Timeless Timepieces produces and sells watches

Timeless Timepieces produces and sells watches. The following data are available for various activies within the company:

Calculate the overhead rates for each of the three activities

Activity Allocation Base Number of Activities Overhead Cost
Unpacking Number of boxes unpacked 10000 $40,000
Inspecting Number of batches inspected 1800 $36,000
Packing Number of watches packed 56000 $28,000

 

Here’s the SOLUTION

Posted in Homework Help | Comments Off

Miller Metal Co. makes a single product that sells for $32 per unit

Miller Metal Co. makes a single product that sells for $32 per unit. Variable costs are $20.80 per unit, and fixed costs total $47,600 per month.

A. Calculate the number of units that must be sold each month for the firm to break even.

B. Assume current sales are $160,000. Calulate the margin of safety and the margin of safety ration.

1. Margin of Safety

2. Margin of Safety Ratio (%)

C. Calculate operating income if 5,000 units are sold in a month.

D. Calculate operating income if the selling price is raised to $33 per unit, advertising expenditures are increased by $7,000 per month, and monthly unit sales volume becomes 5,400 units.

E. Assume that the firm adds another product to its product line and that the new product sells for $20 per unit, has variable costs of $14 per unit, and causes fixed expenses in total to increase to $63,000 per month. Calculate the firm’s operating income if 5,000 units of the original product and 4,000 units of the new product are sold each month. For the original product, use the selling price and variable cost data given in the problem statement.

F. Calculate the firm’s operating income if 4,000 units of the orginal product and 5,000 units of the new product are sold each month

G. Explain why operating income is different in parts E and F, even though sales totaled 9,000 units is each case

Here’s the SOLUTION

Posted in Homework Help | Comments Off

Northwood Company manufactures basketballs

Northwood Company manufactures basketballs. The company has a ball that sells for $42. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $25.20 per ball, of which 60% is direct labor cost

 Last year, the company sold 60,000 of these balls, with the following results:

 Sales (60,000 balls) $ 2,520,000
  Variable expenses 1,512,000
  Contribution margin 1,008,000
  Fixed expenses 840,000
  Net operating income $ 168,000

 

Required:

1-a. Compute the CM ratio and the break-even point in balls. (Do not round intermediate calculations.)

1-b. Compute the the degree of operating leverage at last year’s sales level. (Round your answer to 2 decimal places.)

2. Due to an increase in labor rates, the company estimates that variable expenses will increase by $3.36 per ball next year. If this change takes place and the selling price per ball remains constant at $42.00, what will be the new CM ratio and break-even point in balls? (Do not round intermediate calculations.)

3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $168,000, as last year?(Do not round intermediate calculations. Round your answer to the nearest whole unit.)

4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year, what selling price per ball must it charge next year to cover the increased labor costs? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40%, but it would cause fixed expenses per year to increase by 88%. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls? (Do not round intermediate calculations.)

6. Refer to the data in (5) above.

a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $168,000, as last year? (Do not round intermediate calculations.)

b-1. Assume the new plant is built and that next year the company manufactures and sells 60,000 balls (the same number as sold last year). Prepare a contribution format income statement

b-2. Compute the degree of operating leverage. (Round your answer to 2 decimal places.)

Here’s the SOLUTION

Posted in Homework Help | Comments Off

Fama’s Llamas has a weighted average cost of capital of 9.3 percent

Fama’s Llamas has a weighted average cost of capital of 9.3 percent. The company’s cost of equity is 13 percent, and its pretax cost of debt is 7.3 percent. The tax rate is 40 percent. What is the company’s target debt?equity ratio?

Here’s the SOLUTION

Posted in Homework Help | Comments Off

Bird Leasing, Inc. leased equipment to George Corporation, on jan 1, 2013

Bird Leasing, Inc. leased equipment to George Corporation, on jan 1, 2013. The terms of the lease are as follows. THe lase requires four equal payments of $175,000, with the first payment made at the signing of the lease on Jan 1, 2013, and the other three made at the end of every year, beginning December 31, 2013. The economic lfie of the equipment is 4 years , and the interest rate implicit in the lease is 12%. The equipment has a cost and fair value to Bird Leasing of $595,315 at the inception of the lease. THe lease qualifies as a capital lease for both companies and is a direct fnancing lease for Bird Leasing. Assume no residual or salvage value for the equipment at the end of the lease term. George Corporation uses straight line depreciation.

a.) Prepare a lease amortization schedule for George Corporation (adjust interest in the last row so balance in the lease liability goes to zero when last payment made!)

b.)Prepare journal entries that George would make on Jan 1 2013

c.)Prepare the journal entries that George would make on Dec 31 2013

d.)prepare a lease amortization schedule for Bird leasing.

e.)prepare the journal entries that Bird Leasing would make on Jan 1 2013

f.)prepare the journal entry or entries that Bird Leasing would make on Dec 31 2013

Here’s the SOLUTION

Posted in Homework Help | Comments Off

Montell Inc. produces a variety of outdoor equipment products and utilizes

Montell Inc. produces a variety of outdoor equipment products and utilizes a proccess costing system. The follwing information was provided by the accounting department as of March 31, 2014:

a. Units started during the month of March totaled 314,000.

b. Units partially complete as of March 31 equalled 76,000

c. Ending work in process inventory as of March 31, 2014, was 80 percent complete.

d. Direct materials are added at the beginning of the process, and conversion are incurred uniformly throughout the process.

e. No units were in process on March 1, 2014.

Using the information provided, compute the equivalent units of production for the direct materials and conversion costs for the month ended March 31, 2014, assuming FIFO costing flow.

Here’s the SOLUTION

Posted in Homework Help | Comments Off

Coffeeberry Company manufactures a variety of coffee and utilizes a process costing system

Coffeeberry Company manufactures a variety of coffee and utilizes a process costing system. The following information was provided by the accounting department as of May 31, 2014:

a. Units started during the month of May, totaled 40,000

b. Units partially complete as of May 31 equaled 8,600

c. Ending work in process inventory as of May 31, 2014 was 75 percent complete.

d. Direct materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process.

e. No units were in process on May 1, 2014

Using the information provided, compute the equivalent units of production for direct materials and converison costs for the month ended May 31, 2014, assuming a FIFO costing flow.

Here’s the SOLUTION

Posted in Homework Help | Comments Off

Turkey Products Inc. uses a process costing system and has just completed production

Turkey Products Inc. uses a process costing system and has just completed production for the month of November 2014. The following production data were obtained from accounting records:

a. Units in the beginning inventory totaled 6,800 and were 30 percent complete as of November 1 (all direct materials were added to these products in the preceeding month).

B. During the period, 156,200 units were started.

C. 19,200 units were partially completed as of November 30, 2014.

D. Ending work in process inventory was 40 percent complete at month end.

From the data given, compute the equivalent units of production for the direct materials and conversion costs for the month ended November 30, 2014, assuming the company follows FIFO costing method.

Here’s the SOLUTION

Posted in Homework Help | Comments Off

Tiger Furnishings produces two models of cabinets

Tiger Furnishings produces two models of cabinets for home theater components, the Basic and the Dominator. Data on operations and costs for March follow:

Basic Dominator Total
  Units produced 1,420 440 1,860
  Machine-hours 3,300 2,700 6,000
  Direct labor-hours 2,900 3,300 6,200
  Direct materials costs $ 16,000 $ 5,450 $ 21,450
  Direct labor costs 63,500 51,500 115,000
  Manufacturing overhead costs 194,510
       Total costs $ 330,960

 

Tiger Furnishings’s CFO believes that a two-stage cost allocation system would give managers better cost information. She asks the company’s cost accountant to analyze the accounts and assign overhead costs to two pools: overhead related to direct labor cost and overhead related to machine-hours.

The analysis of overhead accounts by the cost accountant follows:

 Manufacturing Overhead Overhead
Estimate
  Cost Pool Assignment
  Utilities $ 1,500   Machine-hour related
  Supplies 4,600   Direct labor cost related
  Training 9,200   Direct labor cost related
  Supervision 25,800   Direct labor cost related
  Machine depreciation 23,000   Machine-hour related
  Plant depreciation 23,500   Machine-hour related
  Miscellaneous 106,910   Direct labor cost related

 

Required:

Compute the product costs per unit assuming that Tiger Furnishings uses direct labor costs and machine-hours to allocate overhead to the products. (Do not round the direct-labor cost rate in your intermediate calculations. Round your answers to two decimal places.)

Here’s the SOLUTION

Posted in Homework Help | Comments Off

On January 1, 2013, Avondale Lumber adopted the dollar-value LIFO inventory method

On January 1, 2013, Avondale Lumber adopted the dollar-value LIFO inventory method. The inventory value for its one inventory pool on this date was $295,000. An internally generated cost index is used to convert ending inventory to base year. Year-end inventories at year-end costs and cost indexes for its one inventory pool were as follows:

Year Ended Inventory Cost Index
December 31 Year-End Costs (Relative to Base Year)
2013 $ 382,130 1.03
2014 393,760 1.07
2015 447,120 1.08
2016 479,520 1.11

Required:

Calculate inventory amounts at the end of each year.

Here’s the SOLUTION

Posted in Homework Help | Comments Off