1. Ethridge Corporation is presently making part H25 that is used is one of its products. A total of 9,000 units of this part are produced and used every year. The company’s Accounting department reports the following costs of producing the part at this level of activity:
An outside supplier has offered to make and sell the part to the company for $15.40 each. If this offered is accepted. The supervisor’s salary and all of the variable costs can be avoided. The special equipment used to make the part was purchased many year ago and has no salvage value or other use. The allocated general overhead represent fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. If management decided to buy part H25 from the outside supplier rather than to continue making the part, what would be the annual impact on the company’s overall net operating income?
2. A customer has requested that lnga corporation fill a special order for 2,000 units of products K81 for $25.00 a unit. While the product would be modified slightly for the special order, product K81’s normal unit product cost is $1990:
Direct labor is a variable cost. The special order would have no effect on the company’s total fixed manufacturing overhead costs. The customer would like modification made to product K81 that would increase the variable costs by $1.20 per unit and that would required an investment of $10,000 in special molds that would have no salvage value.
This special order would have no effect on the company’s other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company’s overall net operating income would increase (decrease) by:
3. Wright Company produces products I, J, and K form a single raw material input. Budgeted data for the next month follows:
If the cost of the raw material input is $78,000, which of the products should be processed beyond the split-off point?
4. Desrevisseau Inc., a manufacturing company, has provided the following data for the month of august, the balance in the work in process inventory account was $10,000 at the beginning of the month and $22,000 at the end of the month. During the month, the company incurred direct materials cost of $63,000 and direct labor cost of $39,000. The actual manufacturing overhead cost incurred was $40,000. The manufacturing overhead cost applied to work in process was $43,000. the cost of goods manufactured for August was:
5. During February, Degan Inc. transferred $60,000 from work in process to Finished Goods and record ed a Cost of Goods Sold of $65,000. the journal entries to record these transactions would include a:
6. Dimitrov Corporation, a company that produces and sells a single product, has provided its contribution format income statement for July.
If the company sells 6,900 units its net operating income should be closed to:
7. Kiel’s Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year, the estimate direct labor- hours were 11,200 hours and the total estimated manufacturing overhead was $259,840. At the end of the year, actual direct labor-hours for the year were 10,800 hours and the actual manufacturing overhead for the year was $254,840. Overhead at the end of the year was:
8. The contribution margin ratio is 30% for the Honeyville company and the break-even point in sales is $150,000. If the company’s target net operating income is $60,000, sales would have to be:
9. South Company sells a single product for $20 per unit. If variable expenses are 60% of sales and fixed expenses total $9,600, the break-even point will be:
10. Sperberg Corporation’s operating leverage is 3.7. If the company’s sales increase by 12% its operating income should increase by about: