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Exercise 22-1

Stanton Company is planning to produce 1,300 units of product in 2012. Each unit requires 3.10 pounds of materials at $5.00 per pound and a half-hour of labor at $14.20 per hour. The overhead rate is 90% of direct labor.

 

(a) Compute the budgeted amounts for 2012 for direct materials to be used, direct labor, and applied overhead.

 

Direct materials

 

$

Direct labor

 

$

Overhead

 

$

 

(b) Compute the standard cost of one unit of product. (Round answer to 2 decimal places, e.g. 2.75.)

 

Standard cost

 

 

 

 

$

 

 

Brief Exercise 23-3

In Harley Company it costs $30 per unit ($17 variable and $13 fixed) to make a product that normally sells for $51. A foreign wholesaler offers to buy 5,000 units at $26 each. Harley will incur special shipping costs of $1 per unit. Assuming that Harley has excess operating capacity.

Indicate the net income (loss) Harley would realize by accepting the special order. (If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.)

  

Reject
Order
 

Accept
Order
 
Net Income
Increase
(Decrease)
Revenues $
.accepted or rejected?

Exercise 20-3

Garza and Neely, CPAs, are preparing their service revenue (sales) budget for the coming year (2012). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below.

Department 
Quarter 1
 
Quarter 2
 
Quarter 3
 
Quarter 4
Auditing 2,550 1,920 2,160 2,570
Tax 3,270 2,560 2,350 2,770
Consulting 1,700 1,700 1,700 1,700

Average hourly billing rates are: auditing $84, tax $95, and consulting $101.

Prepare the service revenue (sales) budget for 2012 by listing the departments and showing for each quarter and the year in total, billable hours, billable rate, and total revenue.

GARZA AND NEELY, CPAs
Sales Revenue Budget
For the Year Ending December 31, 2012
 
Quarter 1
Quarter 2
Dept.
Billable Hours
Billable Rate
Total Rev.
Billable Hours
Billable Rate
Total Rev.
Auditing
.buy the part or make the part?

 

Brief Exercise 23-6

Ridley Company has a factory machine with a book value of $94,600 and a remaining useful life of 5 years. A new machine is available at a cost of $200,100. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $613,500 to $370,700.

Prepare an analysis showing whether the old machine should be retained or replaced. (If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.)

  


Retain
Equipment
 


Replace
Equipment
 
Net 5-Year
Income
Increase
(Decrease)
Variable manufacturing costs $

.replaced or retaied?

 

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