Week 6 WileyPlus Questions 1-5 Homework Assignment

ACC/561

Exercises: 20-3

Exercises: 22-1

Brief Exercise 23-3

Brief Exercise 23-4

Brief Exercise 23-6

Question 1
Garza and Neely, CPAs, are preparing their service revenue (sales) budget for the coming year (2012).
The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each
department, by quarter, are provided below.
Department

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Auditing

2,430

1,730

2,160

2,660

Tax

3,350

2,790

2,260

2,830

Consulting

1,720

1,720

1,720

1,720

Average hourly billing rates are: auditing $84, tax $93, and consulting $102.
Prepare the service revenue (sales) budget for 2012 by listing the departments and showing for each
quarter and the year in total, billable hours, billable rate, and total revenue.
GARZA AND NEELY, CPAs
Sales Revenue Budget
For the Year Ending December 31, 2012
Quarter 1
Dept.

Billable
Hours

Auditing

2,430

Tax
Consulti
ng

Quarter 2

Billable Rate

Billable
Hours

Total Rev.

84

204,120

3,350

93

311,550

1,720

102

175,440

Billable Rate

Total Rev.

1,730

84

145,320

2,790

93

259,470

1,720

102

175,440

691,110

580,230

GARZA AND NEELY, CPAs

Sales Revenue Budget
For the Year Ending December 31, 2012
Quarter 3
Dept.
Auditing

Tax
Consultin
g

Billable
Hours

Quarter 4

Billable Rate

Total Rev.

$
2,160

2,260

1,720

Billable
Hours

Billable Rate

84

181,440

93

210,180

102

175,440

Total Rev.

$
2,660

2,830

1,720

84

223,440

93

263,190

102

175,440

$
567,060

GARZA AND NEELY, CPAs

$
662,070

Sales Revenue Budget

For the Year Ending December 31, 2012
Year
Dept.

Billable Hours

Auditing

8,980

Tax
Consulting

Billable Rate

Total Rev.

$
84

754,320

11,230

93

1,044,390

6,880

102

701,760

$
2,500,470

Question 2
Stanton Company is planning to produce 1,400 units of product in 2012. Each unit
requires 2.00 pounds of materials at $5.60 per pound and a half-hour of labor at $13.60 per hour. The
overhead rate is 70% of direct labor.
(a) Compute the budgeted amounts for 2012 for direct materials to be used, direct labor, and applied
overhead.
$

Direct materials

15,680

Direct labor

9,520

Overhead

6,664

(b) Compute the standard cost of one unit of product. (Round answer to 2 decimal places, e.g.
2.75.)
$

Standard cost

22.76

Question 3
In Harley Company it costs $31 per unit ($18 variable and $13 fixed) to make a product that normally
sells for $44. A foreign wholesaler offers to buy 3,220 units at $26 each. Harley will incur special
shipping costs of $1 per unit. Assuming that Harley has excess operating capacity.
Indicate the net income (loss) Harley would realize by accepting the special order. (If an amount
reduces the net income for Increase (Decrease) column then enter with a negative sign
preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in
all other columns as positive and subtract where necessary.)

Reject
Order

Accept
Order

Net Income
Increase
(Decrease)

Revenues
CostsManufacturing
Shipping

$
83,720

83,720

57,960

(57,960)

3,220

(3,220)

Net income/(loss)

$
0

The special order should be

$
22,540

22,540

.
accepted

Question 4
Vintech Manufacturing incurs unit costs of $7 ($5 variable and $2 fixed) in making a subassembly part
for its finished product. A supplier offers to make 11,100 of the part at $6.40 per unit. If the offer is
accepted, Vintech will save all variable costs but no fixed costs.
Prepare an analysis showing the total cost saving, if any, Vintech will realize by buying the part. (If
an amount reduces the net income for Increase (Decrease) column then enter with a
negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all
other amounts in all other columns as positive and subtract where necessary.)

Make
Variable manufacturing costs

Buy
$

Net Income
Increase
(Decrease)
$

55,500

55,500

Fixed manufacturing costs

22,200

22,200

Purchase price

71,040

(71,040)

Total annual cost

$
77,700

The decision should be to

$
93,240

(15,540)

.
make the part

Question 5
Ridley Company has a factory machine with a book value of $80,300 and a remaining useful life
of 6 years. A new machine is available at a cost of $197,600. This machine will have a 6-year useful
life with no salvage value. The new machine will lower annual variable manufacturing costs from
$587,300 to $416,800.
Prepare an analysis showing whether the old machine should be retained or replaced. (If an amount
reduces the net income for Increase (Decrease) column then enter with a negative sign
preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in
all other columns as positive and subtract where necessary.)

Variable manufacturing costs

Retain
Equipment
$

Replace
Equipment
$

Net 6-Year
Income
Increase
(Decrease)
$

3,523,800

2,500,800

1,023,000

197,600

(197,600)

New machine cost

$

Total

$
3,523,800

The old factory machine should be

.
replaced

$
2,698,400

825,400