Smart Technology Company had the following information during the previous year for one of its product lines:

Sales Price per Unit	$6000
Units in Beginning Inventory	0
Units Started During the Year	55,000
Units Sold	52,000
Variable Costs per Unit:
Direct Materials	$145
Direct Labor	$200
Variable Overhead Costs	$75
Fixed Costs:
Fixed Overhead per Unit	$50
General and Administrative	$1,250,000

2. Calculate the ending inventory value and prepare an income statement using absorption costing.
4. Calculate the ending inventory value and prepare an income statement using variable costing.

Question 2

Flight Company recently hired you as a managerial accountant.Ithasn't used budgets in the past butis expecting significant growth in the next year and needs to get a loan to pay for the expansion. In order to help determine the amount of the loan needed, your manager asks you to prepare the following budgets:

• sales budget,
• production budget,
• direct materials purchases budget,
• direct labor budget, and
• overhead budget.

The estimates for the next year are as follows:

• Quarter 1 sales:520,000 units
• Quarter 2 sales:750,000 units
• Quarter 3 sales:900,000 units
• Quarter 4 sales:875,000 units
• Quarter 1 of the following year sales:475,000 units
• The price of the product:$30
• Beginning finished goods inventory:40,000 units
• The company policy is to have 10% of next quarter's sales in ending inventory.
• The product contains only two materials (Material A and Material B).
• The product requires three units of Material A costing $3.
• The product requires one unit of Material B costing $1.
• The beginning materials inventory for Material A is 250,000 units.
• The beginning materials inventory for Material B is 175,000 units.
• Company policy is to have 15% of next quarter's material needs in ending inventory.
• Desired ending inventory for the year in Material A is 475,000 units.
• Desired ending inventory for the year in Material B is 225,000 units.
• The direct labor required for each product is 0.25 hours at an average rate of $10 per hour.
• The variable overhead rate is $4 per direct labor hour.
• Fixed overhead is expected to be $45,000 per quarter.

Question 3

You have recently been hired by Window Magic Company, which produces windows for personal homes. Based on the following information, prepare a flexible budget for 5,000; 6,000; and 7,000 units.

Direct Materials per Unit	$14.00
Direct Labor per Unit	$18.00
Variable Overhead Cost per Unit	$7.00
Fixed Overhead	$125,000 per year

Question 4

Higher Education Company has two divisions with the following information:

Division 1	Division 2
Sales: $3,500,000	Sales: $2,500,000
Operating Income: $800,000	Operating Income: $750,000
Assets Jan. 1: $5,500,000	Assets Jan. 1: $3,000,000
Assets Dec. 31: $6,000,000	Assets Dec. 31: $3,500,000

The minimum required rate of return for the company for all its divisions is 15%, and its cost of capital is 10%. The company has a tax rate of 20%. Calculate the following ratios for both divisions:

2. return on investment,
4. margin,
6. turnover,
8. residual income, and
10. economic value added.

Answer rating: 100% (QA)

Question 1 Smart Technology Company Income Statements Absorption Costing Revenue 52000 units 6000unit 312000000 Cost of Goods Sold COGS Direct Materials 55000 units 145unit 7975000 Direct Labor 55000 ... View the full answer