1.

Job 924 was recently completed at OBrien Vineyards. The following data have been recorded on its job cost sheet:

Direct materials	$42,500
Direct labor-hours	1,200
Direct labor wage rate	$12.00
Number of units completed	2,700

The company applies manufacturing overhead on the basis of direct labor-hours. The predetermined overhead rate is $20 per direct labor-hour. Compute the unit product cost that would appear on the job cost sheet for this job.

2.

OBrien Vineyards bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor-hours for the upcoming year at 17,000 labor-hours. The estimated variable manufacturing overhead was $2.25 per labor-hour and the estimated total fixed manufacturing overhead was $165,310. Compute the company's predetermined overhead rate.

3.

OBrien Vineyards recorded the following transactions for the month just completed. Please prepare the journal entries.

a. $60,000 in raw materials were purchased on account.

b. $51,000 in raw materials were requisitioned for use in production. Of this amount, $42,000 was for direct materials and the remainder was for indirect materials.

c. Total labor wages of $92,000 were incurred and paid. Of this amount, $81,000 was for direct labor and the remainder was for indirect labor.

d. Additional manufacturing overhead cost of $112,000 were incurred. All were on account. These included property taxes of $55,000, depreciation of $35,000, utilities of 22,000.

e. The cost of goods manufactured for the year was $1,004,000.

f. Sales for the year totaled $1,416,000 and the costs on the job cost sheets of the goods that were sold totaled $989,000.

4.

OBrien Vineyards plans to sell 200,000 bottles of wine in July and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of bottles is 30% of the next month's estimated sales. There are 58,000 bottles in inventory on June 30. (hint: for Sept ending inventory, you need 30% of Oct. sales. Remember there is a 5% growth rate in sales per month).

Prepare the Production Budget

JULY AUGUST SEPTEMBER

BUDGETED SALES

add: DESIRED END INVENTORY

TOTAL NEEDS

LESS: BEGINNING INVENTORY

REQUIRED PRODUCTION

5.

The budgeted unit sales of OBrien Vineyards for the upcoming fiscal year are provided below:

	July	August	September	October
Budgeted unit sales	24,000	28,000	22,000	20,000

The companys variable selling and administrative expenses per unit are $3.75. Fixed selling and administrative expenses included advertising expenses of $8,000 per month, executive salaries of $40,000 per month, and depreciation of $12,000 per month. In addition, OBrien Vineyards will make insurance payments of $4,000 in the August and $4,000 and October. Finally, property taxes of $3,000 will be paid in August.

Prepare the Selling and Administrative Budget.

		July	August	Spetember
	Budgeted sales
	Variable S&A rate
	Variable expenses
	Fixed expenses
	Total S&A expenses
less:	non-cash
	Cash S&A expenses

6.

OBrien Vineyards has the following direct materials standard to manufacture one bottle of Pinot Noir:

2.4 pounds of grapes per bottle at $1.65 per pound

Last week, 5,415 pounds of grapes were purchased and used to make 2,125 bottles. The grapes cost a total of $9,043.05.

What is OBrien Vineyards materials quantity variance and the materials price variance? (Dont forget to indicate if the variances are favorable or unfavorable).

What is a possible reason for the variances?

7.

OBrien Vineyards has the following direct labor standard to bottle, cork and label one bottle of Pinot Noir:

0.33 standard hours per bottle at $11.25 per direct labor hour

Last week, 777 direct labor hours were worked at a total labor cost of $8,787 to bottle, cork and label 2,125 bottles.

What is OBrien Vineyards labor efficiency variance and the labor rate variance? (Dont forget to indicate if the variances are favorable or unfavorable).

What is a possible reason for the variances?

8.

Electrical costs at OBrien Vineyards are listed below:

	Machine Hours	Electrical Cost
January	2,388	$34,213
February	2,356	$33,912
March	2,380	$34,133
April	2,335	$33,717
May	2,312	$33,514
June	2,360	$33,943
July	2,304	$33,428
August	2,314	$33,530
September	2,378	$34,100

Management believes that electrical cost is a mixed cost that depends on machine-hours. Use the high-low method to estimate the variable and fixed components of this cost.

9

OBrien Enterprises produces giant stuffed bears. Each bear consists of $12 of variable costs and $9 of fixed costs and sells for $45. A wholesaler offers to buy 8,000 bears at $14 each, of which OBrien Enterprises has the capacity to produce. OBrien will incur extra shipping costs of $1 per bear. Determine the incremental income or loss that OBrien Enterprises would realize by accepting the special order.

10

OBrien Corporation currently manufactures 3,000 staplers annually for use its main product. The costs per stapler are as follows:

Direct materials $ 3.00

Direct labor 7.00

Variable overhead 4.00

Fixed overhead 7.00

Total $21.00

Gallup Company has contacted OBrien with an offer to sell them 3,000 staplers for $18.00 each. $5 of the fixed overhead per unit is unavoidable.

Prepare an incremental analysis for the make-or-buy decision.