Note 8 [Plug] Note 5 Note 4 Note 7 [Plug] (Given) Note 6 [Calc. = Total L + SE] $142,500 280,000 $422,500 Liabilities $ 22,500 62,000 Current liabilities ..…………… Noncurrent liabilities ………… Total liabilities.……………….. Note 9 Note 10 [Plug] Note 3 $ 84,500 Stockholders’ Equity Common stock ..……………… Additional paid-in capital ……. Retained earnings .…………… Total stockholders’ equity …… Total liabilities and equity …… $150,000 60,000 128,000 (Given) Note 2 [Calc.: Note 6] 338,000 $422,500

Mesa Verde (p. 2) SUPPORTING COMPUTATIONS
Note 1: Compute net income for 2005 Sales ………………….. Cost of goods sold …… Gross profit ………….. Operating expenses ….. Income before taxes …. Taxes expense ……….. Net income …………… $920,000 690,000 $230,000 180,000 $ 50,000 20,000 $ 30,000 (75% of sales (100% - Gross profit margin ratio)) (25% of sales (#) Gross profit margin ratio) (tax at 40% rate (#)) Note 2: Compute Stockholders’ Equity Common stock ($15 par × 10,000 sh.) Additional paid-in capital (($21-$15)×10,000 sh.) Retained earnings, Dec. 31, 2004 Net income Retained earnings, Dec. 31, 2005 Total stockholders’ equity $150,000 60,000 98,000 30,000 (#) $210,000 128,000 $338,000 (#) Note 3: Total equity Total Debt $338,0000 ÷ 4 $ 84,500 (#) Shareholders’ equity to total debt (#) — piece(s) of information provided in problem

(because it is all we have)
Mesa Verde (p. 3) SUPPORTING COMPUTATIONS Precisely is “Avg.” Inv.., We will use as “End” (because it is all we have) Note 4: Inventory turnover = Cost of goods sold ÷ (Avg.) Inventory 8 = $690,000 (from Note 1) ÷ Inventory Inventory = $86,250 8 = 360(#) ÷ 45(#) Days sales in inventory An alternative calculation for Inventory turnover “Ending” Note 5: Days sales in receivables = Receivables ÷ (Credit sales ÷ 360(#)) 18 days (#) = Receivables ÷ ($920,000(#)÷360) Receivables = $46,000 Note 6: Total assets = Total liabilies + Total equity = $338,000 (from Note 3) + $84,500 (from Note 3) = $422,500 Total assets = Current assets + Noncurrent assets $422,500 = Current assets + $280,000 (#) Current assets = $142, 500 Current assets = Cash + Receivables + Inventory Cash (plug) = Total assets – Receivables – Inventory = $142,500 - $46,000 (from Note 4) - $86,250 (from Note 4) = $10,250 Note 7: Note 8: (#) or (#) — piece(s) of information provided in problem

Mesa Verde (p. 4) SUPPORTING COMPUTATIONS Note 9:
Acid-test ratio = (Cash + Accounts receivable) ÷ Current liabilities 2.5 (#) = ($10,250 + $46,000) ÷ Current liabilities Current liabilities = $22,500 Total liabilities = Current liabilities + Noncurrent liabilities $84,500 (from Note 3) = $22, Noncurrent liabilities Noncurrent liabilities = $62,000 Note 10: (#) or (#) — piece(s) of information provided in problem

Millstone Company MILLSTONE COMPANY Balance Sheet December 31, 2004
Assets Current Assets: Cash ………………………… Accounts receivable ………… Inventories ………………….. Total current assets ………… Noncurrent assets ……………. Total assets …………………… $ 61,700 115,000 161,000 Where? How? Note 7 Note 4 Note 3 Calculation: Cash+A/R+Inv. (Given) Calc: Note 8 $337,700 510,000 $847,700 Liabilities $276,000 63,080 Current liabilities ..…………… Noncurrent liabilities ………… Total liabilities.……………….. Note 6 Note 10 [Plug] Note 9 $339,080 Stockholders’ Equity Common stock ..……………… Additional paid-in capital ……. Retained earnings .…………… Total stockholders’ equity …… Total liabilities and equity …… $100,000 150,000 258,620 (Given) Note 13 [Plug] Note 11 [ = Total assets] 508,620 $847,700

Millstone (p. 2) SUPPORTING COMPUTATIONS Note 1: Compute net income for 2005 Sales ………………….. Cost of goods sold …… Gross profit ………….. Operating expenses ….. Income before taxes …. Taxes expense ……….. Net income …………… $1,840,000 1,288,000 $552,000 $ 92,000 (#) (70% of sales (100% - Gross profit margin ratio)) (30% of sales (#) Gross profit margin ratio) (5% Net operating profit margin ratio (#)) Note 2: Compute Stockholders’ Equity Common stock ($15 par × 10,000 sh.) Additional paid-in capital (($21-$15)×10,000 sh.) Retained earnings, Dec. 31, 2004 Net income Retained earnings, Dec. 31, 2005 Total stockholders’ equity $100,000 150,000 $166,620 92,000 (#) $250,000 258,620 $508,620 (#) [Plug: Note 12] (Note 11) The Answer to Question #2 (Note 13) Note 3: Inventory turnover = Cost of goods sold ÷ (Avg.) Inventory 8 (#) = $1,288,000 (from Note 1) ÷ Inventory Inventory = $161,000 Precisely is “Avg.” Inv.., We will use as “End” (because it is all we have) (#) — piece(s) of information provided in problem

Millstone (p. 3) SUPPORTING COMPUTATIONS Note 4: Accounts receivable turnover = Sales ÷ Average accounts receivable 16 (#) = $1,840,000 ÷ Avg. A/R Accounts receivable = $115,000 Precisely is “Avg.” Inv.., We will use as “End” (because it is all we have) Note 5: Operating cash flow to income = Operating cash flow ÷ Net income 3 (#) = Operating cash flow ÷ $92,000 (Note 1) Operating cash flow = $276,000 Note 6: Cash flow to current liabilities ratio = Operating cash flow ÷ Current liabilities 1 (#) = $276,000 (Note 5) ÷ Current liabilities Current liabilities = $276,000 Note 7: Working capital = Current assets - Current liabilities = Cash + Accounts receivable + Inventories - Current liabilities $27,200 (#) = Cash + $115,000 (Note 4) + $161,000 (Note 3) - $276,000 (Note 6) Cash = $61,700 Note 8: Total assets = Cash + Accounts receivables + Inventories + Noncurrent assets = $61,700 (Note 7) + $115,000 (Note 4) + $161,000 (Note 3) + $510,000 (#) Total assets = $847,700 (#) — piece(s) of information provided in problem

Millstone (p. 4) SUPPORTING COMPUTATIONS Note 9:
Total debt ratio = Total liabilities ÷ Total assets 0.4 (#) = Total liabilities ÷ $847,700 (Note 8) Total liabilities = $339,080 Note 10: Total liabilities = Current liabilities + Noncurrent liabilities $339,080 (Note 9) = $276,000 (Note 6) + Noncurrent liabilities Noncurrent liabilities = $63,080 Note 11: Total assets = Total liabilities + Total equity $847,700 (Note 8) = $339,080 (Note 9) + Total equity Total equity = $508,620 Note 12: Total equity = Common stock + Add’l paid-in capital + Ending retained earnings $508,620 (Note 11) = $100,000 (#) + $150,000 (#) + Ending R/E Ending retained earnings = $258,620 Note 13: End retained earnings = Begin retained earnings + Net income $258,620 (Note 12) = Begin retained earnings + $92,000 (Note 1) Begin retained earnings = $166,620 (#) — piece(s) of information provided in problem

Missouri Retailers (A)
APR MAY JUN Total APR Feb Mar. Apr. May Jun. $ 85,000×20% $ 95,000×30% $ 75,000×50% $ 95,000×20% $ 75,000×30% $ 85,000×50% $ 75,000×20% $ 85,000×30% $108,000×50% $17,000 28,500 37,500 $83,000 MAY $19,000 22,500 42,500 $84,000 JUN $15,000 25,500 54,000 $94,500 $261,500

Missouri Retailers (B)
APR MAY JUN Total APR Mar. Apr. May Jun. $50,000×70% $55,000×30% $55,000×70% $65,000×30% $65,000×70% $88,000×30% $35,000 16,500 $51,500 MAY $38,500 19,500 $58,000 JUN $45,500 26,400 $71,900 $181,400

Mizzou Company 1. Traditional Method
PDOR = Estimated Activity ÷ Estimated Activity = $130,890 ÷ 1,720 = $76.10 per DLH Unit Product Cost: Direct Materials Direct Labor Mfg. Overhead Total Unit Cost Miz Zou $10.70 11.20 53.27 * $75.17 $16.70 19.20 91.32 ** $127.22 * DLH/unit × $76.10 = $53.27 ** 1.2 DLH/unit × $76.10 = $91.32 2. Activity-Based Costing: Activity Rates Estimated MOH Estimated Activity Activity Rates Activity Cost Pool Machine set-ups Purchase orders General factory $13,570 91,520 25,800 230 setups 2,080 orders 1,720 DLH $59 per setup $44 per order $15 per DLH

Mizzou Company (p. 2) 3. (a) Activity-Based Costing: Applying MOH to Products MIZ ZOU Activity Rates Estimated Activity MOH Estimated Activity MOH Activities Machine set-ups Purchase orders General factory Total Overhead Cost $59 per setup $44 per order $15 per DLH 100 setups 810 orders 280 DLH $ 5,900 35,640 4,200 $45,740 130 setups 1,270 orders 1,440 DLH $ 7,670 55,880 21,600 $85,150 3. (b) Activity-Based Costing: MOH per Unit Number of units produced 400 units 1,200 units MOH per unit $ per unit $70.96 per unit 3. (c) Activity-Based Costing: Unit Product Costs Unit Product Cost: Direct Materials Direct Labor Mfg. Overhead Total Unit Cost Miz Zou $ 11.20 114.35 $136.25 $16.70 19.20 79.96 $106.86

Moehrle Manufacturing
Costs to manufacture: DM $45 DL $30 VOH $30 FOH $22 Total $127 A special order is received to produce monitors with a special logo that would increase production costs by $5.00 per monitor * *What is the minimum selling price Moehrle should accept for this order? $105 + $5 $110 minimum selling price for special order

Moore Computers Absorption Costing Income Statement
For the Year Ended Dec. 31, 2003 Rev $500,000 COGS: Direct materials (60,000) Direct labor (45,000) Indirect labor (25,000) Factory insurance (12,000) Depreciation—Factory (80,000) Repairs and maint—Factory (15,000) GM $263,000 S&A: Marketing expenses (66,000) General and admin. expenses (55,000) NI $142,000 Variable Costing Income Statement For the Year Ended Dec. 31, 2003 Rev. $500,000 VC: Direct materials (60,000) Direct labor (45,000) Repairs and maintenance--Factory (15,000) Marketing expenses (66,000) CM $314,000 FC: Indirect labor (25,000) Factory insurance (12,000) Depreciation—Factory (80,000) General and admin. expenses (55,000) NI $142,000

Muleskinner Athletic Wear, Inc.
FG $150,000 $850,000 $835,000 $165,000 COGS $835,000 $835,000 - 0 - I/S $835,000 $940,000 $110,000 $ 5,000 Inventory Accounts Product Costs BI + In = EI + Out DM WIP $120,000 240,000 405, $850,000 200,000 $115,000 COGM $60,000 $250, $240,000 $70,000 DL $405, $405,000 MOH $10,000 25,000 100,000 35,000 30,000 $200, Purch COGS ACOGS Rev. Period Costs Admin. NI (LOSS!!) $200,000

Narcissus Needles 1. 2. 3. Est. DLH = 3,500
PDOR = Est. OH / Ect. Activity = $70,000 / 3,500 Utilities $10,000 Depr. 15,000 Dupr. Sal ,000 Janitorial ,000 Ins. 9,000 Total MOH $70,000 PDOR = $20 Apploied OH = PDOR * Activity = $ * 3,600 DLH Applied OH = $72,000 MOH Utilities $10,500 Depr. 15,000 Supr. Sal ,000 Janitorial ,200 Ins. 8,500 Total MOH $69,200 Actual $69,200 Applied $72,000 $2,800 Overapplied

Oatman Company 1. DM WIP FG BI Purch EI 16,000 $200,000 $26,000 BI EI
$10,000 190,000 160,000 170,000 $50,000 $30,000 480,000 $35,000 BI EI 190,000 $475,000 COGM $480,000 COGS DL COGS $160,000 $160,000 $475,000 $434,000 41,000 $434,000 - 0 - MOH Adj. COGS Utilities IDL Insurance Depr. 42,000 27,000 9,000 51,000 129,000 I/S COGS Sales comm. Admin Sal. Insurance Advertising Depreciation $434,000 36,000 80,000 1,000 50,000 9,000 $700,000 $90,000 Sales Est.OH 40,000 * $4.25 = $170,000 $ 41,000 PDOR = Est Activity $153,000 = 36,000 MH $ 41,000 = $4.25 per MH NI

Oatman Company (p. 2) 2. a. b. c. d. e. f. g. h. Direct materials
Accounts payable Work in process Manufacturing overhead Sales commissions expense Administrative salaries expense Salaries and wages payable Insurance expense Prepaid insurance Advertising expense Depreciation expense Accumulated depreciation 200,000 190,000 160,000 27,000 36,000 80,000 303,000 42,000 9,000 1,000 10,000 50,000 51,000 60,000 170,000 i. j. Finished goods Work in process Accounts receivable Sales Cost of goods sold Manufacturing overhead Income Summary 480,000 700,000 475,000 41,000 434,000

For the Year Ended December 31, 2010
Oatman Company (p. 3) Oatman Company Income Statement For the Year Ended December 31, 2010 Sales Less: Cost of goods sold ($475,000 – $41,000) Gross margin Less: Selling and administrative expenses: Sales commissions Administrative salaries Insurance Advertising Depreciation Net Income $700,000 (434,000) $266,000 $176,000 $90,000 $ 36,000 80,000 1,000 50,000 9,000

Pacific Coast Home Furnishings
DM WIP FG BI Purch. $ 23,400 201,500 BI $ 29,900 192,400 633,100 371,800 BI $19,500 $ 192,400 $1,215,500 COGM $1,215,500 $1,185,600 EI $ 32,500 $ 11,700 EI $ 49,400 COGS COGS DL $1,185,600 $633,100 $633,100 $1,185,600 -0- -0- MOH I/S H,L&P Supp. Prop Tax Dep. Exp. IL Sup. Sal. $ 57,200 37,700 44,200 114,400 32,500 85,800 COGS Sales Sal. Supp—Admin Depr--Admin $1,185,600 188,500 20,800 42,900 $1,950,000 Sales $ 512,200 NI $371,800 $371,800 -0-

Pacific Coast Home Furnishings (p. 2)
Schedule of Cost of Goods Manufactured For the Year Ended December 31, 2006 Direct materials: Direct materials inventory, $ ,400 Add: Purchases of direct materials ,500 Total direct materials available $ ,900 Deduct: Direct materials inventory, (32,500) Direct materials used in production $ ,400 Direct labor $ ,100 Manufacturing overhead Heat, Light, & Power--Plant $ ,200 Supplies—Plant ,700 Property Taxes—Plant ,200 Depreciation Expense—P&E ,400 Indirect Labor—Wages ,500 Supervisor’s Salary Plant ,800 Total Factory Overhead $ ,800 Total manufacturing costs incurred $ 1,197,300 Add: Beginning work in process inventory ,900 Total manufacturing costs to account for $ 1,227,200 Deduct: Ending work in process inventory (11,700) Cost of Goods Manufactured $ 1,215,500

Pacific Coast Home Furnishings (p. 3)
PACFIC COAST HOME FURNISHINGS Income Statement For the Year Ended December 31, 2006 Sales $ 1,950,000 Cost of Goods Sold Finished Goods Inventory, Beginning $ ,500 Cost of Goods Manufactured ,215,500 Total Goods Available for Sale $ 1,235,000 Finished Goods Inventory, Ending ,400 Less: Cost of goods sold (1,185,600) Gross margin $ ,400 Less: Selling and administrative expenses:  Sales reps’ salaries $ ,500  Supplies—Admin Office ,800  Depr. Exp—Admin Office ,900 Total Selling & Administrative Expenses (252,200) Net Income $ ,200

Paradise Company RM (RM-lbs.) WIP (RM-lbs.) FG (RM-lbs.) 40,000 10,000
80,000 Purch. 1,000,000 50,000 RM (RM-lbs.) WIP (RM-lbs.) FG (RM-lbs.) 1,010,000

Pauley’s Parts Company
Remachine Scrap Future revenues Deduct future costs Margin $30,000 25,000 $ 5,000 $2,500 The difference is in favor of remachining. The $50,000 inventory cost is irrelevant.

Pirates, Inc. Rate Efficiency AQ × AC AQ × SC SQ × SC
Std. Allowed for Actual Output (in units) Rate Efficiency AQ × AC AQ × SC SQ × SC 28,000 × $ ,000 × $ (22,000)(1.25) × $12.00 $327, $336, $330,000 $8,400 F $6,000 U $2,400 F

Plentiful Printing, Inc.
WIP FG DM BI Purch EI $15,000 95,000 $20,000 BI $3,000 90,000 40,000 60,000 8000 2000 3000 $13,000 $20,000 180,000 $15,000 90,000 COGM 185,000 $180,000 COGS DL EI COGS $40,000 2,500 * $16 $40,000 $185,000 $182,000 3000 $182,000 $2000 / 125 hrs = $16 /hr Direct Labor Rate Adj. COGS MOH I/S $285,000 $34,000 Sales Actual $57,000 3000 Applied $40,000 * 1.5 = $60,000 3000 Adj. COGS Selling Admin $182,000 57,000 12,000 NI PDOR = Est OH / Est Activity = $600,000 / $400,000 = 1.5 per DL $

Polaris Company hello eh DM WIP FG BI Purch EI $ 10,000 $210,000
$ 10,000 $210,000 $ 34,000 BI EI $ 42,000 $178,000 $ 90,000 $240,000 $ 30,000 $ 37,000 $520,000 $ 77,000 BI EI $178,000 $ 12,000 $480,000 COGS $520,000 DL COGS $ 90,000 - 0 - $ 90,000 $480,000 $472,000 $ 8,000 $472,000 - 0 - Adj. COGS MOH IDM IDL Depr. Other $ 12,000 $110,000 $ 40,000 $ 70,000 $232,000 I/S COGS Selling Admin. $472,000 $ 54,000 $ 42,000 $600,000 $ 32,000 Sales 30,000 * $8 = $240,000 $ 8,000 - 0 - hello eh $ 8,000 NI

Polaris Company (p. 2) [Stmt. of Cash Flows] CASH $600,000 $ 24,000
$ 24,000 $210,000 $ 90,000 $110,000 $ 70,000 $ 54,000 $ 42,000 Accum. Depr. $ 40,000

Portland Pilots Association

Portland Pilots Assoc. (p. 2)

Postmodern Products Price Quantity / Usage AQ × AC AQ × SC SQ × SC
Standard Allowed for Actual Output feet Price Quantity / Usage AQ × AC AQ × SC SQ × SC 15,200 × $3.15 $47,880 15,200 × $3.00 $45,600 (3,000)(5) × $3.00 45,000 × $3.00 $45,000 $2,280 U $600 U $2,880 U ANSWERS: 1(a) = $3.15 1(b) = $2,280 U 1(c) = $600 U DIRECT MATERIALS

Postmodern Products (p. 2)
Standard Allowed for Actual Output DLH Rate Efficiency AQ × AC AQ × SC SQ × SC 5,400 × $11.40 $61,560 5,400 × $11.50 $62,100 (3,000)(1.75) × $11.50 5,250 × $11.50 $60,375 $540 F $1,725 U $1,185 U ANSWERS: 2(a) = $11.50 2(b) = 5,250 2(c) = DIRECT LABOR

P.W. Products Price Quantity / Usage AQ × AC AQ × SC SQ × SC
Standard Allowed for Actual Output pounds Price Quantity / Usage AQ × AC AQ × SC SQ × SC 350,000 × $4.12 $1,442,000 350,000 × $4.00 $1,400,000 $42,000 U 304,000 × $4.00 $1,216,000 (12,000)(25) × $4.00 300,000 × $4.00 $1,200,000 $16,000 U CAN’T! DIRECT MATERIALS DM Purchased ≠ DM Used

P.W. Products (p. 2) Rate Efficiency AQ × AC AQ × SC SQ × SC
Standard Allowed for Actual Output DLH Rate Efficiency AQ × AC AQ × SC SQ × SC 95,400 × $10.55 $1,006,470 95,400 × $10.00 $954,000 (12,000)(8) × $10.00 96,000 × $10.00 $960,000 $52,470 U $6,000 F $46,470 U DIRECT LABOR

Rex Company

Rikki-Tikki-Tavi Taffy

Rikki-Tikki-Tavi Taffy (p. 2)

Robin Hood, Inc. MOH a. Estimated MOH $2,000,000 PDOR = = =
$16.00 per MH Estimated Activity 125,000 DLH b. Applied MOH = Actual Activity × PDOR 140,000 DLH × $ = $2,240,000 MOH c. $2,400,000 $2,240,000 Underapplied $160,000 $160,000 to COGS - 0 -

Roley Poley DM WIP FG COGS DL I/S MOH BI $49,000 $325,000 $293,480
$160,080 BI $87,300 $753,660 (a.) BI $131,400 PURCH. $319,700 EI $126,100 (d.) 325,000 763,660 $753,660 EI $77,300 COGS EI $73,900 $763,660 $5,660 $769,320 DL (f.) $293,480 $293,480 $769,320 I/S MOH $769,320 $85,000 $44,000 $5,400 $1,960 $28,500 $167,200 $9,000 $8,700 $17,400 $4,300 $36,100 $1,281,700 Sales IDL DEPR. PTY TAX FIRE INS. IDM UTIL. $22,700 $31,000 $12,600 $7,840 $11,600 $36,000 $44,000 SOLO SALARIES ADU. PTY TAX FIRE INS. COMM. ADMIN. UTIL. RENT DEPR. MISC. R & ALLOW 920 x 29= 26,680 DLH 26,680 x $600 = $160,080 $165,740 Underapplied $5,660 MOH (c.) $5,660 (f.) PER UNIT $753,660 / 920 = $819 (e.) $1,176,880 DM $325,000 PRIME COSTS DL ,480 $104,820 X 40% = $41,928 $104,820 NI BT $618,480 $62,892 NI AT (b.)

Rondini Magic Company

Rondini Magic Co. (p. 2)

S & P Corporation FC + NI $300,000 + $0 BE(units) = = = 60,000 units
CM per unit $10 - $5 $300,000 +$0 FC + NI 2. BE($) = = = $600,000 CM Ratio 50%

Sam Enterprises Cans Can-ettes Units produced per hour 3 1
Contribution margin per unit $ $ Contribution margin per hour (the resource constraint) $ Total contribution for 1,000 hours $9,000 $6,000 THE WINNER!

Sleepwell, Inc. WIP $12,000 81,700 40,500 $216,450 105,750 $23,500 FG
40,500 $216,450 105,750 $23,500 FG $10,200 261, ,550 $9,100 COGS $217, ,550 I/S DM $18,500 80,000 81,700 $16,800 DL $40,500 $40,500 MOH $105,750 $105,750 $217,550 100,000 $400,000 $ 82,450 Suppose: Revenue = $400,000 Selling & Admin.= $100,000

Sly-Like-A-Fox, Inc. SLY-LIKE-A-FOX, INC. Balance Sheet
December 31, 2002 Assets Current Assets: Cash ………………………… Accounts receivable ………… Inventories ………………….. Current Assets ………………... Noncurrent assets ……………. Total assets …………………… $ 75,000 75,000 50,000 $200,000 $300,000 $500,000 Where? How? Note 10 [Plug] Note 4 Note 5 Note 7 [Plug] (Given) Note 6 [Calc. = Total L+E] Liabilities and Equity $100,000 150,000 $250,000 $500,000 Current liabilities ..…………… Noncurrent liabilities ………… Total liabilities.……………….. Total equity ………………….. Total Liabilities and Equity ….. Note 8 Note 9 [Plug] Note 3 Note 2 [Calc.: Note 6]

Sly-Like-A-Fox (p. 2) SUPPORTING COMPUTATIONS
Note 1: Compute net income for 2005 Sales ………………….. Cost of goods sold …… Gross profit ………….. Operating expenses ….. Net income …………… $1,000,000 500,000 $ 500,000 450,000 $ 50,000 (50% of sales (100% - Gross profit margin ratio)) (50% of sales (#) Gross profit margin ratio) (With no information given about taxes, this is all we have.) Note 2: Return on end-of-year equity = Net income ÷ End of year equity 20% (#) = $50,000 (from Note 1) ÷ End of year equity Equity = $250,000 Note 3: Total debt to equity ratio = Total liabilities ÷ Stockholders’ equity 1 (#) = Total liabilities ÷ $250,000 (from Note 2) Total liabilities = $250,000 Note 4: Accounts receivable turnover = Sales ÷ Average accounts receivable $1,000,000 (#) ($50,000(#) + End A/R) ÷ 2 16 (#) = Ending accounts receivable = $75,000 (#) or (#) — piece(s) of information provided in problem

Sly-Like-A-Fox (p. 3) SUPPORTING COMPUTATIONS Note 5:
Days’ sales in inventory = (Inventory × 360) ÷ Cost of goods sold 36 (#) = (Inventory × 360) ÷ $500,000 (from Note 1) End Inventory = $50,000 Note 6: Total assets = Total liabilities + Total equity = $250,000 (from Note 3) + $250,000 (from Note 2) = $500,000 Total assets = Current assets + Noncurrent assets $500,000 = Current assets + $300,000 (#) Current assets = $200,000 Current ratio = Current assets ÷ Current liabilities 2 (#) = $200, ÷ Current liabilities Current liabilities = $100,000 Total liabilities = Current liabilities + Noncurrent liabilities $250,000 (from Note 3) = $100,000 + Noncurrent liabilities Noncurrent liabilities = $150,000 Note 7: Note 8: Note 9: (This “formula” provided by problem information) Note 10: Current assets = Cash + Accounts receivable + Inventory $200, = Cash (plug) + $75,000 (from Note 4) + $50,000 (from Note 5) Cash = $75,000 (#) or (#) — piece(s) of information provided in problem

Smith Company Price Qty AQ × AC AQ × SC SQ × SC
36,000 × $ ,000 × $8.25 $300, $297,000 $3,600 U Std. Allowed for Actual Output (Std. Amt. x Actual Units) AQ × SC SQ × SC 31,800 × $ (3200)(10) × $8.25 $262, $264,000 $1,650 F CAN’T!

Smith Company (p. 2) Rate Efficiency AQ × AC AQ × SC SQ × SC
11,520 × $ ,520 × $ (3200)(3.5) × $9.65 $112,896 $111, $108,080 $1,728 U $3,088 U $4,816 U Translating Dr. Fessler’s “picture” into Formulas: 1. AQ × (SC – AC) = Rate Variance 2. SC × (SQ – AQ) = Efficiency variance

SoMuch Stereos Absorption Costing Income Statement
For the Year Ended Feb. 28, 2000 Rev. $89,000 COGS: DM (22,000) DC (14,000) VOH (9,000) FOH (10,000) GM $34,000 S&A: VSE (5,000) FSE (16,000) FAE (14,000) NI ($1,000) Variable Costing Income Statement For the Year Ended Feb. 28, 2000 Rev. $89,000 VC: DM (22,000) DL (14,000) VOH (9,000) VSE (5,000) CM $39,000 FC: FOH (10,000) FSE (16,000) FAE (14,000) NI ($1,000)

South Street Furniture Company
Absorption Costing I/S For the Y/E Dec. 31, 2005 Rev CoGS GM - S&A NI South Street Furniture Company Variable Costing I/S For the Y/E Dec. 31, 2005 Rev VC CM - FC NI $3,600,000 (248,000) (2,176,000) (12,000) $1,164,000 (216,000) (340,000) $ 608,000 = 72,000 units × $20 = BI 8,000 units × $31 per unit = 64,000 units × $34 per unit Underapplied MOH $6) = 72,000 units sold × $3 per unit Fixed $ 3,600,000 (208,000) (1,792,000) (216,000) $ 1,384,000 (480,000) (340,000) $ 564,000 = 72,000 units × $20 = BI 8,000 units × $26 per unit = 64,000 units × $28 per unit = 72,000 units × $ 3 per unit MOH S&A The difference in NI : FOH from BI FOH to EI Difference in NI PDOR = $480,000 ÷ 80,000 normal production = $6.00 per unit $(40,000) 84,000 $ 44,000 = 8,000 $5 per unit = 14,000 $6 per unit

Southern Carpets 1. y = a + bx b = hi-lo $ hi-lo activity
4,980 – 2,180 = $210,700 2,800 b = $75.25 per machine hour $390,000 = a + $75.25 (4,980) $390,700 = a + $374,745 a = $15,955 Cost Formula y = $15,955 + $75.25x y = $15,955 + $75.25 (3,500) y = $15,955 + $263,375 y = $279,330 2.

Southern Carpets (cont.)
Cost Function: y = $57.27 x + $86,152.89 when x = 3, y = $286,597.85 when x = 4, y = $315,232.89

Steinmueller Steins, Inc.
WEIGHTED AVERAGE METHOD Step 1 Step 5 DM CC 100% 70% 5,000 $6,000 20,000 23,000 $7,000 23,000*$1.98 80% 2,000 $13,000 $45,540 $18,000 Step 2 $36,000 out $1,920 2000*100%*$.96 $1,632 2000*80%*$1.02 EI 2000*100% $3,552 2000*80% 1,600 E.U. 25,000 24,600 Step 3 BI + IN = EI + Out BI IN $24,000 $25,000 Step 4 Compute E.U. Costs $24,000/25,000 $25,000/24,600 =$.96 =$ = $1.02 $1.98 WIP-Molding (units) EU Total Costs To Account For: WIP-Molding ($)

Steinmueller Steins (p. 2)
FIFO METHOD E.U. WIP Units DM CC DM 100% CC 70% 80% BI IN EI 5,000 20,000 2,000 23,000 Out BI: (DM) 5,000× 0% BI: (CC) 5,000×30% Start & Finish EI: (DM) 2,000×100% EI: (CC) 2,000× 80% E.U. - 0 - 18,000 2,000 20,000 1,500 18,000 1,600 21,100 WIP - $ (FIFO) Costs to Account For Out BI DM $6,000 CC $7,000 DM $18,000 CC $18,000 DM $1,800.00 CC 1,364.80 $3,164.80 DM CC Total $ 13, from BI 1, Finished CC 5,000×30%×$0.853 31, S&F 18,000 × $1.753 $45,833.50 BI $ per EU $6,000 DM ÷ (5,000×100%) $7,000 CC ÷ (5,000× 70%) $1.20 $2.00 $3.20 IN IN $ per EU EI = 2,000 × 100% × $0.90 = 2,000 × 80% × $0.853 $18,000 DM ÷ 20,000 E.U. $18,000 CC ÷ 21,100 E.U. $0.90 $0.853 $1.753 $49,000 Costs to Account For (Info we need to do problem)

Stetson Company Stetson Company Absorption Costing I/S
For the Y/E Dec. 31, 2001 Rev CoGS GM - S&A NI Stetson Company Absorption Costing I/S For the Y/E Dec. 31, 2002 Rev CoGS GM - S&A NI $17,000 (- 0 -) (6,000) (4,000) $ 7,000 (1,000) (1,400) $ 4,600 = 2,000 units × $8.50 = BI ( - none - ) = 2,000 units × $3 per unit Underapplied MOH $1) = 1,000 units sold × $0.50 per unit Fixed $25,500 (9,000) ( ) (9,100) $ 7,400 (1,500) (1,400) $ 4,500 = 3,000 units × $8.50 = BI 3,000 units × $3 per unit = units × $3 per unit Underapplied MOH $1) = 3,000 units sold × $0.50 per unit Fixed Normal volume is 10,000 units of production. Underapplied MOH = 10,000 – 6,000 actual production = 4,000 units Normal volume is 10,000 units of production. Underapplied MOH = 10,000 – 900 actual production = 9,100 units

Stetson Company (p. 2) Stetson Company Variable Costing I/S
For the Y/E Dec. 31, 2001 Rev VC CM - FC NI Stetson Company Variable Costing I/S For the Y/E Dec. 31, 2002 Rev VC CM - FC NI $ 17,000 (4,000) (1,000) $ 12,000 (10,000) (1,400) $ = 2,000 units × $8.50 CoGS (2,000 units × $2.00 per unit) S&A (2,000 units × $0.50 per unit) MOH S&A $ 25,500 (6,000) (1,500) $ 18,000 (10,000) (1,400) $ 6,600 = 3,000 units × $8.50 CoGS (3,000 units × $2 per unit S&A (3,000 units × $0.50 per unit) MOH S&A The difference in NI 2001: Units mfg. - units sold × FOH per unit Difference in NI The difference in NI 2002: Units mfg. - units sold × FOH per unit Difference in NI 4,000 $1.00 $ 4,000 2,100 $1.00 $2,100 Production > Sales Abs. NI is higher! Sales > Production VC NI is higher!

Stewart Company Relevant fixed cost of making ($20*50%)
Relevant variable costs ($35(DM)+$11(DL)+$19(FOH)) Relevant cost per unit $10 $65 $75 When you compare the cost to make of $75 to the cost of buy of $85; there is a $10 per unit savings. Stewart should make the product.

Stiegl Corporation

Stone Monument Co. (A) 1. BE (units) = FC + NI CMU = $6,000,000 $1,000
CMR = $6,000,000 $2,000 - $1,000 $2,000 $12,000,000 = 2. 6,000 units BE 20,000 units Normal capacity = 30%

Stone Monument Co. (B) 1. BE (units) = FC + NI CMU =
$6,000,000 + $1,400,000 $1,000 = 7,400 units 2. BE ($) = FC + NI CMR = $6,000,000 + $1,400,000 $2,000 - $1,000 $2,000 = $14,800,000

Stone Monument Co. (C) 1. SP (x) = VCU (x) + FC + NI
$2,000 (x) = $1,000 (x) + $6,000,000 + (.25) ($2,000) (x) $2,000 x = $1,000 x $6,000,000 + $500 x $500 x = $6,000,000 x = 12,000 units 2. TR = VC FC NI R = .5 R + $6,000, R .25 R = $6,000,000 R = $24,000,000

Stone Monument Co. (D) 1. SP (x) = VCU (x) + FC + NI
$2,000 (x) = $1,000 (x) + $6,000,000 + (.25) ($2,000) (x) $2,000 x = $1,000 x $6,000,000 + $400 x $600 x = $6,000,000 x = 10,000 units 2. 10,000 units x $2,000 SP $20,000,000

Stone Monument Co. (E) SP (x) = VCU (x) + FC + NI
20,000 SP = $2,350

Stone Monument Co. (F) 1. MS ($) = Actual Revenue - BE Revenue
($2,000 SP x 20,000 normal volume) (from (A)) MS ($) = $28,000,000 2. MS Ratio = Actual Revenue - BE Revenue Actual Revenue MS Ratio = $40,000, $12,000,000 $40,000,000 MS Ratio = 70% Quite Good!!

Stone Monument Co. (G) First, … NIAT $1,400,000 $2,000,000 NIBT = = =
1- Tax Rate 1. BE (units) = FC + NI CMU = $6,000,000 + $2,000,000 $1,000 = 8,000 units 2. BE ($) = FC + NI CMR = $6,000,000 + $2,000,000 $2,000 - $1,000 $2,000 = $16,000,000

Strange Fire, P.C. Variable Overhead Spending Efficiency N/A
Actual VOH AQ × SC SQ × SC 2900 × $ × $20 $54, $58, $56,000 $4,000 F $2,000 U 2,000 F Flexible Budget Variance = $2,000 F

Stuffing Company (A) ≥ $0  ☺ Present Year 1 Year 2 Year 3 Purchase
Year 1 Year 2 Year 3 Purchase Savings Total PV Factor NPV Calc. $(60,000) × $25,000 × $22,727.50 $25,000 × $20,660.00 $25,000 × $18,782.50 From PV Table + + + = $2,170 ≥ $0  ☺ OR use Annuity Table Purchase Savings PV Factor NPV Calc. $(60,000) × $25,000 × $62,172.50 per year for 3 years = $2, ☺

Stuffing Company (B) TRIAL & ERROR
THE HIGHER THE INTEREST RATE, THE LOWER THE PV We know 10% is TOO LOW (why, because it yields a positive NPV) So we try 11% … $25,000 × $61,092.50 (11% for 3 yr. annuity) vs. $(60,000) STILL TOO LOW So we try 12% … $25,000 × $60,200 (12% for 3 yr. annuity) vs. $(60,000) Still A BIT too low So we try 13% … $25,000 × $59,025 (13% for 3 yr. annuity) vs. $(60,000) Now A BIT too HIGH Closer to 12% than 13%

Stuffing Company (C) Payback Period = Original Investment ÷ Periodic Cash Flow Investment A: 2 years $ 20,000 in Year 1 80,000 in Year 2 $100,000 Total Investment B: 2 years $ 90,000 in Year 1 10,000 in Year 2 $100,000 Total Investment B BETTER because get money sooner Investment C: 3 years $100,000 ÷ $39,000 = years

Stuffing Company (D) Accounting Rate of Return (ARR) = Avg. NI ÷ Investment [ARR aka Simple Rate of Return] $80,000 5 yrs. Avg. NI = = $16,000 NI per year Average NI Investment $16,000 $100,000 ARR = = = 16% ARR

Stuffing Company (E) PV of CF Investment Profitability Index = 1.
Project 1: $567,270 ÷ $480,000 = Project 2: $336,140 ÷ $270,000 = Project 3: $379,760 ÷ $400,000 = 2. RANKING: NPV PI IRR Project 1 1 2 Project 2 2 1 Project 3 3

Sven’s Sweets Company DM WIP FG BI Purch (for Cash) EI $ 16,700
$ 16,700 $152,500 $22,800 BI EI $ 18,400 146,400 175,600 54,800 $ 25,200 $ 24,600 370,000 $ 19,500 BI EI 185,000 $375,100 COGS $370,000 DL COGS $175,600 - 0 - (for Cash) $175,600 $375,100 $375,100 - 0 - (for Cash) MOH IDL Fact. Repairs Fact. Utilities Depr., Fact. Fact. Ins. $ 14,300 12,600 10,100 9,440 8360 $ 54,800 I/S (on Acct.) COGS Selling Exp. Admin. Exp. Interest Exp. $375,100 114,900 92,600 5,150 $680,000 Sales (on Acct.) $ 54,800 - 0 - (Cash) $ 92,250 NI BT (on Acct.) Inc. Tax $ 20,000 $ 72,250 NI AT (to R/E) $ 72,250 - 0 -

Sven’s Sweets (p. 2) Assets (aka: “Pete”)
CASH $ 42,500 671,900 $ 104,290 Beg End $ 14,300 12,600 10,100 8,360 212,500 19,000 152,500 175,600 5,150 IDL Repairs Util. Ins. A/P Tax Pay. DM DL Int. Exp. A/R (net) Plant Assets Accum. Depr. Cash from Customers ((A/R)) $ 71,900 680,000 $ 80,000 Beg End $724,000 Beg End Beg End $ 278,400 9,440 $ 287,400 (Depr. Exp.) (Sales on Acct.) $671,900 (to Cash) Liabilities & Owners’ Equity (aka: “Re-Pete”) Notes Payable Inc. Taxes Payable A/P Beg End $ 100,000 $ 100,000 Beg End $ 5,000 20,000 $ 6,000 Beg End $ 40,000 114,900 92,600 $ 35,000 (to Cash) $ 19,000 (Inc. Tax Exp.) $ 212,500 (Selling Exp.) (Adm. Exp..) Common Stock R/E Beg End $ 269,600 $ 269,600 Beg End $ 205,100 72,250 $ 277,350 (Net Income)

Sven’s Sweets (p. 3) Sven’s Sweets Company Sven’s Sweets Company
Balance Sheet As of December 31, 2005 Sven’s Sweets Company Statement of Cash Flows (Indirect Method) For the Year-Ended December 31, 2005 Assets Cash A/R Plant Assets Accum Depr DM WIP FG Total $ 104,290 80,000 724,000 (287,840) 22,800 25,200 19,500 $687,950 Net Income Depr. Exp A/R IT/P A/P DM WIP FG Net Cash Inflows Beg. Cash End Cash $ 72,250 + 9,440 8,100 + 1,000 - 5,000 - 6,100 - 6,800 + 5,100 $ 61,790 42,500 $104,290 Liabilities & Owners’ Equity N/P IT/P A/P C/S R/E Total $ 100,000 6,000 35,000 269,600 277,350 $687,950 Not specifically requested by problem; already calculated CF using Direct Method.

Sweet Surrender, Inc. SWEET SURRENDER, INC. Balance Sheet
December 31, 2003 Assets Current Assets: Cash ………………………… Accounts receivable ………… Inventories ………………….. Current Assets ………………... Noncurrent assets ……………. Total assets …………………… $ 85,000 125,000 75,000 $285,000 $495,000 $780,000 Where? How? (Given) Note 5 Note 4 [Calc.: Note 7] Note 8 [Plug] Note 6 [Calc. = Total L+E] Liabilities and Equity $237,500 22,500 $260,000 $520,000 $780,000 Current liabilities ..…………… Noncurrent liabilities ………… Total liabilities.……………….. Total equity ………………….. Total Liabilities and Equity ….. Note 9 Note 10 [Plug] Note 3 Note 2 [Calc.: Note 6]

Sweet Surrender (p. 2) SUPPORTING COMPUTATIONS
Note 1: Compute net income for 2003 Sales ………………….. Cost of goods sold …… Gross profit ………….. Operating expenses ….. Income before taxes …. Taxes expense ……….. Net income …………… $3,000,000 1,800,000 $1,200,000 800,000 $ 400,000 140,000 $ 260,000 (= COGS + Gross profit) (#) (60% of sales (100% - Gross profit margin ratio)) (40% of sales (#) Gross profit margin ratio) (#) (Calculation) (tax at 35% rate (#)) Note 2: Return on end-of-year equity = Net income ÷ End of year equity 0.5 (#) = $260,000 (from Note 1) ÷ End of year equity Equity = $520,000 Note 3: Total debt to equity ratio = Total liabilities ÷ Stockholders’ equity 0.5 (#) = Total liabilities ÷ $520,000 (from Note 2) Total liabilities = $260,000 Note 4: Days’ sales in inventory = (Inventory × 360) ÷ Cost of goods sold 15 days (#) = (Inventory × 360) ÷ $1,800,000 (from Note 1) End Inventory = $75,000 Note 5: Days’ sales in receivables = (Accounts receivable × 360) ÷ Sales 15 days (#) = (Inventory × 360) ÷ $3,000,000 (from Note 1) End Accounts receivable = $125,000 (#) — piece(s) of information provided in problem

Sweet Surrender (p. 3) SUPPORTING COMPUTATIONS Note 6:
Total assets = Total liabilities + Total equity = $260,000 (Note 3) + $520,000 (Note 2) = $780,000 Note 7: Current assets = Cash + Accounts receivable + Inventories Current assets = $85,000 (#) + $125,000 (Note 5) + $75,000 (Note 4) Current assets = $285,000 Note 8: Total assets = Current assets + Noncurrent assets $780,000 (Note 6) = $285,000 (Note 7) + Noncurrent assets (plug) Noncurrent assets = $495,000 Note 9: Current ratio = Current assets ÷ Current liabilities 1.2 (#) = $285,000 (Note 7) ÷ Current liabilities Current liabilities = $237,500 Note 10: Total liabilities = Current liabilities + Noncurrent liabilities $260,000 (Note 3) = $237,500 (Note 9) + Noncurrent liabilities Noncurrent liabilities = $22,500 (#) or (#) — piece(s) of information provided in problem

The Swizzle Manufacturing Co.
DM WIP FG BI Purch EI 10,000 $200,000 $25,000 BI EI $15,000 185,000 230,000 385,200 $22,000 $30,000 793,200 $43,200 BI EI 185,000 $780,000 COGS 793,200 DL COGS (21,400 hrs) $230,000 $230,000 $780,000 $779,800 200 $779,800 Adj. COGS MOH Utilities IDL Maint. Depr. Rental 63,000 90,000 54,000 76,000 102,000 385,000 I/S COGS Utilities S&A Salaries Advertising Depr. Rental 779,800 7,000 110,000 136,000 19,000 18,000 1,200,000 $130,200 Sales Est.OH 21,400 * $18 = $385,200 $ 200 PDOR = Est Activity $360,000 = 20,000 DLH $ 200 = $18 per DLH NI

Swizzle (p. 2) The Swizzle Manufacturing Company
Schedule of Cost of Goods Manufactured For the Year Ended December 31,1994 Direct material: Raw materials inventory, Add: Purchases of raw materials Total materials available Deduct: Raw materials inventory, Raw materials used in production Direct Labor Manufacturing overhead: Utilities Indirect Labor Maintenance Depreciation Building rent Actual overhead costs Add: Overapplied overhead Manufacturing overhead applied to WIP Total manufacturing costs Add: Beginning work in process inventory Deduct: Ending work in process inventory Cost of Goods Manufactured $10,000 200,000 $210,000 (25,000) $185,000 230,000 $63,000 90,000 54,000 76,000 102,000 $385,000 200 385,200 $800,200 15,000 $815,200 (22,000) $793,200

Swizzle (p. 3) The Swizzle Manufacturing Company
Schedule of Cost of Goods Sold For the year ended December 31, 1994 Finished goods inventory, Add: Cost of goods manufactured Goods available for sale Less: Ending finished goods inventory Cost of goods sold Deduct: Overapplied overhead Adjusted cost of goods sold $30,000 793,200 823,200 (43,200) $780,000 (200) $779,800

Swizzle (p. 4) The Swizzle Manufacturing Company Income Statement
For the Year Ended December 31, 1994 Sales Less: Cost of Goods Sold Gross Margin Less: Selling and administrative expenses: Utilities Salaries Advertising Depreciation Building rental Net Income $1,200,000 (779,800) $420,200 $290,000 $130,200 $ 7,000 110,000 136,000 19,000 18,000

Tallyho Company $3,000,000 budgeted FOH ÷ 100,000 budgeted units = $30 per unit (SC) FIXED OVERHEAD Spending Volume Actual FOH Budgeted FOH Applied FOH BQ × SC SQ × SC 110,000 × $30 $3,200, $3,000, $3,300,000 $200,000 U $300,000 F $100,000 F

Thorp Company

Tigér Boats Bill Bird should accept the offer.
$12,500 Selling price per boat (11,500) Variable cost per boat ($5,000 + $5,500 + $1,000) $ 1,000 Contribution per boat Fixed manufacturing overhead will not change and thus is not relevant.

Tillamook Cheese Co. …can sell just milk, or can process the milk further into cheese, ice cream and yogurt Product: Cheese Ice Cream Butter Sales value at split off (i.e., milk) $400,000 $500,000 $100,000 Sales value if processed further $450,000 $679,000 $110,000 Cost of further processing $ 17,000 $103,000 $ 14,000 Joint costs $150,000 Joint costs are allocated by the sales value at split off Relevant! Cost $400, $17, $450,000 Cheese :o) Raw Milk - Joint Costs $150, $500, $103, $679,000 Ice Cream :o) $100, $14, $110,000 Butter :o( $1,000,000 revenue from selling product just as milk Cost to produce butter from milk higher than the increased revenue

Tina’s Best Chocolate (A)
Tina should process the cocoa powder further into an instant cocoa mix. $2,000 Selling price of Instant Cocoa (500) Selling price of Cocoa powder $1,500 Additional revenue from processing further (800) Additional cost of processing further $700 Additional profit per ¼ ton from processing further

Tina’s Best Chocolate (B)
THE LIGHT $1.00 .02 MH $50.00 THE DARK $2.00 .05 MH $40.00 Contribution margin per case Machine hours required per case Cost per machine hour Tina’s best product is The Light

Toledo Torpedo Company
Cost Comparison – Replacement of Machine, Including Relevant and Irrelevant Items RELEVANT Benefit (purchase new machine)

Traber Company DM WIP FG BI Purch. $ 25,000 75,000 BI $ 41,250 56,250
$ 41,250 56,250 43,750 165,000 BI $28,750 $ 56,250 $ 275,000 COGM $ 275,000 $ 278,750 EI $ 43,750 $ 43,750 EI $ 25,000 COGS COGS DL $ 278,750 $ 43,750 $ 43,750 $ 278,750 -0- -0- MOH I/S Repair Fact Ins. Dep. Exp. IL. $ 18,750 15,000 100,000 31,250 COGS Marketing Gen & Admin $ 278,750 82,500 68,750 $ 625,000 Sales $165,000 $ 195,000 NI $165,000 -0-

Traber Company (p. 2) Traber Company
Schedule of Cost of Goods Manufactured For the Year Ended December 31, 2004 Direct material: Direct materials inventory, Add: Purchases of direct materials Total materials available Deduct: Direct materials inventory, Direct materials used in production Direct Labor Manufacturing overhead: Repair and Maintenance Factory insurance Depreciation Expense—Plant Indirect Labor--Wages Total manufacturing costs Add: Beginning work in process inventory Deduct: Ending work in process inventory Cost of Goods Manufactured $25,000 75,000 $100,000 (43,750) $56,250 56,250 $18,750 15,000 100,000 31,250 165,000 $277,500 41,250 $318,750 (43,750) $275,000

For the Year Ended December 31, 2004
Traber Company (p. 3) Traber Company Income Statement For the Year Ended December 31, 2004 Sales $ ,000 Cost of Goods Sold Finished Goods Inventory, Beginning $ ,750 Cost of Goods Manufactured ,000 Total Goods Available for Sale $ ,750 Less: Finished Goods Inventory, Ending ,000 Less: Cost of goods sold (278,750) Gross margin $ ,250 Less: Selling and administrative expenses:  Marketing Expenses $ ,500  General and Administrative ,750 Total Selling & Administrative Expenses (151,250) Net Income $ ,000

True Blue Corporation Variable Overhead Spending Efficiency N/A
Actual VOH AQ × SC SQ × SC 400 × $ × $3.85 $1, $1, $1,617 $60 U $77 F $17 F Flexible Budget Variance = $17 F

Tub Company

Ward Company PART 1 PART 2 July: Aug: Sept: $50,000 × 80% × 15% =
$70,000 × 80% × 50% = $60,000 × 80% × 30% = $60,000 × 20% = $ 6,000 $28,000 $14,400 $12,000 $60,400 20% of sales collected as cash in month of sale 80% of sales are on account and collected later

Whiskers Products, Inc.

Womack Company

Young Products

Young Products (cont.)

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