1. Make or Buy Rashad Rahavy, M.D., is a general practitioner whose offices are located in the South Falls Professional Building. In the past, Dr. Rahavy has operated his practice with a nurse, a receptionist/secretary, and a part-time bookkeeper. Dr. Rahavy, like many small-town physicians, has billed his patients and their insurance companies from his own office. The part-time bookkeeper, who works 10 hours per week, is employed exclusively for this purpose. North Falls Physician's Service Center has offered to take over all of Dr. Rahavy's billings and collections for an annual fee of $7,000. If Dr. Rahavy accepts this offer, he will no longer need the bookkeeper. The bookkeeper's wages and fringe benefits amount to $14 per hour, and the bookkeeper works 50 weeks per year. With all the billings and collections done elsewhere, Dr. Rahavy will have two additional hours available per week to see patients. He sees an average of four patients per hour at an average fee of $35 per visit. Dr. Rahavy's practice is expanding, and new patients often have to wait several weeks for an appointment. He has resisted expanding his office hours or working more than 50 weeks per year. Finally, if Dr. Rahavy signs on with the center, he will no longer need to rent a records storage facility for $100 per month.

Conduct a relevant cost analysis to determine if it is profitable to outsource the bookkeeping. Calculate the net advantage (disadvantage) of outsourcing the bookkeeping. Use a negative sign with your answer to indicate a net disadvantage, if applicable.

2.

Selected data concerning operations of Cascade Manufacturing Company for the past fiscal year follow:

Raw materials used	$300,000
Total manufacturing costs charged to production during the year(includes raw materials, direct labor, and manufacturing overheadapplied at a rate of 60 percent of direct labor costs)	700,000
Cost of goods available for sale	772,500
Selling and general expenses	30,000

	Inventories
	Beginning	Ending
Raw materials	$35,000	$40,000
Work-in-process	42,500	15,000
Finished goods	45,000	55,000

(a) Cost of raw materials purchased

(b) Direct labor costs charged to production

(c) Cost of goods manufactured

(d) Cost of goods sold

3.

Manufactured from Percent Relationships Information about NuWay Products Company for the year ending December 31, 2010, follows:

• Sales equal $550,000.
• Direct materials used total $70,000.
• Manufacturing overhead is 150 percent of direct labor dollars.
• The beginning inventory of finished goods is 20 percent of the cost of goods sold.
• The ending inventory of finished goods is twice the beginning inventory.
• The gross profit is 20 percent of sales.
• There is no beginning or ending work-in-process.

Prepare a statement of cost of goods manufactured for 2010. (Hint: Prepare an analysis of changes in Finished Goods Inventory.)