# 1. The work-in-process inventory account of a manufacturingcompany

1. The work-in-process inventory account of a manufacturing
company shows a balance of \$3,000 at the end of an
accounting period. The job-cost sheets of the two incomplete
jobs show charges of \$500 and \$300 for direct
materials, and charges of \$400 and \$600 for direct labor.
From this information, it appears that the company is
using a predetermined overhead rate as a percentage of
direct labor costs. What percentage is the rate?

3,000 – (500+300) – (400+600) = 1,200 of overhead

1,200 overhead divided by the 1000 (400+600) of labor is 1.20. So the overhead rate is 120% of direct labor.

2. The break-even point in dollar sales for Rice Company is
\$480,000 and the companys contribution margin ratio
is 40 percent. If Rice Company desires a profit of
\$84,000, how much would sales have to total?

contribution margin 40% / variable costs are 60% / break-even point \$480,000

480,000 x 60% = \$288,000 variable costs at break-even point
480,000 – 288,000 = \$192,000 fixed costs

192,000 + 84,000 + 0.60x = x
276,000 = 0.40x
x = \$690,000 sales needed

This means fixed costs are \$288,000 and variable are 192,000.
Each marginal dollar in sales costs \$.40 variable and 0 fixed, so MS=(84,000/.6)=140,000.

break even sales of 480,000 + marginal sales of 140,000 = 620,000.

Fixed costs are 288,000.
Variable costs are 620000*.4=248000.
Total costs are 536,000.
Profits are 620,000-536,000=84,000.

3. Williams Companys direct labor cost is 25 percent of its
conversion cost. If the manufacturing overhead for the
last period was \$45,000 and the direct material cost was
\$25,000, how much is the direct labor cost?

60000 + 30000 = 90000 = 60% / 60 = 1500 = 1% x 100 = 150000 = 100% X .4 = 60000
The above solution is incorrect.
By definition, the conversion cost is the sum of the direct labor cost and the overhead.
Therefore, if we assume x is the conversion cost, then x = 0.4x + 60,000. The solution is conversion cost = 100,000. Hence, the direct labor cost = 40,000.
Note that the knowing the direct material cost is not necessary for the computation of the labor cost.I am really bad at math so i just have to think you are right on this one

4. Grading Companys cash and cash equivalents consist of
cash and marketable securities. Last year the companys
cash account decreased by \$16,000 and its marketable
securities account increased by \$22,000. Cash provided
by operating activities was \$24,000. Net cash used for
financing activities was \$20,000. Based on this information,
was the net cash flow from investing activities on
the statement of cash flows a net increase or decrease?
By how much?

Cash provided by operating activities = 24000
Cash used by financing activities = (20000)
Cash and cash equivalents net increase = 4000
Net increase/(decrease) in cash flow of investing activities = 21000 (because dollar difference between (10000) and 4000 is that of 21000 dollars, i.e., travelling from (10000) to 0 is first 10000 then from 1 to 11000, hence it makes up total of 21000.

5. Gladstone Footwear Corporations flexible budget cost
formula for supplies, a variable cost, is \$2.82 per unit of
output. The companys flexible budget performance report
for last month showed an \$8,140 unfavorable spending
variance for supplies. During that month, 21,250 units
were produced. Budgeted activity for the month had
been 20,900 units. What is the actual cost per unit for
indirect materials?

Spending variance = (AP – SP) x AQ
Since the spending variance was \$8,140 unfavorable we know that the actual price was more than the standard. We also have 3 known, spending variance, standard price, and actual quantity.
\$8,140 U = (AP – 2.82) x 21,250 units.
Rearrange the formula, solve for AP to get 3.20305 or \$3.20305 / unit.

6. Lyons Company consists of two divisions, A and B. Lyons
Company reported a contribution margin of \$60,000 for
Division A, and had a contribution margin ratio of 30
percent in Division B, when sales in Division B were
\$240,000….

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