Question 1. The following data pertain to Martin Company for September:
Raw Materials Inventory, September 1 …$80,000
Work in Process Inventory, September 1 …$95,000
Finished goods inventory, September 1 …$65,000
Raw material purchases …$55,000
Raw materials issued …$100,000
Direct labor costs incurred …$60,000
Overhead costs incurred …$75,000
Costs of goods completed and transferred …$210,000
Cost of sales …$235,000
A. Prepare T accounts for the three inventory accounts and cost of sales
B. Record the beginning balances and post the transaction for the month
C. Draw arrows to show the transfers between accounts
D. Calculate the inventory balances as of September 30th.
Question 2. Micha Smith is a young attorney who has decided to leave her current employer and set up her own law practice. She has prepared the following monthly cost estimates.
Salary of Legal Secretary.....$3000
Office rent and utilities........ $1,200
Other costs ........$1,500
Total cost ....... $5700
Micha would like to earn $3,300 a month and feels that she will be able to bill 150 hours of her time per month to clients.
Required:
A. Assuming that Micha is correct in her estimates, what fee per hour shoudl Micha charge her clients?
B. At the fee calculated in (a) what would Micha earn in a month in which her time charged to clients was only 100 hours? Assume that all costs are fixed.
Question 3. Valade Company produces two products, J and K. Estimated costs are pesented below for a year in which 10,000 units of each product are expected to be sold:
Total Product J Product K
Direct production Cost $700,000 $400,000 $300,000
Overhead Cost $280,000 $160,000 $120,000
Selling and Administrative Cost $140,000 $80,000 $60,000
An Annual Profit of $280,000 for the whole company is considered satisfactory. The company uses the same profit margin(as a percentage of costs) to arrive at the price for both products.
Required:
A. Calculate normal selling prices for Products J and K.
B. Using the prices calculated above, how much profit would result if the sales were 5000 units of J and 15,000 units of K instead of 10,000 of each?
C. Comment on the effect of changes in the product mix on total profit when the same profit margin percentage is used.