Question 4

Lawn Chopper Company sells two types of lawn mowers. The first one is a basic lawn mower, which has variable costs of $50 and sells for $150. The second type is a riding tractor with variable costs of $500 and which sells for $1,500. The company has total fixed costs of $5,000,000. The sales mix for the company is three lawn mowers to one riding tractor. Your manager would like to know how many of each of the product the company must sell to break even.

Question 5

Executive Desk Company has decided to price its desks at 60% above cost. The problem is they are not sure how to assign factory overhead. Your manager has asked you to price the following two jobs based on the information provided using machine hours as the base:

• Estimated factory overhead for the year: $750,000
• Estimated direct labor hours for the year: 250,000 hours
• Estimated machine hours for are: 25,000 hours
• Job 1 has incurred $6,000 of direct materials and $3,000 of direct labor, which is consistent with 400 hours of labor and 30 machine hours.
• Job 2 has incurred $8,000 of direct materials and $5,000 of direct labor, which is consistent with 500 hours of labor and 50 machine hours.

Question 6

Prepare the journal entries needed based on the following information:

• Estimated overhead for the month: $6,000
• Estimated direct labor hours: 2,000
• Purchased $35,000 of materials
• Requisitioned $10,000 of materials to be placed into production
• Incurred $4,000 of direct labor during the month (500 hours)
• Incurred the following actual factory overhead amounts:
  • Utilities: $1,000
  • Indirect materials: $500
  • Indirect labor: $1,000
  • Rent: $1,500
• Completed two jobs with a cost of $18,000
• Sold both jobs completed at price = cost + 50%
• Applied overhead is $3,000