Accounting

Question 1: (40 points)

School Days Furniture, Inc., manufactures a variety of desks, chairs, tables, and shelf units which are sold to public school systems throughout the mid-west. The controller of the company's Desk Division is currently preparing a budget for the third quarter of the year. The following sales forecast has been made by the division's sales manager.

Each desk-and-chair set requires 10 board feet of pine planks and 1.5 hours of direct labor. Each set sells for $40. Pine planks cost $.60 per board foot, and the division ends each month with enough wood to cover 10 percent of the next month's production requirements. The division incurs a cost of $21.00 per hour for direct-labor wages and fringe benefits. The division ends each month with enough finished-goods inventory to cover 20 percent of the next month's sales.

Required: Complete the following budget schedules.

A. Sales budget (10 points):

	July page2image21904	August page2image23304	September
Sales (in sets) .....................................................	7,000
Sales price per set ..............................................	page2image29848	page2image30616
Sales revenue.....................................................	280000

B. Production budget (in sets) (10 points):

	July	August page2image43936	September
Sales ...................................................................	7,000	page2image49000
Add: Desired ending inventory ..........................	1,800		3,000
Total requirements ............................................	8,800	page2image56720
Less: Projected beginning inventory..................	2,000
Planned production ...........................................	6,800

C. Raw material purchases (10 points):

	July	August	September
Planned production (sets) ............................................	6,800
Raw material required per set (board feet) .................
Raw material required for production (board feet) .....	68,000
Add: Desired ending inventory of RM (board feet) ......	9,600		16,000
Total requirements .......................................................	77,600
Less: Projected beginning inventory of RM (board feet)	6,800
Planned purchases of raw material (board feet)..........	70,800
Cost per board foot ......................................................
Planned purchases of raw material (dollars) ................	42,480

D. Direct-labor budget (10 points):

	July	August page3image54120	September
Planned production (sets).....................................	6,800
Direct-labor hours per set.....................................		page3image61288
Direct-labor hours required ..................................	10,200
Cost per hour ........................................................
Planned direct-labor cost......................................	214,200

Question 2: (25 points)

During April, Dryden Company's material purchases amounted to 6,500 pounds at a price of $2.5 per pound. Actual costs incurred in the production of 2,000 units were as follows:

Direct labor:	$39,345 ($6.10 per hour)
Direct material:	$10,750 ($2.5 per pound

The standards for one unit of Dryden Company's product are as follows:

Direct labor:	page4image13880 Direct material:
Quantity, 3 hours per unit	Quantity, 2 pounds per unit
Rate, $6.00 per hour	page4image20160 Price, $2.4 per pound

Required:

Compute the following variances and indicate whether each variance is favorable or unfavorable:

1. Direct-material price variance.

2. Direct-material quantity variance.

3. Direct-material purchase price variance.

4. Direct-labor rate variance.

5. Direct-labor efficiency variance.

Question 3:

Information taken from Collegiate Sporting Goods Company's records for the most recent year is as follows:

	$
Direct material used	page4image33832 78,000 page4image35184
Direct labour	53,750
Variable manufacturing overhead	21,250 page4image40424
Fixed manufacturing overhead	57,000
Variable selling and administrative costs	page4image44432 228,000
Fixed selling and administrative costs	86,000

Required:

1. Assuming the company uses absorption costing, compute the inventoriable costs for the year. (8 points)

2. Compute the year's inventoriable costs using variable costing. (7 points)

Question 4: (20 points)

1. List and explain with examples two important criteria that must be satisfied in order for information to be relevant.

2. Define the term “opportunity cost”, and give an example of one.