During April, the production department of a process manufacturing system completed a number of units of a product and transferred them to finished goods. Of these transferred units, 56,000 were in process in the production department at the beginning of April and 260,000 were started and completed in April. April’s beginning inventory units were 50% complete with respect to materials and 50% complete with respect to labor. At the end of April, 68,000 additional units were in process in the production department and were 80% complete with respect to materials and 40% complete with respect to labor.
The production department had $500,000 of direct materials and $400,000 of direct labor cost charged to it during April. Also, its beginning inventory included $90,000 of direct materials cost and $60,000 of direct labor.


1&2. Using the weighted-average method, compute the direct materials cost and the direct labor cost per equivalent unit and assign April’s costs to the department’s output. (Round “Cost per EUP” to 2 decimal places.)



Blanchard Company manufactures a single product that sells for $310 per unit and whose total variable costs are $248 per unit. The company’s annual fixed costs are $992,000.


(1) Prepare a contribution margin income statement for Blanchard Company at the break-even point.


(2) Assume the company’s fixed costs increase by $145,000. What amount of sales (in dollars) is needed to break even?



Blanchard Company manufactures a single product that sells for $240 per unit and whose total variable costs are $192 per unit. The company targets an annual after-tax income of $780,000. The company is subject to a 35% income tax rate. Assume that fixed costs remain at $734,400.


Castor, Inc. is preparing its master budget for the quarter ended June 30. Budgeted sales and cash payments for merchandise for the next three months follow:


April May June
  Budgeted sales $ 31,500 $ 40,500 $ 24,500
  Budgeted cash payments for merchandise 21,200 16,300 16,700


Sales are 60% cash and 40% on credit. All credit sales are collected in the month following the sale. The March 30 balance sheet includes balances of $12,500 in cash, $12,500 in accounts receivable, $11,000 in accounts payable, and a $2,500 balance in loans payable. A minimum cash balance of $12,500 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 2% per month based on the beginning of the month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (5% of sales), shipping (4% of sales), office salaries ($3,500 per month) and rent ($5,500 per month).


Prepare a cash budget for each of the months of April, May, and June.



Antuan Company set the following standard costs for one unit of its product.


  Direct materials ((4.0 Ibs. @ $6.0 per Ib.) $ 24.00
  Direct labor (1.7 hrs. @ $14.0 per hr.) 23.80
  Overhead (1.7 hrs. @ $18.50 per hr.) 31.45

  Total standard cost $ 79.25


The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory’s capacity of 20,000 units per month. Following are the company’s budgeted overhead costs per month at the 75% level.


Overhead Budget (75% Capacity)
  Variable overhead costs
     Indirect materials $ 15,000
     Indirect labor 75,000
     Power 15,000
     Repairs and maintenance 30,000

     Total variable overhead costs $ 135,000
  Fixed overhead costs
     Depreciation—building 25,000
     Depreciation—machinery 71,000
     Taxes and insurance 18,000
     Supervision 222,750

     Total fixed overhead costs 336,750

  Total overhead costs $ 471,750


The company incurred the following actual costs when it operated at 75% of capacity in October.


  Direct materials (61,000 Ibs. @ $6.10 per lb.) $ 372,100
  Direct labor (29,000 hrs. @ $14.10 per hr.) 408,900
  Overhead costs
     Indirect materials $ 44,000
     Indirect labor 177,750
     Power 17,250
     Repairs and maintenance 34,500
     Depreciation—building 25,000
     Depreciation—machinery 95,850
     Taxes and insurance 16,200
     Supervision 222,750 633,300

  Total costs $ 1,414,300


1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed.


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