1. Premier Manufacturing makes and distributes a wall clock that is popular with schools and other institutions. Normal monthly sales are 2,500 clocks at an average sale price of $40 per clock. Production of each clock takes 15 minutes of direct labor and has material costs of $14. The direct labor rate is $22 per hour, and overhead is applied at a rate of $40 per direct labor hour. The overhead spending is 60% fixed and 40% variable costs. Premier has been approached by a supplier offering to supply all of the clocks at a finished cost of $25 per clock. Assume that all fixed overhead would remain, but the variable overhead would be eliminated. What would be the change in monthly operating income if Premier buys the clocks instead of making them?
2. Roscoe Enterprises has sales for a three-month period as follows: May, $240,000; June, $280,000; July, $275,000. All sales are on account, and history has shown that accounts receivable are typically collected 10% in the month of the sale, 60% in the month after the sale, and 30% two months after the sale. What are Roscoe's expected cash collections in the month of July?
3. Mega Manufacturing has a budget to sell 100,000 units of a certain product at a selling price of $35 per unit. Variable costs for materials, labor, and overhead are $18 per unit. Fixed cost is $800,000. Actual sales were 110,000 units, and management would like to see actual manufacturing performance compared to a budget adjusted for volume (flexible budget). What would be the adjusted budgeted operating profit?