Reliable Rental Resources

Question 1

Outdoor Furniture Company has inventory balances at the end of August as follows:

Materials inventory

$21,360

Work-in-Process inventory

15,112

Finished goods inventory

17,120

Job order cost cards for jobs in process at the company as of the end of September were as follows:

Job Number

Direct Materials

Direct Labor

Mfg Overhead

48A

$1,596

$1,290

$1,677

48B

$1,492

$1,380

$1,794

48C

$1,984

$1,760

$2,288

48D

$1,608

$1,540

$2,002

Materials purchased and received in September:

September 4

$33,120

September 16

$28,600

September 22

$31,920

Direct labor costs for September:

September 15 payroll

$23,680

September 29 payroll

$25,960

Predetermined overhead rate:

130% of direct labor costs

Direct material transferred to production during September:

September 6

$37,240

September 23

$38,960

Finished goods with a 75% markup over cost were sold during September for $230,000.

a. Compute the cost of units completed during the month.

b. What was the total cost of units sold during the month?

c. What are ending inventory balances?

You may use only your textbook for this exam. All paraphrased and quoted material must have accompanying citations and references. For problems, be sure to answer all questions and provide all requested information.

Question 2

Tree Top Company manufactures a single product and uses a process costing system. On the first day of April, there were 5,000 units in process that were 100% complete as to direct materials and 50% complete as to direct labor and manufacturing overhead. During the month of April, the company began production of 100,000 units, and at the end of April, the Work-in-Process inventory consisted of 2,000 units that were 100% complete as to direct materials and 80% complete as to direct labor and manufacturing overhead. The company’s cost information is as follows:

Beginning Work-in-Process

Costs Added In April

Direct materials

$3,000

$65,250

Direct labor

$125

$6,151

Manufacturing overhead

$175

$7,147

Calculate the cost of units manufactured during April and the cost of Work-in-Progress at the end of April.

Question 3

Reliable Rental Resources, Inc. is buying a new computer for its receptionist. The company can rent a basic computer for $2,500 per year. The company can rent a better computer for $3,100 per year, but the better computer uses some software that the basic computer cannot use, and that software costs $750. The receptionist’s salary of $2,200 month will not be affected by the computer that the company decides to rent. If the company rents the better computer, the receptionist will need training on the software that the computer uses, and that training costs $300 per year. The better computer has a greater capacity and speed than the basic computer and is expected to save the company $1,600 per year in part-time wage expenses. The other upkeep and operating costs will not be affected by the computer that the company decides to rent.

a. Identify the relevant costs.
b. Which computer should the company rent?

Your response should be at least 200 words in length. You may use only your textbook for this exam. All paraphrased and quoted material must have accompanying citations and references. For problems, be sure to answer all questions and provide all requested information.

Question 4

Sitting Pretty, Inc. makes garden chairs that sell for $800 each. The variable cost of producing the chairs is $300 per unit and the fixed costs are $50,000 each month.

a. Calculate the break-even point for a month.
b. How many chairs must be sold each month to earn a monthly profit of $20,000?

Question 5

It has been suggested that it is not possible to determine the point at which financial accounting and managerial accounting diverge. What does that mean?