Wiley plus accounting answers chapter 6

Problem 6-1A

Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 79,100 units of product: Net sales $1,542,450; total costs and expenses $1,750,700; and net loss $208,250. Costs and expenses consisted of the following.

Total

Variable

Fixed

Cost of goods sold

$1,197,800

$776,100

$421,700

Selling expenses

427,300

79,600

347,700

Administrative expenses

125,600

53,800

71,800

$1,750,700

$909,500

$841,200

Management is considering the following independent alternatives for 2014.

1.

Increase unit selling price 22% with no change in costs and expenses.

2.

Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $36,100 plus a 5% commission on net sales.

3.

Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50.

(a) Compute the break-even point in dollars for 2014. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)

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Exercise 7-2 (Part Level Submission)

Gruden Company produces golf discs which it normally sells to retailers for $6.90 each. The cost of manufacturing 20,700 golf discs is:

Materials

$9,729

Labor

30,636

Variable overhead

22,149

Fixed overhead

40,572

Total

$103,086

Gruden also incurs 8% sales commission ($0.55) on each disc sold.

   McGee Corporation offers Gruden $5 per disc for 4,700 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Gruden. If Gruden accepts the offer, its fixed overhead will increase from $40,572 to $46,294 due to the purchase of a new imprinting machine. No sales commission will result from the special order.

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(a)

Prepare an incremental analysis for the special order. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Reject

Order

Accept

Order

Net Income

Increase

(Decrease)

Revenues

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(b) Compute the labor price and quantity variances.

Labor price variance

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Labor quantity variance

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(c) Compute the labor price and quantity variances, assuming the standard is 4.18 hours of direct labor at $12.29 per hour.

Labor price variance

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Labor quantity variance

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Problem 11-1A

Costello Corporation manufactures a single product. The standard cost per unit of product is shown below.

Direct materials—2 pound plastic at $6.25 per pound

$ 12.50

Direct labor—2.00 hours at $12.00 per hour

24.00

Variable manufacturing overhead

14.00

Fixed manufacturing overhead

6.00

Total standard cost per unit

$56.50

The predetermined manufacturing overhead rate is $10 per direct labor hour ($20.00 ÷ 2.00). It was computed from a master manufacturing overhead budget based on normal production of 11,400 direct labor hours (5,700 units) for the month. The master budget showed total variable costs of $79,800 ($7.00 per hour) and total fixed overhead costs of $34,200 ($3.00 per hour). Actual costs for October in producing 3,100 units were as follows.

Direct materials (6,390 pounds)

$ 40,704

Direct labor (6,030 hours)

74,048

Variable overhead

44,080

Fixed overhead

20,070

    Total manufacturing costs

$178,902

The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

(a) Compute all of the materials and labor variances. (Round answers to 0 decimal places, e.g. 125.)

Total materials variance

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Materials price variance

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Materials quantity variance

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Total labor variance

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Labor price variance

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Labor quantity variance

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(b) Compute the total overhead variance.

Total overhead variance

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Bracewell Company reported net income of $194,600 for 2014. Bracewell also reported depreciation expense of $40,160 and a gain of $5,580 on disposal of plant assets. The comparative balance sheet shows an increase in accounts receivable of $15,210 for the year, a $17,790 increase in accounts payable, and a $3,400 decrease in prepaid expenses.

Prepare the operating activities section of the statement of cash flows for 2014. Use the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

BRACEWELL COMPANY

Partial Statement of Cash Flows

For the Year Ended December 31, 2014

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Exercise 13-7

Meera Corporation’s comparative balance sheets are presented below.

MEERA CORPORATION

Comparative Balance Sheets

December 31

2014

2013

Cash

$14,270

$10,270

Accounts receivable

20,780

23,540

Land

20,320

25,530

Buildings

69,710

69,710

Accumulated depreciation—buildings

(15,020

)

(10,720

)

   Total

$110,060

$118,330

Accounts payable

$12,270

$27,790

Common stock

74,530

72,510

Retained earnings

23,260

18,030

   Total

$110,060

$118,330

Additional information:

1.

Net income was $22,338. Dividends declared and paid were $17,108.

2.

All other changes in noncurrent account balances had a direct effect on cash flows, except the change in accumulated depreciation. The land was sold for $4,850.

(a) Prepare a statement of cash flows for 2014 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000, or in parenthesis e.g. (15,000).)

MEERA CORPORATION

Statement of Cash Flows

For the Year Ended December 31, 2014

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Dividends

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(c) Indicate where each of the cash inflows or outflows identified in (b) would be classified on the statement of cash flows.

Common stock

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Dividends

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Exercise 14-3

The comparative condensed balance sheets of Garcia Corporation are presented below.

GARCIA CORPORATION

Comparative Condensed Balance Sheets

December 31

2014

2013

Assets

    Current assets

$ 74,450

$ 80,690

    Property, plant, and equipment (net)

98,370

90,210

    Intangibles

25,460

38,040

      Total assets

$198,280

$208,940

Liabilities and stockholders’ equity

    Current liabilities

$ 42,300

$ 49,060

    Long-term liabilities

143,930

150,570

    Stockholders’ equity

12,050

9,310

      Total liabilities and stockholders’ equity

$198,280

$208,940

(a) Prepare a horizontal analysis of the balance sheet data for Garcia Corporation using 2013 as a base. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000). (20%). Round percentages to 1 decimal place, e.g. 12.3%.)

GARCIA CORPORATION

Condensed Balance Sheets

December 31

2014

2013

Increase

(Decrease)

Percentage

Change from 2013

Assets

   Current Assets

$74,450

$80,690

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