Gulf Breeze Corporation produces three products for water skiing enthusiasts: life vests, tow ropes, and water skis. Information relating to each product line is as follows:

	Life Vests	Tow Ropes	Water Skis
Selling price	$\$58$	$\$25$	$\$175$
Direct materials	12	3	75
Direct labor	20	10	80
Variable overhead	6	2	4

Gulf Breeze pays its direct labor workers an average of $\$ 10$ per hour. At full capacity, 65,000 direct labor hours are available per year. The marketing department has just released the following sales estimates for the upcoming year: life vests ( 25,000 units), tow ropes ( 15,000 units), and water skis (5,000 units). Based on these figures, demand for the current year is expected to exceed the company's direct labor capacity.

a. What products should Gulf Breeze produce to maximize its operating income?

Which of the following statements regarding the manufacturing overhead budget is incorrect

A) Both fixed and variable manufacturing overhead costs are budgeted.

B) The manufacturing overhead budget calculates the budgeted overhead costs for the year and also the predetermined overhead allocation rate for the year.

C) The cost accountant and the production manager work together to project variable and fixed manufacturing costs.

D) Depreciation on manufacturing equipment is not included because the production manager has no control over that cost allocation.

Treadwell Pharmaceuticals produces two medications in a joint process: Amoxiphore and Benidrate. With each production run, Treadwell incurs $\$ 4,000$ in common costs up to the split-off point.

Amoxiphore can be sold for $\$ 2,700$ at the split-off point or be processed further at a cost of $\$ 1,600$, at which time it can be sold for $\$ 4,200$. However, if Amoxiphore is sold at the split-off point, its side effects include nausea and headaches. If it is processed further, these side effects are diminished. Demand for Amoxiphore far exceeds Treadwell's production capacity.

Benidrate can be sold for $\$ 2,400$ at the split-off point or be processed further at a cost of $\$ 3,700$, at which time it can be sold for $\$ 6,000$.

b. With a group of three students identify and discuss the ethical issues the company faces regarding its processing decisions.

Sounds, Inc., is a company that produces sound systems for car stereos. It is considering outsourcing its customer service operation. It has a bid of $\$ 2.50$ per call from Callers Service Company. Its current costs to service customers are estimated to be $\$ 2.00$ per call, but it could use the idle space currently occupied by the customer service operation to earn an additional $\$ 3,500$ per year. Sounds, Inc., currently receives about 200 customer calls per month. Should Sounds, Inc., outsource its customer service operation? What nonfinancial factors should be considered?

Manufacturing costs include :

a. direct materials and direct labor only
b. direct materials and manufacturing overhead only.
c. direct labor and manufacturing overhead only
d. direct materials, direct labor, and manufacturing overhead

The journal entry to record applying overhead during the production process is:

A. Debit Manufacturing Overhead, Credit Work In Process

B. Debit Finished Goods, Credit Manufacturing Overhead

C. Debit Manufacturing Overhead, Credit Finished Goods

D. Debit Work In Process, Credit Manufacturing Overhead

On May 1, 2016, Ryde Inc. had common stock of $345,000, additional paid-in capital of$1,298,000, and retained earnings of $3,013,000. Ryde did not purchase or sell any common stock during the year. The company reported net income of$556,000 and declared dividends in the amount of $78,000 during the year ended April 30, 2017.

Required Prepare a financial statement that explains the differences between the beginning and ending balances for the accounts in the Stockholders’ Equity category of the balance sheet.

Two products, wood chips and fiberboard, come out of a joint process costing $\$ 420,000$ per year. The sales value of the wood chips is $\$ 260,000$ per year. The sales value of the fiberboard is $\$ 780,000$ per year. Use the relative sales value method to allocate the joint costs of the joint process to the products. (Round your answer.)

A company regularly sells 100,000 washing machines at an average price of $\$ 250$. The average cost of producing these machines is $\$ 180$. Under what circumstances might the company accept a special order for 20,000 washing machines at $\$ 175$ per machine?

Home Run Corporation produces three products for baseball enthusiasts: bats, gloves, and balls. Information relating to each product line is as follows:

Home Run pays its direct labor workers an average of $\$ 8$ per hour. At full capacity, 60,000 direct labor hours are available per year. The marketing department has just released the following sales estimates for the upcoming year: bats ( 60,000 units), gloves ( 20,000 units), and balls ( 100,000 units). Based on these figures, demand for the current year is expected to exceed the company's direct labor capacity.

a. What products should Home Run produce to maximize its operating income?

Bacrometer, Inc., makes part no. 566 on one of its production lines. Each month Bacrometer makes 60,000 of part no. 566 at a variable cost of $\$ 2.50$ per part. The fixed costs for the production line are $\$ 180,000$, or $\$ 3.00$ per part. Bacrometer has been provided a bid for part no. 566 from another manufacturer that will make the part for $\$ 2.65$ per part. Bacrometer knows the production line could be rented to another manufacturer for $\$ 5,000$ per month. Should Bacrometer continue to make part no. 566 or should it buy the part and rent the production line?

Mazeppa Corporation sells relays at a selling price of $\$ 28$ per unit. The company's cost per unit, based on full capacity of 160,000 units, is as follows:

Mazeppa has been approached by a distributor in Montana offering to buy a special order consisting of 30,000 relays. Mazeppa has the capacity to fill the order. However, it will incur an additional shipping cost of $\$ 2$ for each relay it sells to the distributor.

a. Assume that Mazeppa is currently operating at a level of 100,000 units. What unit price should it charge the distributor if it wishes to increase operating income by $\$ 2$ for each unit included in the special order?

Mark Corporation estimates its manufacturing overhead to be $90,000 and its direct labor costs to be$200,000 for year 1. The actual direct labor costs were $50,000 for Job 301,$75,000 for Job 302, and $100,000 for Job 303 during year 1; the actual manufacturing overhead was$97,000. Manufacturing overhead is applied to jobs on the basis of direct labor costs applying predetermined rates.

Required
How much overhead was assigned to each job during year 1?

River Queen Corporation began operations early in the current year, building luxury boats. During the year, the company started and completed 40 boats at a cost of $\$ 80,000$ per unit. Of these, 30 were sold for $\$ 130,000$ each and 10 remain in finished goods inventory. In addition, the company had five partially completed units in its factory at year-end. Total costs for the year (summarized alphabetically) were as follows:

Compute the following for the current year: e. Ending inventories of (1) work in process and (2) finished goods.