Question 1: Du Page Company manufactures a nutrient, Everlife, through two manufacturing processes: Blending and Packaging. All materials are entered at the beginning of each process. On August 1, 2005, inventories consisted of Raw Materials $5,000, Work in Process—Blending $0, Work in Process—Packaging $3,945, and Finished Goods $7,500. The beginning inventory for Packaging consisted of 500 units, two-fifths complete as to conversion costs and fully complete as to materials. During August, 9,000 units were started into production in Blending, and the following transactions were completed.
1. Purchased $25,000 of raw materials on account.
2. Issued raw materials for production: Blending $18,930 and Packaging $7,140.
3. Incurred labor costs of $20,770.
4. Used factory labor: Blending $13,320 and Packaging $7,450.
5. Incurred $41,500 of manufacturing overhead on account.
6. Applied manufacturing overhead at the rate of $30 per machine hour. Machine hours were Blending 900 and Packaging 300.
7. Transferred 8,200 units from Blending to Packaging at a cost of $54,940.
8. Transferred 8,600 units from Packaging to Finished Goods at a cost of $72,490.
9. Sold goods costing $62,000 for $90,000 on account.
Instructions:
Journalize the August transactions.
Question 2: The Campus Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $2,200 per month. The other barbers are paid $1,400 per month. In addition, each barber is paid a commission of $4 per haircut. Other monthly costs are: store rent $700 plus 60 cents per haircut, depreciation on equipment $500, barber supplies 40 cents per haircut, utilities $300, and advertising $100. The price of a haircut is $10.
Instructions
a. Determine the variable cost per haircut and the total monthly fixed costs.
b. Compute the break-even point in units and dollars.
c. Prepare a CVP graph, assuming a maximum of 1,800 haircuts in a month. Use increments of 300 haircuts on the horizontal axis and $3,000 increments on the vertical axis.
d. Determine the net income, assuming 1,700 haircuts are given in a month.