PEKERJAAN RUMAH 5 1

QUESTION 1
Buttons Company produces three products: LMC, DMC, and KPC. For the coming
year, they expect to produce 160,000 units. Of these, 65,000 will be LMC; 40,000
will be DMC; and 55,000 will be KPC. The following information was provided for
the coming year:

LMC DMC KPC

Price $ 550 $ 860 $ 625
Unit direct materials 250 405 300
Unit direct labor 180 210 205
Unit variable overhead 60 72 55
Unit variable selling expense 45 60 58
Total direct fixed overhead 240,000 425,000 400,000
Common fixed overhead is $984,000 and fixed selling and administrative expenses
for Mario Co. is $881,000 per year.

Required:
A. Calculate the unit variable cost under variable costing.
B. Calculate the unit variable product cost.
C. Prepare a segmented variable-costing income statement for next year.
D. Should Buttons Company keep all product lines?

QUESTION 2
During the most recent year, Boston Corp. had the following data:

Beginning inventory in units -

Units produced 15,400
Units sold ($125 per unit) 8,200
Variable costs per unit:
Direct materials $ 13
Direct labor $ 16
Variable overhead $8
Fixed costs:
Fixed overhead per unit produced $ 23
Fixed selling and administrative $ 185,000
Required:
A. How many units are in ending inventory?
B. Using absorption costing, calculate the per-unit product cost. What is the value of
ending inventory?
C. Using variable costing, calculate the per-unit product cost. What is the value of
ending inventory?
D. Prepare an income statement using absorption costing.
E. Prepare an income statement using variable costing.

QUESTION 3
Rudd Company uses 40,000 micro-chips each year in its production of digital
cameras. The cost of placing an order is $75. The cost of holding one unit of
inventory for one year is $8. Currently Rudd places 20 orders of 2,000 units per order.
Required:
A. Compute the annual ordering cost.
B. Compute the annual carrying cost.
C. Compute the total cost of Rudd's current inventory policy.
D. Compute the economic order quantity.
E. Compute the order cost and the carrying cost for the EOQ.
F. How much money does using the EOQ policy save the company over the policy of
purchasing 2,000 micro-chips per order?

Question 4
McKay Company produces curling irons. The plastic handles used to produce the
curling irons are purchased from an outside supplier. Each year, 45,000 handles are
used at the rate of 150 handles per day. Some days as many as 180 handles are used.
On average it takes 4 days after an order is placed for the inventory to arrive at
McKay Company.

Required:
A. Calculate the reorder point without safety stock.
B. Calculate the amount of safety stock.
C. Calculate the reorder point with safety stock.