11. Rusty Hardware makes only cash sales. It began 2016 with a credit balance of $32,000 in the refund liability account. Sales during 2016 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2016, customers returned merchandise for credit of $28,000 to their accounts.
What is the balance in the allowance for sales returns account at the end of 2016?
a) $32,000
b) $39,000
c) $43,000
d) $40,000
12.The following are the Jensen Corporation's unit costs of making and selling an item at a volume of 2,800 units per month (which represents the company's capacity):
Manufacturing:
Direct materials $2.80
Direct labor $3.80
Variable overhead $2.30
Fixed overhead $0.75
Selling and Administrative:
Variable $3.80
Fixed $1.15
Present sales amount to 1,600 units per month. An order has been received from a customer in a foreign market for 280 units. The order would not affect current sales. Fixed costs, both manufacturing and selling and administrative, are constant within the relevant range between 1,600 units and 2,800 units. The variable selling and administrative expenses would have to be incurred on this special order as well as for all other sales. Direct labor is a variable cost.
Assume the company has 90 units left over from last year which have small defects and which will have to be sold at a reduced price for scrap. The sale of these defective units will have no effect on the company's other sales. Which of the following costs is relevant in this decision?
a) $8.90 variable manufacuting cost
b) $9.65 unit product cost
c) $3.80 variable selling and administrative cost
d) $14.60 full cost