Question 1 Garza and Neely, CPAs, are preparing their service revenue (sales) budget for the coming year (2012). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below. Department Quarter 1 Quarter 2 Quarter 3 Quarter 4 Auditing 2,340 1,990 2,300 2,770 Tax 3,300 2,630 2,200 2,740 Consulting 1,750 1,750 1,750 1,750 Average hourly billing rates are: auditing $84, tax $93, and consulting $102. Prepare the service revenue (sales) budget for 2012 by listing the departments and showing for each quarter and the year in total, billable hours, billable rate, and total revenue. GARZA AND NEELY, CPAs Sales Revenue Budget For the Year Ending December 31, 2012 Quarter 1 Quarter 2 Dept. Billable Hours Billable Rate Total Rev. Billable Hours Billable Rate Total Rev. Auditing $ $ $ $ Tax Consulting $ $ GARZA AND NEELY, CPAs Sales Revenue Budget For the Year Ending December 31, 2012 Quarter 3 Quarter 4 Dept. Billable Hours Billable Rate Total Rev. Billable Hours Billable Rate Total Rev. Auditing $ $ $ $ Tax Consulting $ $ GARZA AND NEELY, CPAs Sales Revenue Budget For the Year Ending December 31, 2012 Year Dept. Billable Hours Billable Rate Total Rev. Auditing $ $ Tax Consulting $ Warning Stanton Company is planning to produce 1,300 units of product in 2012. Each unit requires 3.30 pounds of materials at $7.10 per pound and a half-hour of labor at $13.40 per hour. The overhead rate is 50% of direct labor. (a) Compute the budgeted amounts for 2012 for direct materials to be used, direct labor, and applied overhead. Direct materials $ Direct labor $ Overhead $ (b) Compute the standard cost of one unit of product. (Round answer to 2 decimal places, e.g. 2.75.) Standard cost $ Warning Question 3 In Harley Company it costs $30 per unit ($16 variable and $14 fixed) to make a product that normally sells for $47. A foreign wholesaler offers to buy 3,420 units at $28 each. Harley will incur special shipping costs of $1 per unit. Assuming that Harley has excess operating capacity. Indicate the net income (loss) Harley would realize by accepting the special order. (If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.) Reject Order Accept Order Net Income Increase (Decrease) Revenues $ $ $ Costs—Manufacturing            Shipping Net income/(loss) $ $ $ The special order should be . Warning Question 4 Vintech Manufacturing incurs unit costs of $6 ($4 variable and $2 fixed) in making a subassembly part for its finished product. A supplier offers to make 12,200 of the part at $5.80 per unit. If the offer is accepted, Vintech will save all variable costs but no fixed costs. Prepare an a ...

1. Question 1
Garza and Neely, CPAs, are preparing their service revenue
(sales) budget for the coming year (2012). The practice is
divided into three departments: auditing, tax, and consulting.
Billable hours for each department, by quarter, are provided
below.
Department
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Auditing
2,340
1,990
2,300
2,770
Tax
3,300
2,630
2,200
2,740
Consulting

2. 1,750
1,750
1,750
1,750
Average hourly billing rates are: auditing $84, tax $93, and
consulting $102.
Prepare the service revenue (sales) budget for 2012 by listing
the departments and showing for each quarter and the year in
total, billable hours, billable rate, and total revenue.
GARZA AND NEELY, CPAs
Sales Revenue Budget
For the Year Ending December 31, 2012
Quarter 1
Quarter 2
Dept.
Billable Hours
Billable Rate
Total Rev.
Billable Hours
Billable Rate
Total Rev.
Auditing
$
$
$
$
Tax

3. Consulting
$
$
GARZA AND NEELY, CPAs
Sales Revenue Budget
For the Year Ending December 31, 2012
Quarter 3
Quarter 4
Dept.
Billable Hours
Billable Rate
Total Rev.
Billable Hours
Billable Rate
Total Rev.
Auditing
$

4. $
$
$
Tax
Consulting
$
$
GARZA AND NEELY, CPAs
Sales Revenue Budget
For the Year Ending December 31, 2012
Year
Dept.
Billable Hours
Billable Rate
Total Rev.
Auditing

5. $
$
Tax
Consulting
$
Warning
Stanton Company is planning to produce 1,300 units of product
in 2012. Each unit requires 3.30 pounds of materials at
$7.10 per pound and a half-hour of labor at $13.40 per hour.
The overhead rate is 50% of direct labor.
(a) Compute the budgeted amounts for 2012 for direct materials
to be used, direct labor, and applied overhead.
Direct materials
$
Direct labor
$
Overhead
$
(b) Compute the standard cost of one unit of product. (Round
answer to 2 decimal places, e.g. 2.75.)
Standard cost

6. $
Warning
Question 3
In Harley Company it costs $30 per unit ($16 variable and
$14 fixed) to make a product that normally sells for $47. A
foreign wholesaler offers to buy 3,420 units at $28 each. Harley
will incur special shipping costs of $1 per unit. Assuming that
Harley has excess operating capacity.
Indicate the net income (loss) Harley would realize by accepting
the special order. (If an amount reduces the net income for
Increase (Decrease) column then enter with a negative sign
preceding the number e.g. -15,000 or parenthesis, e.g. (15,000).
Enter all other amounts in all other columns as positive and
subtract where necessary.)
Reject
Order
Accept
Order
Net Income
Increase
(Decrease)
Revenues
$
$
$
Costs—Manufacturing

7. Shipping
Net income/(loss)
$
$
$
The special order should be .
Warning
Question 4
Vintech Manufacturing incurs unit costs of $6 ($4 variable and
$2 fixed) in making a subassembly part for its finished product.
A supplier offers to make 12,200 of the part at $5.80 per unit. If
the offer is accepted, Vintech will save all variable costs but no
fixed costs.
Prepare an analysis showing the total cost saving, if any,
Vintech will realize by buying the part. (If an amount reduces
the net income for Increase (Decrease) column then enter with a
negative sign preceding the number e.g. -15,000 or parenthesis,

8. e.g. (15,000). Enter all other amounts in all other columns as
positive and subtract where necessary.)
Make
Buy
Net Income
Increase
(Decrease)
Variable manufacturing costs
$
$
$
Fixed manufacturing costs
Purchase price
Total annual cost
$

9. $
$
The decision should be to .
Warning
Question 5
Ridley Company has a factory machine with a book value of
$96,200 and a remaining useful life of 5 years. A new machine
is available at a cost of $200,700. This machine will have a 5-
year useful life with no salvage value. The new machine will
lower annual variable manufacturing costs from $617,600 to
$414,700.
Prepare an analysis showing whether the old machine should be
retained or replaced. (If an amount reduces the net income for
Increase (Decrease) column then enter with a negative sign
preceding the number e.g. -15,000 or parenthesis, e.g. (15,000).
Enter all other amounts in all other columns as positive and
subtract where necessary.)
Retain
Equipment
Replace
Equipment
Net 5-Year
Income
Increase
(Decrease)
Variable manufacturing costs

10. $
$
$
New machine cost
Total
$
$
$
The old factory machine should be .
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Question 6
A company has a process that results in 15,000 pounds of
Product A that can be sold for $16 per pound. An alternative
would be to process Product A further at a cost of $200,000 and
then sell it for $28 per pound. Should management sell Product
A now or should Product A be processed further and then sold?

11. What is the effect of the action?
Process further, the company will be better off by $20,000.
Sell now, the company will be better off by $20,000.
Process further, the company will be better off by $180,000.
Question 7
Carter, Inc. can make 100 units of a necessary component part
with the following costs:
Direct Materials
$120,000
Direct Labor
20,000
Variable Overhead
60,000
Fixed Overhead
40,000
If Carter can purchase the component externally for $220,000
and only $10,000 of the fixed costs can be avoided, what is the
correct make-or-buy decision?
Make and save $30,000

12. Buy and save $10,000
Buy and save $30,000
Make and save $10,000
Question 8
Seasons Manufacturing manufactures a product with a unit
variable cost of $100 and a unit sales price of $176. Fixed
manufacturing costs were $480,000 when 10,000 units were
produced and sold. The company has a one-time opportunity to
sell an additional 1,000 units at $140 each in a foreign market
which would not affect its present sales. If the company has
sufficient capacity to produce the additional units, acceptance
of the special order would affect net income as follows:
Income would increase by $8,000.
Income would increase by $140,000.
Income would increase by $40,000.
Income would decrease by $8,000.