Reference no: EM132054891

Questions: 1. Mitten Thaw Inc. is considering producing a new handwarmer that will offer several new features, including an alarm clock and the wireless download of spreadsheet software from any computer to the device. After much market research, it has determined that the appropriate target price for the new product is $700. To achieve its normal minimum profit margin of 30 percent, Mitten Thaw must be able to produce the product at what maximum total unit cost?

2. PokeyokeyCompany manufactures cattle prods. The estimated number of cattle prod sales for each of the last three months of Year 1 is as follows:

Month	Unit Sales
October	10,000
November	14,000
December	7,500

Finished goods inventory at the end of November was 2,000 units. Desired ending finished goods inventory is equal to 25 percent of the next month's sales. Pokeyokey expects to sell the cattle prods for $100 each. January sales for Year 2 are projected at 16,000 tables. How many cattle prods should Pokeyokeyproduce in December?

3. Fifty Shades of Dr. Gray Company manufactures custom window treatments. The company has the following sales forecasts for the selected three-month period in the current year:

Month	Sales
April	$12,000
May	7,000
June	8,000

Collection pattern: 65% of sales are collected in the month of the sale, 35% is collected in the following month.

Accounts Receivable balance (April 1): $10,000

Cash balance (April 1): $5,000

Minimum cash balance is $5,000. Cash can be borrowed in $100 increments from the local bank (assume no interest charges).

Calculate the expected amount the company will need to borrow from the bank balance at the end of April in order to maintain its minimum cash balance. Assume that cash is received only from customers and that $19,000 is paid out during April.

4. Taylormade Garment Wear(TGW) Company is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 65 percent of sales. Fabric purchases and payments are to be made during the month preceding the month of sale. Wages (production-related) are estimated at 20 percent of sales and are paid during the month of sale. Other operating costs amounting to 25 percent of sales are to be paid in the month following the month of sales. Additionally, a monthly lease payment of $5,000 is paid to Net World for computer services. Depreciation is $5,000 per month. Sales revenue is forecasted as follows:

Month	Sales
March	$150,000
April	$160,000
May	$235,000
June	$200,000
July	$250,000

Calculate the amount of budgeted cash disbursements for the month of May.

5. The following information pertains to an item sold by Boyd Company:

	Budget	Actual
Unit sales	2,000	1,900
Unit selling price	$400	$420
Unit standard variable costs	$160

Required: a. Determine the sales price variance.

b. Determine the sales volume variance.

c. Reconcile the difference between budgeted and actual revenues using the sales variances computed in requirements a and b.

6. Liquid Company manufactures a single product that has astandard materials cost of $20 (2 units of raw materials at $10 per unit), standard direct labor cost of $18 (1 hour per unit), and standard variable overhead cost of $8 (based on direct labor-hours). Fixed overhead is budgeted at $34,000 per month.

The following data pertain to operations for May of this year:

Raw materials purchased	3,600 units costing $31,620
Raw materials used in production of 1,500 units of finished product	3,200 units of raw materials
Direct labor used	1,500 hours costing $30,000
Variable overhead costs incurred	$11,920
Fixed overhead costs incurred	$35,000

Required: a. Compute the following variances (show calculations, 15 points):

1. Materials quantity variance

2. Labor rate variance

3. Labor efficiency variance

b. Give one possible explanation for each of the three variances computed in requirement (a). This requirement is 6 points

7. The Chip Division of Marino Co. has just revised its actual cost data for the year just ended. Chip Division transfers circuit boards to the Assembly Division, and incurs no selling expense for such transfers. Assembly Division can buy the same goods in the open market for $71 each. Chip's new cost data are:

Direct materials	$30
Direct labor	15
Variable manufacturing overhead	7
Fixed manufacturing overhead	4
Variable selling expenses	3
Fixed selling and administrative expenses	6
Total costs	$65
Desired return	10
Sales price	$75

Current production is 400,000 units, and Chip has a capacity of 600,000 units.

Required: a. What is the lowest price Chip should charge for the internal transfer of its goods?

b. What is the highest price Assembly should pay Chip for the units?

c. Give the primary reason why Chip should reduce its price for internal transfers below the market price.