Problem 1. The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31.
Amount
Total sales revenue $1,344,000
Selling price per pair of skis $420
Variable selling expense per pair of skis 47
Variable administrative expense per pair of skis $16
Total fixed selling expense $ 140,000
Total fixed administrative expense $ 105,000
Beginning merchandise inventory $ 70,000
Ending merchandise inventory $ 115,000
Merchandise purchases $ 285,000
Required:
1. Prepare a traditional income statement for the quarter ended March 31.
2. Prepare a contribution format income statement for the quarter ended March 31.
3. What was the contribution toward fixed expenses and profits for each pair of skis sold during the quarter? (Round your final answer to nearest whole dollar amount.)
Problem 2: The Lakeshore Hotel's guest-days of occupancy and custodial supplies expense over the last seven months were:
Custodial
Guest-Days Supplies
Month of Occupancy Expense
March 8,500 $ 14,100
April 8,000 $ 13,600
May 10,500 $ 16,100
June 12,000 $ 17,600
July 14,000 $ 19,600
August 13,000 $ 18,600
September 10,500 $ 16,100
Guest-days Is a measure of the overall activity at the hotel. For example, a guest who stays at the hotel for three days is counted as three guest-days.
Required:
1. Using the high-low method, estimate a cost formula for custodial supplies expense.
2. Using the cost formula you derived above, what amount of custodial supplies expense would you expect to be incurred at an occupancy level of 13,000 guest-days?
3. Prepare a scattergraph using the data given above.
Instructions:
1. On the graph below, use the point tool (Mar) to plot custodial supplies expense on the vertical axis and guest-days on the horizontal axis.
2. Repeat the same process for the plotter tools (Apr, May, June, July, Aug, Sep).
3. To enter exact coordinates, click on the point and enter the values of x and y.
4. To remove a point from the graph, click on the point and select delete option.
Problem 3:
Wollogong Group Ltd. of New South Wales, Australia, acquired its factory building about 10 years ago. For several years, the company has rented out a small annex attached to the rear of the building. The company has received a rental income of $30,000 per year on this space. The renter's lease will expire soon, and rather than renewing the lease, the company has decided to use the space itself to manufacture a new product.
Direct materials cost for the new product will total $80 per unit. To have a place to store finished units of product, the company will rent a small warehouse nearby. The rental cost will be $500 per month. In addition, the company must rent equipment for use in producing the new product; the rental cost will be $4,000 per month. Workers will be hired to manufacture the new product, with direct labor cost amounting to $60 per unit. The space in the annex will continue to be depreciated on a straight-line basis, as in prior years. This depreciation is $8,000 per year.
Advertising costs for the new product will total $50,000 per year. A supervisor will be hired to oversee production; her salary will be $1,500 per month. Electricity for operating machines will be $1.20 per unit. Costs of shipping the new product to customers will be $9 per unit.
To provide funds to purchase materials, meet payrolls, and so forth, the company will have to liquidate some temporary Investments. These investments are presently yielding a retum of about $3,000 per year.
Required:
For each of the costs associated with the new product decision, indicate whether it would be variable or fixed. If it is a product cost, Indicate whether It would be direct materials, direct labor or a manufacturing overhead cost. If it is not a product cost, indicate whether it is a period, opportunity or a sunk cost. Select "None" if none of the categories apply for a particular item. NOTE: Opportunity cost Is a special category, and to avoid confusion, do not attempt to classify the cost in any other way except as an opportunity cost.
Problem 4:
The following data from the just completed year are taken from the accounting records of Mason Company:
Sales $ 656,000
Direct labor cost $ 83,000
Raw material purchases $ 132,000
Selling expenses $ 100,000
Administrative expenses $ 41,000
Manufacturing overhead applied to work in process $ 207,000
Actual manufacturing overhead costs $ 228,000
Beginning End of
Inventories of Year Year
Raw materials $8,700 $10,700
Work in process $5,400 $20,200
Finished goods $78,000 $25,900
Required:
1. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials.
2. Prepare a schedule of cost of goods sold.
3. Prepare an income statement.
Problem 5:
Supreme Videos. Inc.. produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1, the beginning of its fiscal year, are given below:
Supreme Videos, Inc.
Balance Sheet
January 1
Assets
|
Current assets:
|
|
|
|
Cash
|
|
$82,000
|
|
Accounts receivable
|
|
121,000
|
|
Inventories:
|
|
|
|
Raw materials (film, costumes)
|
$49,000
|
|
|
Videos in process
|
22,000
|
|
|
Finished videos awaiting sale
|
100,000
|
171,000
|
|
Prepaid insurance
|
|
12,800
|
|
Total current assets
|
|
386,800
|
|
Studio and equipment
|
768,000
|
|
|
Loss accumulated depreciation
|
229,000
|
539,000
|
|
Total assets
|
|
$925,800
|
|
Uabilities and Stockholders'
|
Equity
|
|
|
Accounts payable
|
|
$128,800
|
|
Capital stock
|
$508,000
|
|
|
Retained earnings
|
289,000
|
797,000
|
|
Total liabilities and stockholders' equity
|
|
$925,800
|
Because the videos differ in length and In complexity of production, the company uses a job-order costing system to determine the cost of each video produced. Studio (manufacturing) overhead Is charged to videos on the basis of camera-hours of activity. The company's predetermined overhead rate for the year is based on a cost formula that estimated $360,000 in manufacturing overhead for an estimated allocation base of 9.000 camera-hours. The following transactions were recorded for the year
a. Film, costumes, and similar raw materials purchased on account, $204,000. b.Film, costumes, and other raw materials Issued to production. $219,000 (75% considered direct to the videos In production, and the other 25% was considered i c. Utility costs Incurred in the production studio, $91,000.
d.Depreciation recorded on the studio, cameras. and other equipment. $103,000. depreciation related to actual production of the videos. and the remainder related marketing and administration.
e. Advertising expense Incurred, 5149,000.
f. Costs for salaries and wages were incurred as follows:
Direct labor (actors and directors) $101.000
Indirect labor (carpenters to build sets,
costume designers, and so forth) $129.000
Administrative salaries $114,000
g. Prepaid Insurance expired during the year, $8,900 (70% related to production of videos, and 30% related to marketing and administrative activities).
h. Miscellaneous marketing and administrative expenses incurred, 510.500.
i. Studio (manufacturing) overhead was applied to videos in production. The company recorded 9.500 camera-hours of activity during the year.
j. Videos that cost $569.000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment.
k. Sales for the year totaled $963,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $619,000.
I. Collections from customers during the year totaled $869,000.
m. Payments to suppliers on account during the year, $519,000; payments to employees for salaries and wages, $326,000.
Required:
1 & 2.Prepare a T-account for each account on the company's balance sheet, and enter the beginning balances. Make an entry directly into the T-accounts for transactions (a) through (m).
3-a. Was the Studio (manufacturing) Overhead account underapplied or overapplled for the year?
4. Prepare an income statement for the year.