mstrong Helmet Company manufactures a unique model of bicycle helmet. The company began operations December 1, 2013. Its accountant quit the second week of operations, and the company is searching for a replacement. The company has decided to test the knowledge and ability of all candidates interviewing for the position. Each candidate will be provided with the information below and then asked to prepare a series of reports, schedules, budgets, and recommendations based on that information. The information provided to each candidate is as follows:

Cost Items and Account Balances:

Administrative salaries $15,500

Advertising for helmets $11,000

Cash, December 1 $0

Depreciation on factory building $1,500

Depreciation on office equipment $800

Insurance on factory building $1,500

Miscellaneous expensesfactory $1,000

Office supplies expense $300

Professional fees $500

Property taxes on factory building $400

Raw materials used $70,000

Rent on production equipment $6,000

Research and development $10,000

Sales commissions $40,000

Utility costsfactory $900

Wagesfactory $70,000

Work in process, December 1 $0

Work in process, December 31 $0

Raw materials inventory, December 1 $0

Raw materials inventory, December 31 $0

Raw material purchases $70,000

Finished goods inventory, December 1 $0

Production and Sales Data:

Number of helmets produced $10,000

Expected sales in units for December ($40 unit sales price) $8,000

Expected sales in units for January 10,000

Desired ending inventory: 20% of next month's sales Direct materials per finished unit: 1 kilogram

Direct materials cost: $7 per kilogram Direct labor hours per unit: 0.35 Direct labor hourly rate: $20

Cash Flow Data:

Cash collections from customers: 75% in month of sale and 25% the following month.

Cash payments to suppliers: 75% in month of purchase and 25% the following month.

Income tax rate: 45%. Cost of proposed production equipment: $720,000.

Manufacturing overhead and selling and administrative costs are paid as incurred. Desired ending cash balance: $30,000.

**INSTRUCTIONS!**

Using the data presented above, do the following...

2. classify the costs as either variable or fixed costs. Assume there are no mixed costs. enter the dollare amount of each cost in the approriate column and total each classification. Use the format shown below

Item Variable Cost Fixed costs Total costs

11. Prepare a flexible budget for manufacuring costs for activity levels between 8000 and 10000 units, in 1000 unit increments.

12. identify one potential cause of direct materials, direct labor, and manufacturing over head variances in the production of the helmet.