For the month of January 2014, Ghent Corporation had a beginning balance of
$103,200 in work in process inventory. During the month, the company added the
following costs to work in process: direct materials, $90,900; direct labor, $54,000; and
manufacturing overhead, $81,000. The ending balance in work in process inventory was
$37,400. What was the cost of goods manufactured for the period? Prepare a schedule
that shows the calculation of the cost of goods manufactured.
Chicago Company incurs annual fixed costs of $80,000. Variable costs are $3.00 per
unit, and the sales price is $10 per unit. Chicago desires to earn an annual profit of
$60,000.
Required:
Use the contribution margin ratio approach to determine the sales volume in dollars and
units needed to earn the desired profit.
Omicron Company is considering purchasing equipment that would cost $60,000 and
have a useful life of 5 years. The equipment is expected to provide net cash inflows of
$16,000 per year. Omicron’s cost of capital is 12%.
Required:
Estimate the internal rate of return for this capital investment. Is this an acceptable
investment?
Comparative income statements for Pearle Company are provided below:
Required:Perform a horizontal analysis of Pearle Company’s income statement by
computing horizontal percentages for each item. Round your answer to one decimal
place (i.e. 22.5%).
Gamma Company and Chi Company are similar and similar-sized companies operating
in the same industry. At the end of the most recent year, Gamma’s price/earnings ratio
was 22.0, and Chi’s price/earnings ratio was 14.2. What conclusion would you draw
based on the difference in price/earnings ratios for the two companies?
Indicate whether each of the following statements about process cost systems is true or
false.
Process cost systems use the same general ledger accounts as job-order cost systems.
Job-order cost systems accumulate product costs by departments.
In a process cost system, as units are transferred from one processing department to
another, their costs are transferred to finished goods inventory.
In a process cost system, the movement of costs parallels the physical movement of
products.
In a process cost system, each batch has its own work in process account.