Reference no: EM132017050

Questions -

Q1. 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	2,340	1,720	2,150	2,720
Tax	3,230	2,550	2,320	2,740
Consulting	1,620	1,620	1,620	1,620

Average hourly billing rates are: auditing $84, tax $91, 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.

Q2. Stanton Company is planning to produce 1,400 units of product in 2012. Each unit requires 3.70 pounds of materials at $6.50 per pound and a half-hour of labor at $15.60 per hour. The overhead rate is 80% of direct labor.

(a) Compute the budgeted amounts for 2012 for direct materials to be used, direct labor, and applied overhead.

(b) Compute the standard cost of one unit of product.

Q3. In Harley Company it costs $32 per unit ($20 variable and $12 fixed) to make a product that normally sells for $53. A foreign wholesaler offers to buy 4,960 units at $25 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.

Q4. Vintech Manufacturing incurs unit costs of $6 ($4 variable and $2 fixed) in making a subassembly part for its finished product. A supplier offers to make 12,200 of the part at $6.30 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.

Q5. Ridley Company has a factory machine with a book value of $82,800 and a remaining useful life of 5 years. A new machine is available at a cost of $218,200. This machine will have a 5-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $628,700 to $393,300.

Prepare an analysis showing whether the old machine should be retained or replaced.