1.

The following information applies to the General Lawnmower Company for the year ended
December 31, 2010:

Factory Rent $80,000
Direct Materials Inventory, Beginning $50,000
Direct Materials Inventory, Ending $45,000
Direct Materials Purchases $325,000
Direct LaborWages $550,000
Indirect LaborWages $25,000
Finished Goods Inventory, Beginning $50,000
Finished Goods Inventory, Ending $75,000
Indirect Materials $50,000
Plant Utilities $25,000
General and Administrative $130,000
Work-in-Process Inventory, Beginning $50,000
Work-in-Process Inventory, Ending $55,000
Marketing Expenses $180,000
Sales Revenue $1,825,000


Prepare a statement of cost of goods manufactured and an income statement for the year
ended December 31, 2010.


2. Data concerning Golding Corporation's single product appear below:

Per Unit Percent of Sales
Selling price $210 100%
Variable costs. 126 60%
Contribution margin $84 40%


Fixed costs are $444,000 per month. The company is currently selling 7,000 units per month.


Management is considering using a new component that would increase the unit variable
cost by $2. Since the new component would improve the company's product, the marketing
manager predicts that monthly sales would increase by 200 units. What should be the overall
effect on the company's monthly operating profit of this change if fixed costs are
unaffected?

3. Penny Company offers two products. At present, the following represents the usual results
of a month's operations:

Product A Product B
Per Unit Per Unit Combined
Sales $120,000 $1.20 $80,000 $0.80 $200,000
Variable costs 60,000 0.60 60,000 0.60 120,000
Contribution margin $60,000 0.60 $20,000 $0.20 80,000
Fixed costs 50,000
Operating profit $30,000


a. Find the break-even point in dollars.

b. Find the margin of safety in dollars.

c. The company is considering decreasing product A's unit sales to 80,000 and increasing product B's
unit sales to 180,000, leaving unchanged the selling price per unit, variable cost per unit, and total
fixed costs. Would you advise adopting this plan?

d. Refer to (c) above. Under the new plan, find the break-even point in dollars.

e. Under the new plan in (c) above, find the margin of safety in dollars.

Assume that the following events occurred at a division of Admiral Enterprises for the current year.

(1) Purchased $900,000 in direct materials.
(2) Incurred direct labor costs of $520,000.
(3) Determined that manufacturing overhead was $820,000.
(4) Transferred 75% of the materials purchased to Work-in-Process Inventory.
(5) Completed work on 60% of the work in process. Costs assigned equally across all work-in-
process.
(6) The inventory accounts have no beginning balances. All costs incurred were debited to the
appropriate account and credited to Accounts Payable.

Compute the following amounts in the Work-in-Process Inventory account:

(a) Transfers-in (TI).
(b) Transfers-out (TO).
(c) Ending balance (EB).