Assignment ACC/561week6

Question 1

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		2,340		1,990		2,300		2,770
Tax		3,300		2,630		2,200		2,740
Consulting		1,750		1,750		1,750		1,750

Average hourly billing rates are: auditing $84, tax $93, and consulting $102. 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		$	$		$	$
Tax
Consulting
			$			$

GARZA AND NEELY, CPAs Sales Revenue Budget For the Year Ending December 31, 2012
Quarter 3	Quarter 4
Dept.	Billable Hours	Billable Rate	Total Rev.	Billable Hours	Billable Rate	Total Rev.
Auditing		$	$		$	$
Tax
Consulting
			$			$

GARZA AND NEELY, CPAs Sales Revenue Budget For the Year Ending December 31, 2012
Year
Dept.	Billable Hours	Billable Rate	Total Rev.
Auditing		$	$
Tax
Consulting
			$

Warning

Stanton Company is planning to produce 1,300 units of product in 2012. Each unit requires 3.30 pounds of materials at $7.10 per pound and a half-hour of labor at $13.40 per hour. The overhead rate is 50% 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

$

Warning

Question 3

In Harley Company it costs $30 per unit ($16 variable and $14 fixed) to make a product that normally sells for $47. A foreign wholesaler offers to buy 3,420 units at $28 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		$		$		$
Costs—Manufacturing
Shipping
Net income/(loss)		$		$		$

The special order should be .

Warning

Question 4

Vintech Manufacturing incurs unit costs of $6 ($4 variable and $2 fixed) in making a subassembly part for its finished product. A supplier offers to make 12,200 of the part at $5.80 per unit. If the offer is accepted, Vintech will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Vintech will realize by buying the part.  (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.)

		Make		Buy		Net Income Increase (Decrease)
Variable manufacturing costs		$		$		$
Fixed manufacturing costs
Purchase price
Total annual cost		$		$		$

The decision should be to .

Warning

Question 5

Ridley Company has a factory machine with a book value of $96,200 and a remaining useful life of 5 years. A new machine is available at a cost of $200,700. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $617,600 to $414,700. 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		$		$		$
New machine cost
Total		$		$		$

The old factory machine should be .

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Question 6 A company has a process that results in 15,000 pounds of Product A that can be sold for $16 per pound. An alternative would be to process Product A further at a cost of $200,000 and then sell it for $28 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action? Process further, the company will be better off by $20,000. Sell now, the company will be better off by $20,000. Process further, the company will be better off by $180,000.

Question 7

Carter, Inc. can make 100 units of a necessary component part with the following costs:

Direct Materials	$120,000
Direct Labor	20,000
Variable Overhead	60,000
Fixed Overhead	40,000

If Carter can purchase the component externally for $220,000 and only $10,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

Make and save $30,000

Buy and save $10,000

Buy and save $30,000

Make and save $10,000

Question 8

Seasons Manufacturing manufactures a product with a unit variable cost of $100 and a unit sales price of $176. Fixed manufacturing costs were $480,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $140 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:

Income would increase by $8,000.

Income would increase by $140,000.

Income would increase by $40,000.

Income would decrease by $8,000.