1. The problem set consists of 3 questions.

2. You may use your word processor to expand/contract the space provided

3400 civic centre blvd.

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1. (60 points)

Oilco makes cheese packing machines. The following data reflect management’s monthly financial
projections for the foreseeable future (i.e., each month is expected to be the same):

Sales ($31,000 per machine x 20 machines) $620,000

Manufacturing costs:
Materials 80,000
Direct labor 500,000
Overhead 200,000 380,000

Gross margin 240,000

Selling and administrative expense 200,000
Pre-tax net income $40,000

All manufacturing costs are variable, except for $120,000 in fixed overhead. Variable overhead is driven
The company’s production capacity is 25 machines per month.

A sales representative received an unexpected offer for 10 machines per month at $25,000 per machine.
The prospective customer has never bought machines from Oilco before, and the expected volume given
above does not reflect this sale.
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2. (40 points)

The following data are available for donc Works:

Selling price = $ 150 per unit

Standard direct labor cost per unit = 1 hour per unit x $ 10 per hour
Actual direct labor cost per unit = 1.1 hours per unit x $ 11 per hour

Standard number of parts per unit = 2

Actual number of parts per unit = 2

Budgeted fixed manufacturing overhead = $ 1,900,000

Actual fixed manufacturing overhead = $ 2,178,000

Budgeted variable manufacturing overhead = $1,000,000

Actual variable manufacturing overhead = $940,500

Expected (budgeted) output = 100,000 units

Actual output = 90,000 units

Actual sales = 85,000 units

Actual variable selling costs = $ 50 per unit sold
Actual fixed selling costs = $ 900,000
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3. (30 points)

darby produces designer sunglasses. This year’s expected production is 10,000 units. Currently, Each
pair of sunglasses is sold with the case included. The accountant reports the following costs per sunglass
case for making 10,000 units:

Variable
Cost Total
per unit Cost

Direct materials $4.00 $40,000

Direct labor $2.00 $20,000
Power and utilities $1.50 40000

Inspection, setup, material handling $2,000

Machine lease $2,000
Allocated fixed plant administration, taxes, and insurance $30,000

Notes:

Direct materials, direct labor, and power and utility costs vary directly with the number of sunglass cases
produced.

The total inspection, setup, and materials handling costs vary with the number of batches in which the
sunglass cases are produced. stimates that it will produce the 10,000 sunglass cases in 10 batches.

Outside Offer:
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