Exercise Set B

LO 2.1Winterfell Products manufactures electrical switches for the aerospace industry. For the year ending 2019, they reported these revenues and expenses. Use this information to construct an income statement for the year 2019.

LO 2.1CPK & Associates is a mid-size legal firm, specializing in closings and real estate law in the south. In 2019, they generated $945,000 in sales revenue. Their expenses related to this year’s revenue are shown:

Based on the information provided for the year, what was their net operating income?

LO 2.1Flip or Flop is a retail shop selling a wide variety of sandals and beach footwear. In 2019, they had gross revenue from sales totaling $93,200. Their operating expenses for this same period were $34,000. If their Cost of Goods Sold (COGS) was 21% of gross revenue, what was their net operating income for the year?

Roper Furniture manufactures office furniture and tracks cost data across their process. The following are some of the costs that they incur. Classify these costs as fixed or variable costs, and as product costs or period costs.

1. Wood used to produce desks ($125.00 per desk)
2. Production labor used to produce desks ($15 per hour)
3. Production supervisor salary ($45,000 per year)
4. Depreciation on factory equipment ($60,000 per year)
5. Selling and administrative expenses ($45,000 per year)
6. Rent on corporate office ($44,000 per year)
7. Nails, glue, and other materials required to produce desks (varies per desk)
8. Utilities expenses for production facility
9. Sales staff commission (5% of gross sales)

LO 2.2Baxter Company has a relevant range of production between 15,000 and 30,000 units. The following cost data represents average variable costs per unit for 25,000 units of production.

Using the costs data from Rose Company, answer the following questions:

1. If 15,000 units are produced, what is the variable cost per unit?
2. If 28,000 units are produced, what is the variable cost per unit?
3. If 21,000 units are produced, what are the total variable costs?
4. If 29,000 units are produced, what are the total variable costs?
5. If 17,000 units are produced, what are the total manufacturing overhead costs incurred?
6. If 23,000 units are produced, what are the total manufacturing overhead costs incurred?
7. If 30,000 units are produced, what are the per unit manufacturing overhead costs incurred?
8. If 15,000 units are produced, what are the per unit manufacturing overhead costs incurred?

LO 2.2Sanchez & Vukmin, LLP, is a full-service accounting firm located near Chicago, Illinois.

Last year, Sanchez provided tax preparation services to 500 clients. Total fixed costs were $265,000 with total variable costs of $180,000. Based on this information, complete this chart.

LO 2.2Case Airlines provides charter airline services. The fixed expenses to operate the company’s aircraft are $377,300 in January and $378,880 in February. It costs Case Airlines $0.45 per mile in variable costs. In January, Case aircraft flew a total of 385,000 miles, and in February, Case aircraft flew a total of 296,000 miles. Using this information, answer the following:

1. What were the total costs to operate the aircraft in January and February, respectively?
2. What were the total costs per mile to operate the fleet in January and February, respectively?

LO 2.2Suppose that a company has fixed costs of $11 per unit and variable costs $6 per unit when 11,000 units are produced. What are the fixed costs per unit when 20,000 units are produced?

LO 2.3The cost data for BC Billing Solutions for the year 2020 is as follows:

1. Using the high-low method, express the company’s overtime wages as an equation where x represents number of invoices processed. Assume BC has monthly fixed costs of $3,800.
2. Predict the overtime wages if 9,000 invoices are processed.
3. Predict the overtime wages if 6,500 invoices are processed.
4. Using Excel, create a scatter graph of the cost data and explain the relationship between the number of invoices processed and overtime wage expense.

LO 2.3This cost data from Hickory Furniture is for the year 2017.

1. Using the high-low method, express the factory utility expenses as an equation where x represents number of chairs produced.
2. Predict the utility costs if 900 chairs are produced.
3. Predict the utility costs if 750 chairs are produced.
4. Using Excel, create a scatter graph of the cost data and explain the relationship between number of chairs processed and utility expenses.

LO 2.3Able Transport operates a tour bus that they lease with terms that involve a fixed fee each month plus a charge for each mile driven. Able Transport drove the tour bus 4,000 miles and paid a total of $1,250 in March. In April, they paid $970 for 3,000 miles. What is the variable cost per mile if Able Transport uses the high-low method to analyze costs?

LO 2.3Able Transport operates a tour bus that they lease with terms that involve a fixed fee each month plus a charge for each mile driven. Able Transport drove the bus 7,000 miles and paid a total of $1,360 in June. In October, Able Transport paid $1,280 for the 5,000 miles driven. If Able Transport uses the high-low method to analyze costs, how much would Able Transport pay in December, if they drove 6,000 miles?