Problem 1

Apollo Manufacturing produces a basic cellphone as a contract manufacturer. Overhead is applied at a rate of $42 per direct labor hour. The direct labor rate is $18 per hour. In March, there was no beginning or ending work in process, and the assembly department produced 20,000 finished phones. The materials cost was $120,000, and there were 2,500 direct labor hours worked during the month. Actual overhead spending was $103,400 during the month.

Calculate the total cost of production in the month of March and the cost per unit for each phone produced. Determine if overhead was over applied or under applied and by what amount.

Problem 2

Mega Manufacturing produces wooden chairs. The cutting department produces all of the component parts and transfers the parts to the assembly department. The assembly department had no work in process at the beginning of the month and had two jobs started during the month. Since materials are transferred in, all materials are charged to each job at the beginning of the job. The materials cost is $17.50 per chair. Assembly time is 20 minutes per chair and the direct labor rate is $15 per hour. Overhead is charged to a job only when a job is completed and ready to transfer to finished goods. The overhead is applied on a per-chair basis at a rate of $6 per chair. Job No. 1 was for 1,000 chairs, and it was started and completed during the month. Job No. 2 was for 1,500 chairs, and it was 60% complete at month end.

Calculate the costs to complete Job No. 1 and the unit cost per chair. Calculate the costs charged as of month's end and the equivalent units of production for Job No. 2.

Problem 3

Presented below is an income statement, with the past two years' results presented:

	2016	2015
Revenue	$4,200,000	$4,000,000
Cost of goods sold	$2,910,000	$2,800,000
Gross profit	$1,290,000	$1,200,000
Selling cost	$280,000	$250,000
Administrative cost	$140,000	$120,000
Operating profit	$870,000	$830,000
Interest expense	$78,000	$80,000
Income before taxes	$792,000	$750,000
Income taxes	$277,200	$262,500
Net income	$514,800	$487,500

Prepare a vertical analysis of both 2016 and 2015. Display percentages to 3 decimal places (.654 = 65.4%). Discuss any line items from the income statement that may warrant further investigation from management.

Problem 4 Presented below is a balance sheet for the last two years:

	2016	2015
Cash	$118,000	$115,000
Accounts receivable	$98,000	$ 77,000
Short-term investments	$60,000	$65,000
Current assets	$276,000	$257,000
Equipment, net of depreciation	$220,000	$205,000
Land	$75,000	$75,000
Total assets	$571,000	$537,000
Accounts payable	$72,000	$96,000
Wages payable	$4,000	$3,000
Short-term revolving bank loan	$85,000	$50,000
Current liabilities	$161,000	$149,000
Long-term debt	$128,000	$132,000
Total liabilities	$289,000	$281,000
Common stock	$100,000	$100,000

Prepare a horizontal analysis. Display percentages to 3 decimal places (.654 = 65.4%). Discuss any line items from the balance sheet that may warrant further investigation from management

Problem 1 Direct materials Direct labor Overhead applied Total cost Cost per unit (total $ / units) Total overhead incurred Overhead applied Over applied overhead Problem 2 Job 1 Direct materials $ Direct labor $ Overhead applied $ Total cost $ Cost per unit (total / units) $ Job 2 Material Units started Percent complete Equivalent units Cost per unit Total cost Total in WIP at month end is $ Labor Overhead Next page for problem 3 and 4 Problem 3 2016 2015 Revenue $4,200,000 $4,000,000 Cost of goods sold $2,910,000 $2,800,000 Gross profit $1,290,000 $1,200,000 Selling cost $280,000 $250,000 Administrative cost $140,000 $120,000 Operating profit $870,000 $830,000 Interest expense $78,000 $80,000 Income before taxes $792,000 $750,000 Income taxes $277,200 $262,500 Net income $514,800 487,500 Which items should be looked at further? Management should look into selling and administrative costs because these expenses are growing faster than revenue. Problem 4 2016 2015 Cash $118,000 $115,000 Accounts receivable $98,000 $77,000 Short-term investments $60,000 $65,000 Current assets $276,000 $257,000 Equipment, net of depreciation $220,000 205,000 Land $75,000 $75,000 Total assets $571,000 537,000 Accounts payable $72,000 $96,000 Wages payable $4,000 $3,000 Short-term revolving bank loan $85,000 $50,000 Current liabilities $161,000 $149,000 Long-term debt $128,000 $132,000 Total liabilities $289,000 $281,000 Common stock $100,000 $100,000 Retained earnings $182,000 $156,000 Total liabilities and equity $571,000 $537,000