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1.

Payroll department expenses:


Salaries of employees
Share of utilities
Share of building rent
Managers salary
Computers and supplies
Other department expenses

###
###
###
###
###
###

Total annual expenses

###

Pilsden also noted that Salary Experts quoted a fixed fee of $125,000 and variable processin

a. Assume Learning Toys has 14,000 employees on its payroll. Can the company save money by outso

$
$

14000 *7.50=
105,000.00 +
$75,000 +
230,000.00 +
$439,350 -

By outsourcing the payroll function, it will only co


them $413,350. That will save them exactly $26,00
they do choose to outsource instead of doing th
regular payroll function.

b. What are the pros and cons of outsourcing the payroll function?
Pro: Oursourcing frees up time that can be spent in your business. There is cost saving
when it comes to calculating wages, printing, and signing. There is an improvement in
security and there is also regulatory compliance.
Cons: there may be a difficulty obtaining wages anf employees data. If there is an error,
there will be delayes in corrections to payroll. There is a risk of vendor going out of
business, so may lose access to your payroll data.

variable processing costs of $7.50 per employee transaction.

ave money by outsourcing the payroll function?


$ 105,000.00
125000 $ 230,000.00
$39,350 +
$183,350 =
$ 413,350.00 =

nction, it will only cost


them exactly $26,000 if
e instead of doing the
function.

$69,000 =
$ 413,350.00
$26,000.00

$183,350

1.The following information applies to the General Lawnmower Company fo


Factory Rent
Direct Materials Inventory, Beginnin
Direct Materials Inventory, Ending
Direct Materials Purchases
Direct LaborWages
Indirect LaborWages
Finished Goods Inventory, Beginning
Finished Goods Inventory, Ending
Indirect Materials
Plant Utilities
General and Administrative
Work-in-Process Inventory, Beginnin
Work-in-Process Inventory, Ending
Marketing Expenses
Sales Revenue

$80,000
$50,000
$45,000
$325,000
$550,000
$25,000
$50,000
$75,000
$50,000
$25,000
$130,000
$50,000
$55,000
$180,000
$1,825,000

Prepare a statement of cost of goods manufactured and an income statement for the year en

General Lawnmower C
Cost of Goods Manufa
For the Year Ending Decem
Direct Materials :
Beginning Inventory
Purchases
Material Avaible for use
Less: Direct Ending Materials
Direct Materials Used
Direct Labor
Indirect Labor
Indirect Materials
Factory Rent
Utilities
Total Manufacturing Cost
Plus: Beginning Work-In-Process
Total Work-In-Process
Less: Work-In-Process
Cost of Good Manufactured

General Lawnmower C

Cost of Goods So
For the Year Ending Decem
Beginning Finished Gooods
Cost of Good Manufactured
Cost of Goods Available for Sale
Less: Ending Finished Goods
Costs of Goods Solds

General Lawnmower C
Income Stateme
For the Year Ending Decem
Sales Revenue
Costs of Goods Solds
Gross Margin
Marketing
Administrative Costs
Less: Total Marketing and Administratie Cost
Operating Profit

mower Company for the year ended December 31, 2010:

ent for the year ended December 31, 2010.

eneral Lawnmower Company


Cost of Goods Manufactured
e Year Ending December 31, 2010
$50,000
$325,000
$375,000
($45,000)

eneral Lawnmower Company

$330,000
$550,000
$25,000
$50,000
$80,000
$25,000
$1,060,000
$50,000
$1,110,000
($55,000)
$1,055,000

Cost of Goods Sold


e Year Ending December 31, 2010
$50,000
$1,055,000
$1,105,000
($75,000)
$1,030,000

eneral Lawnmower Company


Income Statement
e Year Ending December 31, 2010

d Administratie Cost

$1,825,000
($1,030,000)
$795,000
$180,000
$130,000
($310,000)
$485,000

1.Data concerning Golding Corporation's single product appear below:

Per Unit
Selling price
Variable costs.
Contribution margin

##
###
###

Fixed costs are $444,000 per month. The company is currently selling 7,000 u
Management is considering using a new component that would increase the
unit variable cost by $2. Since the new component would improve the
company's product, the marketing manager predicts that monthly sales would
increase by 200 units. What should be the overall effect on the company's
monthly operating profit of this change if fixed costs are unaffected?
Monthly Sales
Variable Cost
Contribution Margin
Total Contribution Margin
Current Contribution Margin
Net Operating Income

7200
128
$82
$590,400
$588,000
$2,400

The Operating Income will increase to $2,400

e product appear below:


Percent of Sales
100%
60%
40%

ny is currently selling 7,000 units per month.

1.Penny Company offers two products. At present, the following represents


Product A
Per Unit
Sales

$120,000

Variable costs

$1.20

60,000

Contribution
margin
Fixed costs
Operating
profit

$60,000

$80,000.00

0.6

60,000

0.6

20,000

Required: 20 Points
a. Find the break-even point in dollars.
Contribution Margin Ratio
Break-even point in terms of $

40%
125000

b. Find the margin of safety in dollars.


Margin of Safety

$75,000

c. The company is considering decreasing product A's unit sales to 80,000 and increasing pr
Product A
Sales
Variable costs
Contribution
margin
Fixed costs
Operating
profit

$96,000.00
$48,000.00
$48,000.00

I would advise adopting to this new plan because it arrange a more profita

d. Refer to (c) above. Under the new plan, find the break-even point in dollars.

Contribution Margin Ratio


Break-even point in terms of $

35%
142,857

e. Under the new plan in (c) above, find the margin of safety in dollars.
Margin of Safety

$97,143

t, the following represents the usual results of a month's operations:


Production B
Combine
d
$0.80 $200,000

Per Unit

0.6
$0.20

120,000
80,000
50,000
$30,000

o 80,000 and increasing product B's unit sales to 180,000, leaving unchanged the selling price per un
Product B
$144,000.00
$108,000.00
$36,000.00

ause it arrange a more profitable

Combined
$240,000
$156,000
$84,000
50,000
$34,000

nt in dollars.

he selling price per unit, variable cost per unit, and total fixed costs. Would you advise adopting this p

advise adopting this plan?

5.Assume that the following events occurred at a division of Admiral Enterp


(1)
(2)
(3)
(4)
(5)
(6)

Purchased $900,000 in direct materials.


Incurred direct labor costs of $520,000.
Determined that manufacturing overhead was $820,000.
Transferred 75% of the materials purchased to Work-in-Process Inventory
Completed work on 60% of the work in process. Costs assigned equally ac
The inventory accounts have no beginning balances. All costs incurred we

Compute the following amounts in the Work-in-Process Inventory account:


(a) Transfers-in (TI).
(b) Transfers-out (TO).
(c) Ending balance (EB).
a.

75% *
$
520,000.00 +
$ 1,195,000.00 +

900,000.00
675,000.00
820,000.00

=
=
=

60% *

$ 2,015,000.00

c.
$ 2,015,000.00
-

$ 1,209,000.00

b.

$
$
$

ed at a division of Admiral Enterprises for the current year.

was $820,000.
ed to Work-in-Process Inventory.
ocess. Costs assigned equally across all work-in-process.
g balances. All costs incurred were debited to the appropriate account and credited to Accounts Paya

n-Process Inventory account:

$
675,000.00
$ 1,195,000.00
$ 2,015,000.00
$ 1,209,000.00
$

806,000.00

credited to Accounts Payable.