Problem 2 (3 min) Meiser, Howard and Associates, a law firm, employs ABC The following budgeted data for each of the activity cost pools is provided for the year 2016 Activity Cost Pools Researching legal issues Preparing legal documents Meeting with clients Estimated Overhead $ 31,500 480,000 1,760,000 Expected Use of Cost Drivers per Activity 900 research hours 30,000 pages 8,800 professional hours During 2016 the firm worked 660 research hours, 10,000 professional hours, and prepared 25,000 document pages Instructions Compute the total overhead applied during 2016 Problem 3 (12 17 min) In the month of September, Matlock Industries sold 800 units of product The average sales price was $30 During the month, fixed costs were $6,300 and variable costs were 70 of sales Instructions (a) Determine the contribution margin in dollars, per unit, and as a ratio (b) Using the contribution margin technique, compute the break even point in dollars and in units Problem 5 (9 13 min) Sebastian Company produced and sold 50,000 units of product and is operating at 70 of plant capacity Unit information about its product is as follows Sales price Variable manufacturing cost Fixed manufacturing cost ($500,000 50,000) Profit per unit $70 $45 10 55 $15 The company received a proposal from a foreign company to buy 10,000 units of Sebastian Companys product for $50 per unit This is a one time only order and acceptance of this proposal will not affect the companys regular sales The president of Sebastian Company is reluctant to accept the proposal because he is concerned that the company will lose money on the special order Instructions Prepare a schedule reflecting an incremental analysis of this proposal and indicate the effect the acceptance of this order might have on the companys income

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Problem 2 (3 min) Meiser, Howard and Associates, a law firm, employs ABC. The following budgeted data for each of the activity cost pools is

Problem 2 (3 min)

Meiser, Howard and Associates, a law firm, employs ABC. The following budgeted data for each of the activity cost pools is provided for the year 2016.

Activity Cost Pools

Researching legal issues Preparing legal documents Meeting with clients

Estimated Overhead $ 31,500 480,000 1,760,000

Expected Use of Cost Drivers per Activity 900 research hours

30,000 pages 8,800 professional hours

During 2016 the firm worked 660 research hours, 10,000 professional hours, and prepared 25,000 document pages.

Instructions

Compute the total overhead applied during 2016.

Problem 3 (12-17 min)

In the month of September, Matlock Industries sold 800 units of product. The average sales price was $30. During the month, fixed costs were $6,300 and variable costs were 70% of sales.

Instructions

(a) Determine the contribution margin in dollars, per unit, and as a ratio.
(b) Using the contribution margin technique, compute the break-even point in dollars and in units.

Problem 5 (9-13 min)

Sebastian Company produced and sold 50,000 units of product and is operating at 70% of plant capacity. Unit information about its product is as follows:

Sales price Variable manufacturing cost Fixed manufacturing cost ($500,000 50,000) Profit per unit

$70

$45 10 55

$15

The company received a proposal from a foreign company to buy 10,000 units of Sebastian Companys product for $50 per unit. This is a one-time only order and acceptance of this proposal will not affect the companys regular sales. The president of Sebastian Company is reluctant to accept the proposal because he is concerned that the company will lose money on the special order.

Instructions

Prepare a schedule reflecting an incremental analysis of this proposal and indicate the effect the acceptance of this order might have on the companys income.