Question 1:
Big Man Company gives you information from the records for the year ended December 31, 2015. (Variable costs are designated V and fixed costs are F).
Big Man has a 30% marginal Tax rate.
Sales (25,000 units @ $15) $375,000
Costs:
Direct Materials 60,000 (100% V)
Direct Labor 90,000 (100% V)
Factory Overhead 120,000 (80% F and 20% V)
Marketing Expenses 40,000 (50% F and 50% V)
Administrative Expenses 30,000 (80% F and 20% V)
Total Costs $340,000
Operating Income 35,000
Show all computations:
1) Compute the breakeven point in number of units and sales dollars.
2) Assuming Big Man has a marginal tax rate of 30%, compute the number of units required to generate an after tax profit of $35,000.
3) Compute number of units required to generate a net before tax profit of 10 percent of sales revenue.
Question 2:
Job Order Costing (one job two departments)
Lyons Inc. employs a normal costing system and has identified the following overhead costs and activity drivers for the next year.
Marketing Department (overhead allocated with direct manufacturing labor hours)
Manufacturing Overhead Costs (Budgeted) $147,000
Direct manufacturing labor hours (Budgeted) 4,200 Hours
Machine Hours (Budgeted) 9,800 Hours
Manufacturing Overhead Costs (Actual) $146,500
Direct Manufacturing Labor Hours (Actual) 4,250 Hours
Machine hours (Actual) 9,900
Finishing Department (overhead allocated with direct machine hours)
Manufacturing Overhead Costs (Budgeted) $90,000
Direct manufacturing labor hours (Budgeted) 3,000 Hours
Machine Hours (Budgeted) 5,000 Hours
Manufacturing Overhead Costs (Actual) $86,500
Direct Manufacturing Labor Hours (Actual) 3,150 Hours
Machine hours (Actual) 4,900
The following info is related to Job XX which consists of 300 units and was completed and sold during the year.
Job XX
Molding Department
Direct Materials $2,250
Direct Labor $3,000
Direct Labor Hours 90
Machine Hours 180
Finishing Department
Direct Materials $2,500
Direct Labor $1,875
Direct Labor Hours 110
Machine Hours 150
Required:
1) Determine the overhead application rates for both departments
2) Determine the unit cost for Job XX
3) Calculate the amount under or over allocated overhead for each department and for Lyons as a whole.