4. Carborundum Corporation reported the following operating costs and environmental quality costs for the past four years. Assume that all environmental quality costs are variable and that all changes in the quality cost ratios are due to an environmental cost reduction program.

	Quality Costs as
Year	Operating Costs	Percent of Operating Costs
1	$3,000,000	25.0%
2	3,100,000	23.0
3	3,200,000	21.0
4	3,300,000	20.0

What is the change in environmental costs from Year 3 to Year 4?

a.$12,000

b.$672,000

c.$41,000

d.$37,000

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15

Macheski Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are as follows: June 30 balance sheet amounts are as follows:

Cash	$ 25,000	Accounts payable	$ 45,000
Accounts receivable	110,000	Capital stock	300,000
Inventory	54,000	Retained earnings	94,000
Building and equipment (net)	250,000

Actual sales for June and budgeted sales for July, August, and September are as follows:

June	$137,500
July	360,000
August	400,000
September	320,000

Sales are 20% for cash and 80% on credit. All credit sales are collected in the month following the sale. There are no bad debts. The gross margin percentage is 40% of sales. The desired ending inventory is equal to 25% of the following month's sales. One fourth of the purchases are paid for in the month of purchase, and the others are purchased on account and paid in full the following month. The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000. What is the balance of the inventory account at the end of July?

a.$124,000

b.$54,000

c.$216,000

d.$60,000

13.

Area

Prior to installing a JIT system, Grindstone Company used machine hours to assign maintenance costs to its three products of 4-inch, 6-inch, and 9-inch insulation. The maintenance costs totaled $432,000 per year. The machine hours used by each product and the quantity produced of each product are as follows:

	Machine Hours	Quantity Produced
4-inch	5,000	15,000 rolls
6-inch	12,000	12,500 rolls
9-inch	7,000	11,200 rolls

After installing JIT, three manufacturing cells were created, and the cell workers were trained to perform maintenance. Maintenance costs for the three cells still totaled $432,000; however, these costs are now traceable to each cell.

Cell, 4-inch	$125,000
Cell, 6-inch	175,000
Cell, 9-inch	165,000

The maintenance cost per roll of 9-inch insulation before JIT is installed would be

a.$7.75.

b.$30.00.

c.$11.25.

d.$14.00.