| The cost of goods sold includes $1,275,000 of fixed manufacturing overhead; the operating expenses include $130,000 of fixed marketing expenses. A special order offering to buy 50,300 units for $10.50 per unit has been made to Dexter. Fortunately, there will be no additional operating expenses associated with the order and Tram has sufficient capacity to handle the order. How much will operating profits be increased if Dexter accepts the special order? 4. The DWE Company produces 10,900 units of item S10 annually at a total cost of $217,000. | Direct materials | $ | 24,500 | | Direct labor | | 64,000 | | Variable overhead | | 49,500 | | Fixed overhead | | 79,000 | | | | | | Total | $ | 217,000 | | | | | | The B&B Company has offered to supply 10,900 units of S10 per year for $22.50 per unit. If DWE accepts the offer, $8.50 per unit of the fixed overhead would be saved. In addition, some of DWE's facilities could be rented to a third party for $19,500 per year. At what price would DWE be indifferent to B&B's offer? | | 5. The Axle Division of Blasse coy. produces axles for off-road sport vehicles. One-third of Axle's output is sold to an internal division of Blasse; the remainder is sold to outside customers. Axle's estimated operating profit for the year is: | | | Internal | | Outside | | | | | | | | | Sales | $ | 132,000 | | $ | 357,000 | | Variable costs | | 77,000 | | | 147,000 | | Fixed costs | | 30,100 | | | 60,200 | | | | | | | | | Operating profits | $ | 24,900 | | $ | 149,800 | | | | | | | | | Unit sales | | 11,000 | | | 21,000 | | The internal division has an opportunity to purchase 11,000 axles of the same quality from an outside supplier on a continuing basis. The Axle Division cannot sell any additional products to outside customers. What is the minimum selling price that Axle should accept from the internal division? | 6. Clipper Corporation is a specialty component manufacturer with idle capacity. Management would like to use its unused capacity to generate additional profits. A potential customer has offered to buy 7,600 units of component VFG. Each unit of VFG requires 8.00 units of material C79 and 6.00 units of material X70. Data concerning these two materials follow: | | Material | Units in Stock | | Original Cost Per Unit | | Current Market Price Per Unit | | Disposal Value Per Unit | | C79 | 33,820 | | $5.20 | | $4.75 | | $4.50 | | X70 | 32,460 | | $10.70 | | $11.00 | | $9.75 | | Material C79 is in use in many of the company's products and is routinely replenished. Material X70 is no longer used by the company in any of its normal products and existing stocks would not be replenished once they are used up. | | What would be the relevant cost of the materials, in total, for purposes of determining a minimum acceptable price for the order for product VFG? | 7. The following direct labor information pertains to the manufacture of product Fanz: | Time required to make one unit | 2 | direct labor hours | | Number of direct workers | 38 | | | Number of productive hours per week, per worker | 49 | | | Weekly wages per worker | $700 | | | Workers' benefits treated as direct labor costs | 30 | % of wages | What is the standard direct labor cost per unit of product Fanz? (Round your final answer to 2 decimal places.) | 8. Tunns, Inc. uses a predetermined manufacturing overhead rate based on direct labor hours to apply its indirect product costs to jobs. The following information has been collected for the previous year: | | Direct materials | $ | 30,000 | | Direct labor | | 40,000 | | Sales commission | | 20,000 | | Indirect labor | | 10,000 | | Rent on office equipment | | 5,000 | | Depreciation factory building | | 15,000 | | Utilities factory | | 25,000 | | Tunns used 10,000 direct labor hours and 20,000 machine hours during the previous year. What is the predetermined overhead rate per direct labor hour? | | | 9. Given the following information, compute the total number of units for the period: | | | | Direct labor hours | | 17,400 | | | Direct labor cost | $ | 5.00 | per hour | | Direct materials cost | $ | 100 | per unit | | Total manufacturing cost | $ | 208,800 | | | Fixed overhead cost | $ | 52,200 | | | Variable overhead cost | | 50% | of total labor cost | | 10. CoxF Company is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff has suggested that linear regression be employed to derive an equation in the form of y = a + bx for maintenance costs. Data regarding the maintenance hours and costs for last year and the results of the regression analysis are as follows: | | | Hours of Activity | | Maintenance Costs | | January | 460 | | $ 4,000 | | February | 330 | | 3,100 | | March | 390 | | 3,600 | | April | 280 | | 2,920 | | May | 500 | | 4,340 | | June | 290 | | 2,940 | | July | 300 | | 3,130 | | August | 490 | | 4,780 | | September | 460 | | 4,310 | | October | 480 | | 4,180 | | November | 320 | | 3,600 | | December | 320 | | 3,200 | | | | | | | Sum | 4,620 | | 44,100 | | Average | 385 | | 3,675 | | A coefficient | | | 1,017.90 | | B coefficient | | | 6.9016 | | Standard error of the a cofficient | 284.392 | | | | Standard error of the a cofficient | 0.72197 | | | | Standard error of the estimate | | | 208.373 | | R2 | | | 0.90136 | | T-value a | | | 3.579 | | T-value b | | | 9.559 | | Using the high-low method to estimate cost behavior, 500 maintenance hours in a month would mean the maintenance costs would be budgeted at: (Round your intermediate calculations and final answer to 2 decimal places.) | 11. The following information relates to the PAW Company for the upcoming year. | | | Amount | | Per Unit | | | | | | | | Sales | | $8,600,000 | | $32.00 | | Cost of goods sold | | 6,700,000 | | 22.00 | | | | | | | | Gross margin | | 1,900,000 | | 10.00 | | Operating expenses | | 720,000 | | 2.70 | | | | | | | | Operating profit | | $1,180,000 | | $ 7.30 | | | | | | | | The cost of goods sold includes $2,700,000 of fixed manufacturing overhead; the operating expenses include $320,000 of fixed marketing expenses. A special order offering to buy 51,200 units for $27.00 per unit has been made to PAW. Fortunately, there will be no additional operating expenses associated with the order; however, PAW is operating at full capacity. How much will operating profits increase if PAW accepts the special order? | 12. The BGA Company produces 10,400 units of item S10 annually at a total cost of $202,000. | Direct materials | $ | 22,000 | | Direct labor | | 59,000 | | Variable overhead | | 47,000 | | Fixed overhead | | 74,000 | | | | | | Total | $ | 202,000 | | | | | | The GRAT Company has offered to supply 10,400 units of S10 per year for $20.00 per unit. If BGA accepts the offer, $6.00 per unit of the fixed overhead would be saved. In addition, some of BGA's facilities could be rented to a third party for $17,000 per year. What are the relevant costs for the "make" alternative? 13. Drek Sales had $2,130,000 in sales last month. The contribution margin ratio was 25% and operating profits were $173,000. What is Drek's break-even sales volume? | During April, Pepsi Company had the following operating results: | | Sales revenue | $ | 1,590,000 | | Gross margin | $ | 636,000 | | Ending work in process inventory | $ | 47,700 | | Beginning work in process inventory | $ | 82,700 | | Ending finished goods inventory | $ | 95,000 | | Beginning finished goods inventory | $ | 132,000 | | Marketing costs | $ | 254,400 | | Administrative costs | $ | 159,000 | | What is the cost of goods manufactured for April? | 14. Shade produces and sells three products. Last month's results are as follows: | | P1 | P2 | P3 | | Revenues | $ | 104,000 | $ | 208,000 | $ | 208,000 | | Variable costs | | 41,600 | | 93,600 | | 83,200 | | | Fixed costs total $140,000. What is shade's margin of safety? (Assume the current product mix.) | 15. Yarn Company has the following data for the production and sale of 2,500 units. | | Sales price | | $ | 880.00 | per unit | | Fixed costs: | | | | | | Marketing and administrative | | $ | 290,000 | per period | | Manufacturing overhead | | $ | 145,000 | per period | | Variable costs: | | | | | | Marketing and administrative | | $ | 55.00 | per unit | | Manufacturing overhead | | $ | 88.00 | per unit | | Direct labor | | $ | 110.00 | per unit | | Direct material | | $ | 220.00 | per unit | | What is the prime cost per unit? | | | | |
