HW-134-Management Accounting problems

1. The work-in-process inventory account of a manufacturing
company shows a balance of $3,000 at the end of an
accounting period. The job-cost sheets of the two incom-
plete jobs show charges of $500 and $300 for direct
materials, and charges of $400 and $600 for direct labor.
From this information, it appears that the company is
using a predetermined overhead rate as a percentage of
direct labor costs. What percentage is the rate?



2. The break-even point in dollar sales for Rice Company is
$480,000 and the company’s contribution margin ratio
is 40 percent. If Rice Company desires a profit of
$84,000, how much would sales have to total?



3. Williams Company’s direct labor cost is 25 percent of its
conversion cost. If the manufacturing overhead for the
last period was $45,000 and the direct material cost was
$25,000, how much is the direct labor cost?



4. Grading Company’s cash and cash equivalents consist of
cash and marketable securities. Last year the company’s
cash account decreased by $16,000 and its marketable
securities account increased by $22,000. Cash provided
by operating activities was $24,000. Net cash used for
financing activities was $20,000. Based on this informa-
tion, was the net cash flow from investing activities on
the statement of cash flows a net increase or decrease?
By how much?



5. Gladstone Footwear Corporation’s flexible budget cost
formula for supplies, a variable cost, is $2.82 per unit of
output. The company’s flexible budget performance report
for last month showed an $8,140 unfavorable spending
variance for supplies. During that month, 21,250 units
were produced. Budgeted activity for the month had
been 20,900 units. What is the actual cost per unit for
indirect materials?



6. Lyons Company consists of two divisions, A and B. Lyons
Company reported a contribution margin of $60,000 for
Division A, and had a contribution margin ratio of 30
percent in Division B, when sales in Division B were
$240,000. Net operating income for the company was
$22,000 and traceable fixed expenses were $45,000. How
much were Lyons Company’s common fixed expenses?



7. Atlantic Company produces a single product. For the most
recent year, the company’s net operating income computed
by the absorption costing method was $7,800, and its net
operating income computed by the variable costing method
was $10,500. The company’s unit productcost was $15
under variable costing and $24 under absorption costing.
If the ending inventory consisted of 1,460 units, how
many units must have been in the beginning inventory?



8. Black Company uses the weighted-average method in its
process costing system. The company’s ending work-in-
process inventory consists of 6,000 units, 75 percent
complete with respect to materials and 50 percent com-
plete with respect to labor and overhead. If the total
dollar value of the inventory is $80,000 and the cost per
equivalent unit for labor and overhead is $6.00, what is
the cost per equivalent unit for materials?



9. At Overland Company, maintenance cost is exclusively a
variable cost that varies directly with machine-hours. The
performance report for July showed that actual mainte-
nance costs totaled $11,315 and that the associated rate
variance was $146 unfavorable. If 7,300 machine-hours
were actually worked during July, what is the budgeted
maintenance cost per machine-hour?



10. The cost of goods sold in a retail store totaled $650,000.
Fixed selling and administrative expenses totaled $115,000
and variable selling and administrative expenses were
$420,000. If the store’s contribution margin totaled
$590,000, how much were the sales?



11. Denny Corporation is considering replacing a technologi-
cally obsolete machine with a new state-of-the-art
numerically controlled machine. The new machine would
cost $600,000 and would have a 10-year useful life.
Unfortunately, the new machine would have no salvage
value. The new machine would cost $20,000 per year to
operate and maintain, but would save $125,000 per year
in labor and other costs. The old machine can be sold
now for scrap for $50,000. What percentage is the simple
rate of return on the new machine rounded to the nearest
tenth o a percent? (Ignore income taxes in this problem.) 12. Lounsberry Inc. regularly uses material O55P and currently
has in stock 375 liters of the material, for which it paid
$2,700 several weeks ago. If this were to be sold as is on
the open market as surplus material, it would fetch $6.35
per liter. New stocks of the material can be purchased
on the open market for $7.20 per liter, but it must be
purchased in lots of 1,000 liters. You’ve been asked to
determine the relevant cost of 900 liters of the material
to be used in a job for a customer. What is the relevant
cost of the 900 liters of material O55P?


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