1. Two products (W and X) are created from a joint process.

Both products can be sold

immediately after split-off. There are no opening inventories or work in progress. The
following information is available for last period:
Total joint production costs $776,160

Product Production units Sales units Selling price per unit

W 12,000 10,000 $10
X 10,000 8,000 $12

Using the sales value method of apportioning joint production costs, what was the value
of the closing inventory of product X for last period?

2. WX is reviewing the selling price of one of its products. The current selling price of the
product is $25 per unit and annual demand is forecast to be 150,000 units at this price.
Market research indicates that the level of demand would be affected by any change in
the selling price. Detailed analysis from this research shows that for every $1 increase in
selling price, annual demand would reduce by 25,000 units and that for every $1 decrease
in selling price, annual demand would increase by 25,000 units.
A forecast of the annual costs that would be incurred by WX in respect of this product at
differing activity levels is as follows:

Annual production (units) 100,000 160,000 200,000

Direct materials $200,000 $320,000 $400,000
Direct labour $600,000 $960,000 $1,200,000
Mixed Overhead (MOH) $880,000 $1,228,000 $1,460,000

Required:
a) Calculate the variable overhead (VOH) per unit and the fixed overhead (FOH).
MOH =( VOH per unit × annual production ) + FOH
b) Calculate the total variable cost per unit.
c) Calculate the company’s profits if the optimum selling price of the product is $22.

3. A newly formed company has drawn up the following budgets for its first two accounting
periods:

Period 1 Period 2
Sales units 9,500 10,300
 Production units (equivalent to normal capacity) 10,000 10,000

The following budgeted information applies to both periods:

Selling price per unit $6.40

Variable cost per unit $3.60
Fixed production overhead per period $15,000

a) In period 1, compare the budgeted profit under both absorption costing and
variable costing.
b) In period 2, everything was as budgeted, except for the fixed production
overhead, which was $15,700. How much would be the reported profit using
absorption costing?

4. Williams Company began operations in January 2017 with two operating (selling)
departments and one service (office) department. Its departmental income statements
follow.

WILLIAMS COMPANY
Departmental Income Statements
For Year Ended December 31, 2017
Clock Mirror Combined
Sales $130,000 $55,000 $185,000
Cost of goods sold 63,700 34,100 97,800
Gross profit 66,300 20,900 87,200
Direct expenses
Sales salaries 20,000 7,000 27,000
Advertising 1,200 500 1,700
Store supplies used 900 400 1,300
Depreciation-Equipment 1,500 300 1,800
Total direct expenses 23,600 8,200 31,800
Allocated expenses
Rent expense 7,020 3,780 10,800
Utilities expense 2,600 1,400 4,000
Share of office department expenses 10,500 4,500 15,000
Total allocated expenses 20,120 9,680 29,800
Total expenses 43,720 17,880 61,600
Net income $22,580 $3,020 $25,600

Williams plans to open a third department in January 2018 that will sell paintings.
Management predicts that the new department will generate $50,000 in sales with a 55%
gross profit margin and will require the following direct expenses: sales salaries, $8,000;
advertising, $800; store supplies, $500; and equipment depreciation, $200. It will fit the
new department into the current rented space by taking some square foot-age from the
other two departments. When opened, the new painting department will fill one-fifth of
the space presently used by the clock department and one-fourth used by the mirror
department. Management does not predict any increase in utilities costs, which are
allocated to the departments in proportion to occupied space (or rent expense). The
company allocates office department expenses to the operating departments in proportion
to their sales. It expects the painting department to increase total office department
expenses by $7,000. Since the painting department will bring new customers into the
store, management expects sales in both the clock and mirror departments to increase by
8%. No changes for those departments’ gross profit percents or their direct expenses are
expected except for store supplies used, which will increase in proportion to sales.
Required
Prepare departmental income statements that show the company’s predicted results of
operations for calendar-year 2018 for the three operating (selling) departments and their
combined totals. (Round percents to the nearest one-tenth and dollar amounts to the
nearest whole dollar.)