PROBLEM 1-2.

Incremental Analysis. Consider the production cost information for Santiagos Salsa in Problem 1-1.

The company is currently producing and selling 325,000 jars of salsa annually. The jars sell for $5.00 each. The company is considering lowering the price to $4.60. Suppose this action will increase sales to 375,000 jars.

Required

a. What is the incremental cost associated with producing an extra 50,000?

b. What is the incremental revenue associated with the price reduction of $0.40 per jar?

c. Should Santiagos lower the price of its salsa?

PROBLEM 1-3.

Budgets in Managerial Accounting. Matthew Gabon, the sales man- ager of Office Furniture Solutions, prepared the following budget for 2014:

Sales Department

Budgeted Costs, 2014

(Assuming Sales of $10,000,000)

Salaries (fixed)	400,000
Commissions (variable)	150,000
Advertising (fixed)	75,000
Charge for office space (fixed)	3,000
Office supplies & forms (variable)	2,000
Total	630,000

After he submitted his budget, the president of Office Furniture Solutions reviewed it and recommended that advertising be increased to $100,000. Further, she wanted Matthew to assume a sales level of $11,000,000. This level of sales is to be achieved without adding to the sales force.

Matthews sales group occupies approximately 250 square feet of office space out of total administrative office space of 20,000 square feet. The $3,000 space charge in Matthews budget is his share (allocated based on relative square feet) of the companys total cost of rent, utilities, and janitorial costs for the administrative office building.

Required

Prepare a revised budget consistent with the presidents recommendation.

PROBLEM 2-1.

Cost of Goods Manufactured, Cost of Goods Sold, and Income. The following information is available for Satterfields Custom Glass for the fiscal year ending December 31, 2014:

Required

a. Prepare a schedule of cost of goods manufactured.

b. Prepare an income statement for fiscal 2014. Ignore income taxes.

PROBLEM 2-3.

Job-Order Costing: Inventory Accounts and Cost of Goods Sold. Smith Die Company manufactures cutting dies for the shoe industry. Each set of dies is custom designed to a customers templates. During the first week of May, six orders were received from customers. They were assigned job numbers 1005 to 1010. The following transactions occurred during the first week of May:

Smith Die purchased steel on account from Eastern City Steel costing $5,500. The company received and paid for supplies (indirect materials) from Mallard Supply costing $2,400.

Material requisitions indicated that materials were issued to the factory floor as follows:

Overhead was applied to all jobs in process at 180 percent of direct labor cost. Jobs 1005, 1006, 1007, and 1008 were completed and transferred to finished goods. Jobs 1009 and 1010 were still in process at the end of the week. Jobs 1005, 1006, 1007, and 1008 were shipped to customers and billed at 150 percent of total job cost.

Required

a. Calculate the total cost of each job.

b. Prepare journal entries to record the above information.