WEEK 1 HOMEWORK

Exercise 1-12 (Algo) Product and Period Cost Flows [LO1-3] The Devon Motor Company produces automobiles. On April 1st the company had no beginning inventories and it purchased 6,730 batteries at a cost of $115 per battery. It withdrew 6,200 batteries from the storeroom during the month. Of these, 100 were used to replace batteries in cars being used by the companys traveling sales staff. The remaining 6,100 batteries withdrawn from the storeroom were placed in cars being produced by the company. Of the cars in production during April, 90 percent were completed and transferred from work in process to finished goods. Of the cars completed during the month, 30 percent were unsold at April 30th. Required: 1. Determine the cost of batteries that would appear in each of the following accounts on April 30th.

Exercise 1-4 (Algo) Fixed and Variable Cost Behavior [LO1-4] Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $900 and the variable cost per cup of coffee served is $0.79. Required: 1. Fill in the following table with your estimates of the company's total cost and average cost per cup of coffee at the indicated levels of activity. 2. Does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases? Required information Cost Classifications (Algo) Skip to question [The following information applies to the questions displayed below.] Kubin Companys relevant range of production is 21,000 to 25,000 units. When it produces and sells 23,000 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 8.10 Direct labor $ 5.10 Variable manufacturing overhead $ 2.60 Fixed manufacturing overhead $ 6.10 Fixed selling expense $ 4.60 Fixed administrative expense $ 3.60 Sales commissions $ 2.10 Variable administrative expense $ 1.60

Exercise 1-10 (Algo) Differential Costs and Sunk Costs [LO1-5] Required: 1. What is the incremental manufacturing cost incurred if the company increases production from 23,000 to 23,001 units? 2. What is the incremental cost incurred if the company increases production and sales from 23,000 to 23,001 units? 3. Assume that Kubin Company produced 23,000 units and expects to sell 22,690 of them. If a new customer unexpectedly emerges and expresses interest in buying the 310 extra units that have been produced by the company and that would otherwise remain unsold, what is the incremental manufacturing cost per unit incurred to sell these units to the customer? 4. Assume that Kubin Company produced 23,000 units and expects to sell 22,690 of them. If a new customer unexpectedly emerges and expresses interest in buying the 310 extra units that have been produced by the company and that would otherwise remain unsold, what incremental selling and administrative cost per unit is incurred to sell these units to the customer?

Exercise 3-2 (Algo) Prepare T-Accounts [LO3-2, LO3-4] Jurvin Enterprises is a manufacturing company that had no beginning inventories. A subset of the transactions that it recorded during a recent month is shown below. $75,900 in raw materials were purchased for cash. $71,300 in raw materials were used in production. Of this amount, $66,700 was for direct materials and the remainder was for indirect materials. Total labor wages of $151,500 were incurred and paid. Of this amount, $133,800 was for direct labor and the remainder was for indirect labor. Additional manufacturing overhead costs of $126,200 were incurred and paid. Manufacturing overhead of $119,500 was applied to production using the companys predetermined overhead rate. All of the jobs in process at the end of the month were completed. All of the completed jobs were shipped to customers. Any underapplied or overapplied overhead for the period was closed to Cost of Goods Sold. Required: 1. Post the above transactions to T-accounts. 2. Determine the adjusted cost of goods sold for the period.

Exercise 3-3 (Algo) Schedules of Cost of Goods Manufactured and Cost of Goods Sold [LO3-3] Primare Corporation has provided the following data concerning last months manufacturing operations. Purchases of raw materials $ 31,000 Indirect materials used in production $ 4,870 Direct labor $ 59,200 Manufacturing overhead applied to work in process $ 88,600 Underapplied overhead $ 4,010 Inventories Beginning Ending Work in process $ 54,300 $ 66,100 Raw materials $ 11,100 $ 18,200 Finished goods $ 34,200 $ 42,900 Required: 1. Prepare a schedule of cost of goods manufactured for the month. 2. Prepare a schedule of cost of goods sold for the month. Assume the underapplied or overapplied overhead is closed to Cost of Goods Sold.

Exercise 5-1 (Algo) The Effect of Changes in Sales Volume on Net Operating Income [LO5-1] Whirly Corporations contribution format income statement for the most recent month is shown below: Total Per Unit Sales (9,000 units) $ 297,000 $ 33.00 Variable expenses 180,000 20.00 Contribution margin 117,000 $ 13.00 Fixed expenses 54,400 Net operating income $ 62,600 Required: (Consider each case independently): 1. What would be the revised net operating income per month if the sales volume increases by 80 units? 2. What would be the revised net operating income per month if the sales volume decreases by 80 units? 3. What would be the revised net operating income per month if the sales volume is 8,000 units?

Exercise 5-9 (Algo) Compute and Use the Degree of Operating Leverage [LO5-8] Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 123,000 100% Variable expenses 49,200 40 Contribution margin 73,800 60% Fixed expenses 20,000 Net operating income $ 53,800 Required: 1. What is the companys degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 18% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 18% increase in unit sales.

Exercise 5-10 (Algo) Multiproduct Break-Even Analysis [LO5-9] Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below: Claimjumper Makeover Total Sales $ 106,000 $ 53,000 $ 159,000 Variable expenses 32,800 6,950 39,750 Contribution margin $ 73,200 $ 46,050 119,250 Fixed expenses 88,425 Net operating income $ 30,825 Required: 1. What is the overall contribution margin (CM) ratio for the company? 2. What is the company's overall break-even point in dollar sales? 3. Prepare a contribution format income statement at the company's break-even point that shows the appropriate levels of sales for the two products.