3-27 Review of Chapters 2 and 3 For each of the following independent cases, find the unknowns, designated by letters.

CASE 1 CASE 2 CASE 3 Sales $100,000 $ M $100,000 Direct material used 29,000 55,000 40,000 Direct labor 10,000 25,000 15,000 Variable selling and administrative expenses 16,000 70,000 (E Fixed manufacturing overhead 30,000 Q 20,000 Fixed selling and administrative expenses 9,000 R 10,000 Gross profit A ie 20,000 Finished-goods inventory, 1/1 -0- -0- 5,000 Finished-goods inventory, 12/31 -0- -0- 5,000 Contribution margin (dollars) [g 40,000 V Direct-material inventory, 1/1 1,000 N 50,000 Direct-material inventory, 12/31 10,000 15,000 WwW Variable manufacturing overhead Cc 10,000 x CASE 1 CASE 2 CASE 3 Work in process, 1/1 -0- -0- 9,000 Work in process, 12/31 -0- -0- 9,000 Purchases of direct material D 60,000 10,000 Breakeven point (in dollars) F S Vf Cost of goods manufactured B 110,000 U Net income (loss) 1,000 5,000 (5,000)

Additional Information Factory overhead has been applied as a percentage of direct labor through December 30.
Direct material purchases during 19_6 were $90,000.
There were no returns to suppliers.
Direct labor costs during 19_6 totaled $150,000, not including the December 31 working day described above.
ie 2:
4-19 Beginning inventories of direct material, work in process, and finished goods.
Show T-accounts.
Prepare all adjusting and closing journal entries for the above accounts. Assume that all under- or overapplied overhead is closed directly to Cost of Goods Sold.
. Ending inventories, after adjustments and closing, of direct material, work in process, and finished goods.
Proration of Overhead The Invincible Company has commercial and defense contracting business. A contracting officer for the United States Air Force has insisted that underapplied overhead should no longer be written off directly as an adjustment of Cost of Defense Goods Sold for a given year. His insistence was prompted by the fact that $40 million of underapplied overhead was added to the $400 million of unadjusted Cost of Goods Sold in 19_4. There were no beginning inventories.
Overhead is applied as a percentage of direct labor as contracts are produced.
The Air Force had a large cost-plus-fixed-fee contract representing $300 million of the $400 million of defense production started and sold during 19_4; it had no other contracts pending with Invincible. An analysis of (before considering the $40 million) costs showed (in millions):
DEFENSE BUSINESS Contracts in Finished- Cost of Progress Goods Inventory Goods Sold Direct material $380 $20 $200 Direct labor 90 10 100 Factory overhead applied peo a0) _ 100 $560 $40 $400 _ As a judge trying to settle a dispute on the disposition of the overhead, what position would you favor? Why? Show computations and, assuming your answer would be formally recorded in the books of account, show a journal entry for the proration.
_ As the contracting officer, what proration of the underapplied overhead would you favor? Why? Show computations.
General-Ledger Relationships; Incomplete Data You are asked to bring the following incomplete accounts up to date through May, 19_1. Also consider the additional information that follows the T-accounts.
STORES CONTROL ACCOUNTS PAYABLE S/STASI Balance 18,000 4/30/_1 Balance 10,000 DEPARTMENT FACTORY WORK-IN-PROCESS CONTROL OVERHEAD CONTROL 4/30/1 Total Balance 2,000 charges for May 15,000z3-28 Review of Chapters 2 and 3 The Cook Co. makes deluxe kitchen cabinets to special order. The controller has given you, his newly hired assistant, the task of constructing a so-called contribution income statement for the year ended December 31, 195. You are troubled because all the data produced by the routine accounting system do not distinguish between variable and fixed costs.
After laboring with statistical regressions you have identified various cost behavior patterns to your satisfaction. You have determined a breakeven point of $550,000; your computations were relatively easy because Cook’s policy is not to carry any inventories. Instead, the company finishes pending orders sometime in December and gives all employees vacations that end in early January.
The traditional income statement included a gross profit of $70,000, sales of $500,000, direct labor of $140,000, and direct material used of $210,000.
The contribution margin was $100,000 and the variable manufacturing overhead was $30,000.
You need not work these in sequence:
1. Fixed manufacturing overhead 2. Variable selling and administrative expenses 3. Fixed selling and administrative expenses