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Problem A.
The selected amounts that follow were taken from Kentucky Corporation's accounting records:
Required:
Compute the following:
1. Manufacturing overhead.
2. Work-in-process inventory, 12/31.
3. Finished-goods inventory, 1/1.
4. Cost of goods sold.
5. Gross margin.
6. Net income.
Problem B
Global Systems began business on January 1 of the current year, producing a single product that is popular with home builders.
Demand was very strong, allowing the company to sell its entire manufacturing output of 80,000 units. The following unit costs were
incurred:
Manufacturing costs:
Direct materials $15
Direct labor 8
Variable overhead 11
Fixed overhead 6
Selling and administrative costs:
Variable 5
Fixed 2
Global anticipates an increase in productive output to 100,000 units and sales of 95,000 units in the next accounting period.
The company uses appropriate drivers to determine cost behavior and estimates.
Required:
7. Assuming that present cost behavior patterns continue, compute the total expected costs in the upcoming
accounting period.
8. George Levy is about to prepare a graph that shows the unit cost behavior for variable selling and administrative
cost. If the graphs horizontal axis is volume and the vertical axis is dollars, briefly describe what Georges graph
should look like.
9. Determine whether the following costs are variable or fixed in terms of behavior:
a. Yearly lease payments for a state-of-the-art cutting machine.
b. A fee paid to a consultant who provided advice about quality issues. The fee was based on the number of
consulting hours provided.
c. Cost of an awards dinner for "star" salespeople.
PROBLEM C.
Consider the following items:
Required:
Complete the table that follows and classify each of the costs listed as (1) a product or period cost and (2) a variable or
fixed cost by placing an "X" in the appropriate column.
Problem D
Using the following data for a recent period, calculate the beginning finished goods inventory:
Problem E.
A partial listing of costs incurred during March at Febbo Corporation appears below:
PROBLEM F.
Debra works on the assembly line of a manufacturing company where she installs a component part for one of the company's products.
She is paid $16 per hour for regular time and time and a half for all work in excess of 40 hours per week.
Required:
12. Debra works 42 hours during a week in which there was no idle time. The allocation of Debra's wages for the
week between direct labor cost and manufacturing overhead cost would be:
Problem G.
Circle K Toys, Inc. manufactures toys and children's clothing and sells these products to retail outlets. The following costs were
incurred in performing quality activities at Circle K during the year: