21-1 Fire Out Company manufactures its product, Vitadrink, through two manufac turing processes: Mixing and Packaging. All materials are entered at the beginning of each process. On October 1, 2017, inventories consisted of Raw Materials $26,000, Work in. Process —Mixing $0, Work in Process—Packaging $250,000, and Finished Goods $289,000, The beginning inventory for Packaging consisted of 10,000 units that were 50% complete as to conversion costs and fully complete as to materials. During October, 50,000 units ‘were started into production in the Mixing Department and the following transactions ‘were completed. |. Purchased $300,000 of raw materials on account. Isstied raw materials for production: Mixing $210,000 and Packaging $45,000, Incurred labor costs of $278,900. Used factory labor: Mixing $182,500 and Packaging $96,400. Incurred $810,000 of manufacturing overhead on account. . Applied manufacturing overhead on the basis of $23 per machine hour, Machine hours ‘were 28,000 in Mixing and 6,000 in Packaging. 7. Transferred 45,000 units from Mixing to Packaging at a cost of $979,000. 8. Transferred 53,000 units from Packaging to Finished Goods at a cost of $1,315,000. 9. Sold goods costing $1,604,000 for $2,500,000 on account. Instructions ‘Tournalize the October transactions. P21-2A Rosenthal Company manufactures bowling balls through two processes: Molding and Packaging. In the Molding Department, the urethane, rubber, plastics, and other ‘materials are molded into bowling balls. In the Packaging Department, the balls are placed in cartons and sent to the finished goods warehouse. All materials are entered at the begin- ning of each process. Labor and manufacturing overhead are incurred uniformly through- ‘uit each process, Production and cost data for the Molding Department during June 2017 are presented below. Production Data June ‘Beginning work in provess units 0 Units started into production 22,000 Ending work in process units 2,000 Percent complete—ending inventory 40% Cost Data ‘Materials $198,000 Labor 53,600 Overhead 112,800 Total $364,400 Instructions (a) Prepare a schedule showing physical units of production. (b) Determine the equivalent units of production for materials and conversion costs. (©) Compute the unit costs of production, (@) Determine the costs to be assigned to the units transferred out and in process for June. (©) Prepare production cost report for the Molding Department for the month of June.P21-3A Thakin Industries Ine. manufactures dorm furniture separate processes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in two different manufacturing plants are as follows. Production Data—huly Work in process units, July 1 Units started into production Work in process units, July 31 ‘Work in process percent complete Cost Data—July Work in process, July 1 Materials: Labor Overhead, Total Instructions {a) Foreach plant (2) Compute the physical units of production, so 380,000 234,400 104,000 $718,400 so 288,000 110,000 104,800 $502,800 (2) Compute equivalent units of production for materials and for conversion costs. (3) Determnine the unit costs of production. (4) Show the assignment of costs to units transferred out and in process. (b) Prepare the production cost report for Plant 1 for July 2017. P21-4A Rivera Company has several processing departments, Costs charged to the Assembly Department for November 2017 totaled $2,280,000 as follows. ‘Work in process, November 1 Materials $79,000 Conversion costs 48,150 $127,150 Materials added 1,589,000 Labor 225,920 Overhead 337930 Production records show that 35,000 units were in be Jing work in process 304% com= plete as to conversion costs, 660,000 units were started into production, and 25,000 units ‘were in ending work in process 40% complete as to conversion costs. Materials are entered, al the beginning of each process. Instructions (a) Determine the equivalent units of production and the unit production costs for the Assembly Department. (b) Determine the assignment of costs to goods transferred out and in process. (©) Prepare a production cost report for the Assembly Department.P21-5A Polk Company manufactures basketballs. Materials are added at the beginning of the production process and conversion costs are incurred uniformly, Production and cost data for the month of July 2017 are as follows. Percentage Production Data—Basketballs Units. Complete Work in process units, July 1 500 60% Units started into production 1,000 Work in process units, July 31 600 40% Cost Data—Basketballs Work in process, July 1 Materials $750 Conversion costs 600 Direct materials ~ Direet labor “Manufacturing overhead Instructions (@) Caleulate the following. (2) The equivalent units of production for materials and conversion costs. (2) The unit costs of production for materials and conversion costs. (3) The assignment of costs to units transferred out and in process at the end of the accounting period. (b) Prepare a production cost report for the month of July for the basketballs.P22-1A Vin Diesel owns the Fredonia Barber Shop. He employs four barbers and pays ‘each a base rate of $1,250 per month. One of the barbers serves as the manager and receives an extra $500 per month. In addition to the base rate, each barber also receives a ‘commission of $4.50 per haircut. Other costs are as follows, Advertising $200 per month $1,100 per month $0.30 per haireut $175 per month plus $0.20 per haircut Magazines: $25 per month Vin currently charges $10 per haircut. Instructions (a) Determine the variable costs per haircut and the total monthly fixed costs. (b) Compute the break-even point in units and dollars (c) Prepare a CVP graph, assuming a maximum of 1,800 haircuts in a month. Use inere- ‘ments of 300 haircuts on the horizontal axis and $3,000 on the vertical axis. (@) Determine net income, assuming 1,600 haircuts are given in a month. P22-2A Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2017, management estimates the following revenues and costs. Sales {$1,800,000 ig expenses—variable $70,000 Direct materials 430,000 Selling expenses—fixed 65,000, Direct labor 360,000 Administrative expenses— Manuiacturing overhead— 20,000 variable 380,000 ‘Manufacturing overhead— 0,000 fixed 280,000 Instructions (a) Prepare a CVP income statement for 2017 based on management’ estimates. (Show ‘coliuma for total amounts only.) (b) Compute the break-even point in (1) units and (2) dollars. (© Compute the contribution margin ratio and the margin of safety ratio, (Round to nearest full percent.) (d) Determine the sales dollars required to earn net income of $180,000.P22-3A Tanck Corp.’ sales shamped badly in 2017, For the first its history, it oper= ated ata loss. The company’s income statement showed the following results from selling 500,000 units of product: sales $2,500,000, total costs and expenses $2,600,000, and net loss $100,000. Costs and expenses consisted of the amounts shown on page 999, Total Variable Fixed Cost of goods sold $2,140,000 $1,590,000 $550,000, Selling expenses 250,000 92,000 158,000 ‘Administrative expenses 210,000 68,000 _ 142,000 $2,600,000 $1,750,000 $850,000 Management is considering the following independent alternatives for 2018, 4, Increase unit selling price 20% with no change in costs, expenses, and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totaling $150,000 {0 total salaries of $60,000 plus a 5% commission on sales. Instructions (a) Compute the break-even point in dollars for 2017. (b) Compute the break-even point in dollars under each of the alternative courses of action. (Round all ratios to nearest full percent.) Which course of action do you recommend? 22-48 Mary Willis isthe advertising manager for Bargain Shoe Store. She is currently ‘working on s major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $24,000 in fixed costs to the $270,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $24 per pair of shoes. Management is impressed with Mary's ideas but concerned about the effects that these changes will have on the break-even point and the arg of safety Instructions (a) Compute the current break-even point in units, and compare it to the break-even point inunits if Marys ideas are used (6) Compute the margin of safety ratio for current operations and after Mary's changes are introduced. (Round to nearest fll percent.) (©) Prepare a CVP income statement for current operations and after Mary’ changes are introduced. (Show column for total amounts only.) Would you make the changes sug- gested?P22-5A Vicjol Corporation has collected the following information after its first year of sales. Sales were $1,600,000 on 100,000 units, selling expenses $250,000 40% variable and {60% fixed), direct materials $490,000, direct labor $290,000, administrative expenses $270,000 (20% variable and 80% fixed), and manufacturing overhead $380,000 (70% vari- able and 30% fixed). Top management has asked you to do a CVP analysis so that it can ‘make plans for the coming year. It has projected that unit sales will increase by 10% next year Instructions (@) Compute (1) the contribution margin for the current year and the projected year, and (Q) the fixed costs for the current year: (Assume that fixed costs will remain the Same in the projected year) (b) Compute the break-even point in units and sales dollars for the current year (©) The company has a target net income of $200,000. What is the required sales in dollars for the company to meet its target? (@) Ifthe company meets its target net income number, by what percentage could its sales fall before it is operating at a loss? That is, what is its margin of safety ratio?P23-1 Cook Farm Supply Company manufactures and sells a pesticide called Snare. The following data are avilable for preparing budgets for Snare for the first 2 quarters of 2017. 1. Sales: quarter 1, 40,000 bags: quarter 2, 36,000 bags. Slling price is $60 per bag. 2 Direct materials: each bag of Share requires 4 pounds of Guram at a cost of $3.80 per pound and 6 pounds of Tarr at $1.50 per pound. 3. Desired inventory levels: ‘Type of Inventory January! April July ‘Snare (bags) 8.000 15,000 18,000 Gumm (pounds) 81000 10,000 13,000 ‘Tarr (pounds) 14.000 20.000 25.000, |. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hou Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter Interest expense is $100,000. Income taxes are expected to be 30% of income before income taxes. ‘Your assistant has prepared two budgets: (1) the manufacturing overhead budget shows expected costs to be 125% of direct labor cost, and (2) the direct materials budget for Tarr shows the cost of Tarr purchases to be $297,000 in quarter 1 and $439,500 in quarter 2 Instructions Prepare the budgeted multiple-step income statement for the first 6 months and all required operating budgets by quarters. (Note: Use variable and fixed in the selling and administrative expense budget) Do not prepare the manufacturing overhead budget or the direct materials budget for Tare 'P23-2A Deleon Inc. is preparing its annual budgets for the year ending December 31, 2017. Accounting assistants furnish the data shown below. Product 1850 Product JB 60 Sales budget “Anticipated volume in units 400,000 200,000 Unit selling price $20 $25 Production budget: ‘Desired ending finished goods units 30.000 15,000 ‘Beginning finished goods units 25,000 10,000 Direct materials budget: Direct materials per unit (pounds) 2 3 Desired ending direct materials pounds 30,000 10,000 Beginning direct materials pounds 40,000 15,000 Cost per pound $3 $4 Direct labor budget: Direct labor time per unit os 06 Direct labor rate per hour sz $12 Budgeted income statement: ‘Total unit cost si $0 ‘An accounting assistant has prepared the detailed manufacturing overhead budget and the selling and administrative expense budget. The latter shows selling expenses of ‘$560,000 for product 3B 50 and $360,000 for product JB 60, and administrative expenses ‘0 $540,000 for product 3B 50 and $340,000 for product JB 60. Interest expense is $150,000 (aot allocated to products). Income taxes are expected to be 30% Instructions Prepare the following budgets forthe year: Show data for each product. Quarterly budgets should not be prepared. (a) Sales. (2) Direct labor, (b) Production. (@) Multiplestep income statement (Note: income taxes are () Direct materials. not allocated to the products).P23-3A Hill Industries had sales in 2016 of $6,800,000 and gross profit of $1,100,000. Man- agement is considering two altemative budget plans to increase its gross profit in 2017, Plan A would inerease the selling price per unit from $8.00 to $8.40. Sales volume would, decrease by 10% from its 2016 level. Plan B would decrease the selling price per unit by $0.50. ‘The marketing department expects that the sales volume would increase by 100,000 units. At the end of 2016, Hill has 40,000 units of inventory on hand. If Plan Ais accepted, the 2017 ending inventory should be equal to 5¢ of the 2017 sales. If Plan B is accepted, the ending inventory should be equal 10 60,000 units. Each unit produced will cost $1.80, in direct labor, $1.40 in direct materials, and $1.20 in variable overhead. The fixed over- head for 2017 should be $1,895,000. Instructions (a) Prepare a sales budget for 2017 under each plan. (b) Prepare a production budget for 2017 under each plan. (©) Compute the production cost per unit under each plan. Why isthe cost per unit for each of the two plans? (Round to two decimals.) (@) Which plan should be accepted? (Hin: Compute the gross profit under each plan.) ferent 23-40 Colter Company prepares monthly cash budgets. Relevant data from operating ‘budgets for 2017 are as follows. January February ‘Sales $360,000 $400,000 Direct materials purchases 120,000 125,000 Direct labor 90,000 100,000 Manufacturing overhead 70,000 75,000 ‘Selling and administrative expenses 79,000 85,000 Al sales are on account. Collections are expected to be 50% in the month of sale, 30% In the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purehase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except lor selling and administrative expenses that include $1,000 of depreciation per month. Other data: 1. Credit sales: November 2016, $250,000; December 2016, $320,000, 2. Purchases of direct materials: December 2016, $100,000. 3. Other receipts: January—collection of December 31, 2016, notes reeei Februaty—proceeds from sale of securities $6,000. 4. Other disbursements: February—payment of $6,000 cash dividend. ‘The company’s cash balance on January 1, 2017, is expected to be $60,000. The company ‘wants to maintain a minimum cash balance of $50,000. Instructions (@) Prepare schedules for (1) expected collections from customers and (2) expected pay- ‘ments for direct materials purchases for January and February. (b) Prepare a cash budget for January and February in columnar form.P23-5A The budget committee of Suppar Company collects the following data for its San ‘Miguel Store in preparing budgeted income statements for May and June 2017. 1. Sales for May are expected to be $800,000. Sales in June and July are expected to be $4% higher than the preceding month, 2. Cost of goods sold is expected to be 75% of sales. 3. Company policy is to maintain ending merchandise inventory at 10% of the following ‘month cost of goods sold. 4. Operating expenses are estimated to be as Follows: Sales salaries $35,000 per month Advertising (62 of monthly sales Delivery expense 2% of monthly sales Sales commissions 5% of monthly sales. Rent expense $5,000 per month Depreciation $800 per month Usilities $000 per month Insurance $500 per month 5, Interest expense is $2,000 per month, Income taxes are estimated to be 30% of income before income taxes. Instructions (a) Prepare the merchandise purchases budget for each month in columnar farm. (b) Prepare budgeted multiple-step income statements for each month in columnar form. ‘Show in the statements the details of cost of goods sold.