19and20_AdditionalStudyQuestions

19and20_AdditionalStudyQuestions - ACC 333 (Farrell)...

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ACC 333 (Farrell) Classes 19 & 20 Fall 2011 Page 1 of 12 Additional Study Questions Information Relevance and Constraints 1) Bellingham, Inc., has just completed its first year of operations. The unit costs were as follows: Manufacturing costs (per unit): Direct materials (2 lbs @ $2) $ 4.00 Direct labor (1.5 hrs @ $9) 13.50 Variable overhead (1.5 hrs @ $2) 3.00 Fixed overhead (1.5 hrs @ $3) 4.50 Total $25.00 Selling and administrative costs: Variable $5 per unit Fixed $190,000 For the year, the company also had the following information: Units produced and sold 21,500 Unit selling price $42 Required: a) Compute the unit cost using (i) absorption costing and (ii) variable costing. b) Prepare an absorption-costing income statement. c) Prepare a variable-costing income statement.
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ACC 333 (Farrell) Classes 19 & 20 Fall 2011 Page 2 of 12 2) Knot, Wright, and Bright consulting firm has a client in Mexico City that needs immediate help in solving a personnel training problem in the shipping department. Classify each activity on the basis of its relationship with this consulting engagement, by checking the appropriate box(es) below. Items may have multiple classifications. Relevant Costs Irrelevant Costs Opportunity Outlay Outlay Sunk a. Three employees will have to spend four nights in Mexico City; the hotel bill has been negotiated in advance for $1,200. b. All staff members receive $800 per diem for foreign travel. c. Current year's depreciation of the firm's computer system is $12,000. d. Round-trip transportation for each staff member is $600 e. The firm is also sending the same three staff members to Atlanta for a two week engagement upon their return from Mexico City; the firm's cost of this trip will be $15,000. f. The firm has a $2,200 maintenance contract on its telecommunications system for the current year. g. If the firm accepts the Mexico City job, it will have to decline a job in Seattle that has the potential of providing a net cash inflow of $7,200 after all expenses. h. The firm's variable overhead is $40 per client hour. i. The firm will pay $50 next month for this year's membership in the American Consultants Society for each professional staff member. j. Last year the firm paid $3,500 to make improvements in its 5-year leasehold on its offices.
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ACC 333 (Farrell) Classes 19 & 20 Fall 2011 Page 3 of 12 3) Leland Mfg. Company uses 10 units of part KJ37 each month in the production of radar equipment. The cost of manufacturing one unit of KJ37 is the following: Direct material $1,000 Material handling (20% of direct material dollars) 200 Direct labor 8,000 Manufacturing overhead (150% of direct labor dollars) 12,000 Total cost $21,200 Additional information: Material handling costs are direct variable costs from the Receiving Department, and are applied to direct materials and purchased components on the basis of their cost. Leland’s annual manufacturing overhead budget is 1/3 variable and 2/3 fixed.
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This note was uploaded on 03/19/2012 for the course ACCACC 333 taught by Professor Anne during the Fall '11 term at Miami University.

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19and20_AdditionalStudyQuestions - ACC 333 (Farrell)...

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