FACT PATTERN: Donehart Corporation
Donehart Corporation produces agricultural vehicles. Most of the component parts for these vehicles are subcontracted to reliable vendors. The final assembly of all vehicles is accomplished at Donehart's plant. Donehart's Engineering Department has developed a new fuel injection system that can be produced in-house because of the availability of production capacity. The first production run of the new fuel injection system has already been completed in-house. This 80-unit production run took 60 direct labor hours per unit to produce based on the cumulative average labor hours per fuel injection unit. Donehart has experienced an 80% learning curve with similar products, and this experience indicates that learning tends to cease by the time 640 systems are produced. Donehart's direct labor cost (including employee benefits) is $18 per direct labor hour. Donehart's management must decide whether to continue producing the fuel injection system or to subcontract the work. Donehart's purchasing agent has received a proposal from Midland, Inc., a company specializing in fuel injection systems. From past contracts, Midland has proven to be efficient and reliable. The terms of Midland's proposal are outlined below.
If Donehart manufactures the units in-house, how many TOTAL hours will it take to complete 1,000 units?
70% collected in month of sale
15% collected in the first month after sale
10% collected in the second month after sale
4% collected in the third month after sale
The sales on open account have been budgeted for the last 6 months of the year as shown below:
Esplanade's estimated total cash collections during the fourth calendar quarter from sales made on open account during the fourth calendar quarter are
A corporation anticipates the following sales during the last 6 months of the year:
20% of the corporation's sales are for cash. The balance is subject to the collection pattern shown below.
Percentage of balance collected in the month of sale
Percentage of balance collected in the month following sale
Percentage of balance collected in the second month following sale
Percentage of balance uncollectible
What is the planned net accounts receivable balance as of December 31?
A company's management team is preparing a cash budget for the coming quarter.
The company expects to collect 40% of its monthly sales in the month of sale and 60% in the following month. 50% of inventory purchases are paid in the month of purchase, and 50% in the following month. Payments for all other expenses are made in the month incurred.
The company forecasts the following account balances at the beginning of the quarter:
Accounts payable (Inventory)
Given the above information, the projected ending cash balance for February will be
A company expects the following results for Year 1.
Cost of goods sold
Earnings before interest and taxes
The controller is preparing a forecast for Year 2 using the following assumptions.
Unit sales growth: 5% per year
Increase in unit selling price: 3% per year
Increase in direct cost per unit: 2% per year
Increase in indirect costs: 4% per year
The forecast of earnings before interest and taxes for Year 2 using the above assumptions (rounded to the nearest thousand) would be
During May, Jackson purchased 125,000 pounds of direct materials at a total cost of $475,000. The total factory wages for May were $364,000, 90% of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct materials and 28,000 direct labor hours.
Jackson's direct labor price (rate) variance for May is
An entity has the following cost components for 100,000 units of product for the year:
Selling and administrative expense
All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expenses. The total costs to produce and sell 110,000 units for the year are
Data regarding Ball Corp.'s investment in available-for-sale debt securities follow:
December 31, Year 3
December 31, Year 4
Differences between cost and fair values are considered temporary. The decline in fair value was considered temporary and was properly accounted for at December 31, Year 3. Ball's Year 4 statement of changes in equity should report an increase of
They planned and actually manufactured 200,000 units of its single product during its first year of operations. Variable manufacturing costs were $30 per unit of product. Planned and actual fixed manufacturing costs were $600,000, and selling and administrative costs totaled $400,000. Osawa sold 120,000 units of product at a selling price of $40 per unit.
Osawa's operating income for the year using variable costing is:
A company has just completed the first month of producing a new product but has not yet shipped any of this product. The product incurred variable manufacturing costs of $5,000,000, fixed manufacturing costs of $2,000,000, variable marketing costs of $1,000,000, and fixed marketing costs of $3,000,000. If the company uses the variable cost method to value inventory, the inventory value of the new product will be
2,100, $ 900
Using the high-low method, what is Jackson's variable cost of cleaning per machine hour?
Last year a company had sales of 75,000 units and production of 100,000 units. Other information for the year is shown below.
Direct manufacturing labor
Variable manufacturing overhead
Variable selling expenses
Fixed administrative expenses
Fixed manufacturing overhead
Assuming no beginning inventory, what is the total value of ending finished goods inventory under ABSORPTION COSTING?
A firm uses a weighted-average process costing system. Direct materials and conversion costs are incurred evenly during the production process. During the month of October, the following costs were incurred:
The work-in-process inventory as of October 1 consisted of 5,000 units, valued at $4,300, that were 20% complete. During October, 27,000 units were transferred out. Inventory as of October 31 consisted of 3,000 units that were 50% complete. The weighted-average inventory cost per unit completed in October was
A company has been asked to evaluate the profitability of a product that it manufactured and sold from Year 7 through Year 10. The product had a one-year warranty from date of sale. The following information appears in the financial records:
Research, development, and design cost
Manufacturing and distribution costs
Yr 5 & Yr 6
Yr 7 - Yr 10
Yr 7 - Yr 10
The life-cycle cost for this product is
A company has an 8% required rate of return. It is evaluating the following four mutually exclusive projects as possible investments.
Estimated Operating Income
Using the residual income method, which one of the four projects should the company accept?