Caballero Manufacturing incurs unit costs of $15 ($10 variable and $5 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 20,000 of the assembly part at $13.75 per unit. If the offer is accepted, Caballero will save all variable costs but no fixed costs.
Instructions: Part A) Prepare an analysis showing the total cost savings, if any, Caballero will
realize by buying the part.
Part B) Caballero Company should _________ the part because total annual costs to make are _________ than total costs to buy.
Problem 2: 10 points
Ziray Corporation has the following cost records for November 2013.
Indirect factory labor
Direct materials used
Work in process, 11/1/13
Work in process, 11/30/13
Finished goods, 11/1/13
Finished goods, 11/30/13
$ 5,107Factory utilities$ 613
24,826Depreciation, factory equipment1,499
3,267Direct labor33,052
3,633Maintenance, factory equipment1,958
4,609Indirect materials2,749
7,429Factory manager’s salary4,038
Instructions: Prepare a cost of goods manufactured schedule for November 2013.
Problem 3: 15 points
Here are comparative balance sheets for Wilson Company.
Additional information: 1. The 2013 Income Statement reported $8,100 in depreciation expense, a $5,400 loss on sale of investments and Net income of $48,600. 2. Cash dividends of $24,300 were declared and paid. 3. Long-term investments that has a cost of $24,300 were sold for $18,900 4. Sales for 2013 were $162,000.
Instructions: Prepare a statement of cash flows for 2013 using the indirect method. Prob
Wilson Company Comparative Balance Sheets
December 31, 2013
Assets
2013
2012
Cash
$ 44,550
$ 13,500
Accounts receivable
24,300
18,900
Inventories
33,750
24,300
Prepaid expenses
8,100
12,150
Long-term investments
0
24,300
Equipment
81,000
43,200
Accumulated depreciation—Equipment
(27,000)
(18,900)
Total assets
$ 164,700
$ 117,450
Liabilities and Stockholder’s Equity
Accounts payable
$ 22,950
$ 9,450
Bonds payable
49,950
63,450
Common stock ($1 par)
54,000
31,050
Retained earnings
37,800
13,500
Total liabilities and stockholder’s equity
$ 164,700
$ 117,450
Problem 4: 10 points
Cosmo Corporation is projecting a cash balance of $32,785 in its December 31, 2013, balance sheet. Cosmo schedule of expected collections from customers for the third quarter of 2013 shows total collections of $190,875. The schedule of expected payments for direct materials for the third quarter of 2013 shows total payments of $41,300. Other information gathered for the first quarter of 2013 is: sale of equipment $3,471, direct labor $69,178, manufacturing overhead $37,543, and purchase of securities $15,000, plus a $300 brokerage fee. Selling and administrative expenses are projected to be $45,116; this figure includes $1,116 in depreciation expense on the office equipment. All costs and expenses will be paid in cash. Cosmo wants to maintain a balance of at least $25,000 cash at the end of each quarter.
Instructions: Complete the cash budget for the first quarter.
Problem 5: 10 points
Stein Company had the following transactions pertaining to its short-term stock investments. Stein owns more than 20% of the Pine Company stock and has significant influence in decision-making.
Jan. 1
June 1
Sept. 15
Purchased 50,000 shares of Pine Company stock as an investment for $499,750 cash plus brokerage fees of $250.
Received cash dividends of $0.25 per share on the Pine Company stock investment.
Sold 2,000 shares of the Pine Company stock investment for $220,100 less brokerage fees of $100.
Instructions
Journalize the transactions.
Problem 6: 10 points
Long Company has a unit-selling price of $750, variable costs per unit of $400, and fixed costs of $300,000.
Instructions: Part A) Compute the break-even point in units. Round answer up to the next whole unit.
Part B) Compute the break even in dollars. Part C) Assume Long Company sets a target net income goal of $1,200,000