Question 1:

Big Man Company gives you information from the records for the year ended December 31, 2015. (Variable costs are designated V and fixed costs are F).

Big Man has a 30% marginal Tax rate.

Sales (25,000 units @ $15) $375,000

Costs:

Direct Materials 60,000 (100% V)

Direct Labor 90,000 (100% V)

Factory Overhead 120,000 (80% F and 20% V)

Marketing Expenses 40,000 (50% F and 50% V)

Administrative Expenses 30,000 (80% F and 20% V)

Total Costs $340,000

Operating Income 35,000

Show all computations:

1. Compute the breakeven point in number of units and sales dollars.
2. Assuming Big Man has a marginal tax rate of 30%, compute the number of units required to generate an after tax profit of $35,000.
3. Compute number of units required to generate a net before tax profit of 10 percent of sales revenue.

Question 2:

Job Order Costing (one job two departments)

Lyons Inc. employs a normal costing system and has identified the following overhead costs and activity drivers for the next year.

Marketing Department (overhead allocated with direct manufacturing labor hours)

Manufacturing Overhead Costs (Budgeted) $147,000

Direct manufacturing labor hours (Budgeted) 4,200 Hours

Machine Hours (Budgeted) 9,800 Hours

Manufacturing Overhead Costs (Actual) $146,500

Direct Manufacturing Labor Hours (Actual) 4,250 Hours

Machine hours (Actual) 9,900

Finishing Department (overhead allocated with direct machine hours)

Manufacturing Overhead Costs (Budgeted) $90,000

Direct manufacturing labor hours (Budgeted) 3,000 Hours

Machine Hours (Budgeted) 5,000 Hours

Manufacturing Overhead Costs (Actual) $86,500

Direct Manufacturing Labor Hours (Actual) 3,150 Hours

Machine hours (Actual) 4,900

The following info is related to Job XX which consists of 300 units and was completed and sold during the year.

Job XX

Molding Department

Direct Materials $2,250

Direct Labor $3,000

Direct Labor Hours 90

Machine Hours 180

Finishing Department

Direct Materials $2,500

Direct Labor $1,875

Direct Labor Hours 110

Machine Hours 150

Required:

1. Determine the overhead application rates for both departments
2. Determine the unit cost for Job XX
3. Calculate the amount under or over allocated overhead for each department and for Lyons as a whole.

Question 1: Big Man Company gives you information from the records for the year ended December 31, 2015. (Variable costs are designated V and fixed costs are F). Big Man has a 30% marginal Tax rate. Sales (25,000 units @ $15) $375,000 Costs: Direct Materials 60,000 (100% V) Direct Labor 90,000 (100% V) Factory Overhead 120,000 (80% F and 20% V) Marketing Expenses 40,000 (50% F and 50% V) Administrative Expenses 30,000 (80% F and 20% V) Total Costs Operating Income $340,000 35,000 Show all computations: 1) Compute the breakeven point in number of units and sales dollars. 2) Assuming Big Man has a marginal tax rate of 30%, compute the number of units required to generate an after tax profit of $35,000. 3) Compute number of units required to generate a net before tax profit of 10 percent of sales revenue. Question 2: Job Order Costing (one job two departments) Lyons Inc. employs a normal costing system and has identified the following overhead costs and activity drivers for the next year. Marketing Department (overhead allocated with direct manufacturing labor hours) Manufacturing Overhead Costs (Budgeted) Direct manufacturing labor hours (Budgeted) Machine Hours (Budgeted) Manufacturing Overhead Costs (Actual) Direct Manufacturing Labor Hours (Actual) Machine hours (Actual) $147,000 4,200 Hours 9,800 Hours $146,500 4,250 Hours 9,900 Finishing Department (overhead allocated with direct machine hours) Manufacturing Overhead Costs (Budgeted) Direct manufacturing labor hours (Budgeted) $90,000 3,000 Hours Machine Hours (Budgeted) Manufacturing Overhead Costs (Actual) Direct Manufacturing Labor Hours (Actual) Machine hours (Actual) 5,000 Hours $86,500 3,150 Hours 4,900 The following info is related to Job XX which consists of 300 units and was completed and sold during the year. Job XX Molding Department Direct Materials Direct Labor Direct Labor Hours Machine Hours $2,250 $3,000 90 180 Finishing Department Direct Materials Direct Labor Direct Labor Hours Machine Hours $2,500 $1,875 110 150 Required: 1) Determine the overhead application rates for both departments 2) Determine the unit cost for Job XX 3) Calculate the amount under or over allocated overhead for each department and for Lyons as a whole