Problem 1: Given the following account balances in (000's):
January 1, 2012 December 31,2012
Direct Materials Inventory 15,000 15,500
Work-in-process Inventory 18,000 20,000
Finished Goods Inventory 21,000 18,000
Executive Compensation 15,000
Purchases of Direct Materials 80,000
Customer Service & Warranty Claims 8,000
Depreciation on Corporate Office Building 12,000
Direct Manufacturing Labor 18,000
Direct Manufacturing Labor Fringe Benefits 9,000
Direct Manufacturing Labor - Overtime premium (overtime due to breakdown of machines) 6,000
Factory Labor - Maintenance & Cleaning 5,000
Sales Commissions 2,000
Distribution of finished goods to the customer 3,000
Production Managers' Salaries 7,000
Plant Liability Insurance 500
Product design costs 8,000
Property tax on Factory Building 1,000
Depreciation - Plant Equipment 4,000
Revenue 500,000
a. Show the following total costs - List each cost that makes up your total below:
Total Prime Cost added during the period:
Total Manufacturing Overhead added during the period:
Total Selling and Administrative expense:
b. Based on your work in part a, prepare a Schedule of Cost of Goods Manufactured in good form. Show all work for maximum credit.
c. Create an Income Statement including Cost of Goods Sold.
Problem 2: CVP Analysis
SuperShades operates a kiosk at the local mall, selling sunglasses for $20 each. SuperShades currently pays $800 a month to rent the space and pays 2 full-time employees to work 40 hours a week at $10 per hour. The store shares a manager with a neighboring mall and pays 50% of the manager's $40,000 salary and benefits. (The manager's total benefits are 20% of her salary). The wholesale cost of the sunglasses to the company is $5 each.
a. How many sunglasses does SuperShades need to sell each month to break even?
b. If SuperShades wants to earn $4,500 per month after all expenses, how many sunglasses does the store need to sell?
c. If the store's hourly employees agreed to a 15% sales commission only pay structure, instead of their hourly pay, could the store get to its desired income of $4,500 faster?
d. Assume SuperShades pays its employees under the original hourly pay structure, but is able to pay the mall 20% of its monthly revenue instead of monthly rent. If the store would like to earn operating income of $4,500, what selling price would it need to charge customers if it wanted to maintain the level of units sold in question b above?