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ACCT 386 - Week 3 - Homework 3

ACCT 386 - Week 3 - Homework 3
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ACCT 386 - Week 3 - Homework 3

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Question 1

The PVC Company manufactures a high-quality plastic pipe that goes through three processing stages prior to completion.

       Information on work in the first department, Cooking, is given below for May:

 

 

 

  Production data:

 

 

    Pounds in process, May 1: materials
      100% complete; conversion 90% complete

 

83,000   

    Pounds started into production during May

 

480,000   

    Pounds completed and transferred to
      the next department

 

?   

    Pounds in process, May 31:
      materials 75% complete; conversion 25% complete

 

43,000   

  Cost data:

 

 

    Work in process inventory, May 1:

 

 

        Materials cost

$

128,300   

        Conversion cost

$

53,900   

    Cost added during May:

 

 

        Materials cost

$

666,940   

        Conversion cost

$

296,395   


The company uses the weighted-average method

 

Question 2

Nature’s Way, Inc., keeps one of its production facilities busy making a perfume called Essence de la Vache. The perfume goes through two processing departments: Blending and Bottling.

 

      The following incomplete Work in Process account is provided for the Blending Department for March:

Work in Process—Blending


 


  March 1 balance

33,200  

  Completed and transferred
       to Bottling (760,000 ounces)

?       

  Materials

150,600  

  

 

  Direct labor

68,200  

  

 

  Overhead

480,000  

 

 



  March 31 balance

?       

 

 

     The $33,200 beginning inventory in the Blending Department consisted of the following elements: materials, $8,900; direct labor, $3,300; and overhead applied, $21,000.

     Costs incurred during March in the Bottling Department were: materials used, $46,000; direct labor, $17,800; and overhead cost applied to production, $107,000.

 

 

Question 3

Shirts Unlimited operates a chain of shirt stores that carry many styles of shirts that are all sold at the same price. To encourage sales personnel to be aggressive in their sales efforts, the company pays a substantial sales commission on each shirt sold. Sales personnel also receive a small basic salary.

 

     The following worksheet contains cost and revenue data for Store 36. These data are typical of the company's many outlets:

 

Per Shirt

  Selling price

$

52.00   

 





  Variable expenses:

 

 

     Invoice cost

$

24.00   

     Sales commission

 

9.40   

 



       Total variable expenses

$

33.40   

 





 

 

Annual

  Fixed expenses:

 

 

     Rent

$

182,280   

     Advertising

 

96,140   

     Salaries

 

86,140   

 



       Total fixed expenses

$

364,560   

 






     The company has asked you, as a member of its planning group, to assist in some basic analysis of
its stores and company policies.

 

Question 4

 Puleva Milenario SA, a company located in Toledo, Spain, manufactures and sells two models of luxuriously finished cutlery—Alvaro and Bazan. Present revenue, cost, and unit sales data for the two products appear below. All currency amounts are stated in terms of euros, which are indicated by the symbol € .

 

Alvaro

Bazan

  Selling price per unit

4.10  

 

6.15  

 

  Variable expenses per unit

2.46  

 

1.23  

 

  Number of units sold monthly

 

250  

units

 

100  

units


Fixed expenses are €590 per month

 

Question 5

Frieden Company's contribution format income statement for the most recent month is given below:

 

 

 

  Sales (45,000 units)

$

1,170,000

  Variable expenses

 

819,000

 



  Contribution margin

 

351,000

  Fixed expenses

 

280,800

 



  Net operating income

$

70,200

 

 

 

The industry in which Frieden Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits.

 

Question 6

Tyrene Products manufactures recreational equipment. One of the company’s products, a skateboard, sells for $30. The skateboards are manufactured in an antiquated plant that relies heavily on direct labor workers. Thus, variable costs are high, totaling $21.00 per skateboard of which 70% is direct labor cost.

    Over the past year the company sold 53,000 skateboards, with the following operating results:

 

 

 

  Sales (53,000 skateboards)

$

1,590,000  

  Variable expenses

 

1,113,000  

 



  Contribution margin

 

477,000  

  Fixed expenses

 

378,000  

 



  Net operating income

$

99,000  

Management is anxious to maintain and perhaps even improve its present level of income from the skateboards.