Question

1.

The following information has been taken from the perpetual inventory system of Elite Mfg. Co. for the month ended August 31:

Purchases of direct materials	$	80,000
Direct materials used	$	68,500
Direct labor costs assigned to production	$	28,000
Manufacturing overhead costs incurred (and applied)	$	35,000

Balances in inventory	August 31			August 1
Materials	$	?			30,000
Work in Process	$	64,000			57,000
Finished Goods	$	69,000			49,000

  

Total manufacturing costs charged (debited) to Work in Process during August amount to:

Multiple Choice

• $63,000.

• $161,500.

• Some other amount.

• $131,500.

2. The following information is from the manufacturing budget and budgeted financial statements of Altman Corp.:

Direct materials inventory, 1/1	$	83,000
Direct materials inventory, 12/31	$	99,000
Direct materials budgeted for use during year	$	341,000
Accounts payable to suppliers, 1/1	$	51,000
Accounts payable to suppliers, 12/31	$	61,000

For the year, budgeted purchases of direct materials amounted to:

Multiple Choice

• $367,000.

• $325,000.

• $357,000.

• $347,000.

3. Burns Industries currently manufactures and sells 24,000 power saws per month, although it has the capacity to produce 39,000 units per month. At the 24,000-unit-per-month level of production, the per-unit cost is $73, consisting of $44 in variable costs and $29 in fixed costs. Burns sells its saws to retail stores for $84 each. Allen Distributors has offered to purchase 5,400 saws per month at a reduced price. Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs.

Using an incremental analysis approach, Burns should consider accepting this special order only if the price per unit offered by Allen is at least:

Multiple Choice

• $84.

• $44.

• $29.

• $73.

4. If monthly fixed costs are $32,000 and the contribution margin ratio is 25%, the monthly sales volume required to break even is:

Multiple Choice

• $136,000.

• $40,000.

• $8,000.

• $128,000.

Answer 1

Q1.
Total Manufacturing cost:
Material used		68500
Direct labour cost		28000
Overheads applied		35000
Total Manufacturing cost:	131500
Answer is $ 131500
Q2.
Direct material used		341000
Add: Ending inventory	99000
Less: Beginning inventory	-83000
Direct matrial purchased	357000
Answer is $ 357000
Q3.
Answer is $ 44.
As the incremental revenue shall cover the incremental cost of $ 44 per unit
Q4.
Fixed cost		32000
Divide: CM ratio	25%
Break even sales	128000
Answer is $ 128,000