Module 1

Problem 1

Magio Company manufactures kitchen equipment used in hospitals. They distribute their
products directly to the customer and, for the year ending 2019, they reported these revenues and
expenses. Use this information to construct an income statement for the year 2019.

Problem 2

Park and West, LLC, provides consulting services to retail merchandisers in the Midwest. In
2019, they generated $720,000 in service revenue. Their total cost (fixed and variable) per client
was $2,500 and they served 115 clients during the year. If operating expenses for the year were
$302,000 what was their net income?

Problem 3

Canine Couture is a specialty dog clothing boutique that sells clothing and clothing accessories
for dogs. In 2019, they had gross revenue from sales totaling $86,500. Their operating expenses
for this same period were $27,500. If their Cost of Goods Sold (COGS) was 24% of gross
revenue, what was their net operating income for the year?

Problem 4

Ballentine Manufacturing produces and sells lawnmowers through a national dealership network.
They purchase raw materials from a variety of suppliers, and all manufacturing and assembly
work is performed at their plant outside of Kansas City, Missouri. They recorded these costs for
the year ending December 31, 2017. Construct an income statement for Ballentine
Manufacturing to reflect their net income for 2017.
Problem 5

Tom West is a land surveyor who operates a small surveying company, performing surveys for
both residential and commercial clients. He has a staff of surveyors and engineers who are
employed by the firm. For the year ending December 31, 2017, he reported these income and
expenses. Using this information, construct an income statement to reflect his net income for
2017.

Module 2

FIXED COST VS VARIABLE COST

Problem 1

Listed as follows are various costs found in businesses. Classify each cost as a fixed or variable
cost, and as a product and/or period cost.

A. Wages of administrative staff

B. Shipping costs on merchandise sold
C. Wages of workers assembling computers
D. Cost of lease on factory equipment
E. Insurance on factory
F. Direct materials used in production of lamps
G. Supervisor salary, factory
H. Advertising costs
I. Property taxes, factory
J. Health insurance cost for company executives
K. Rent on factory
Problem 2

Wachowski Company reported these cost data for the year 2017.

Use the data to complete the following table.

Total prime costs
Total manufacturing overhead costs
Total conversion costs
Total product costs
Total period costs

Problem 3

Baxter 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:
A. If 15,000 units are produced, what is the variable cost per unit? 10 + 9 + 2 + 14 = $35
B. If 28,000 units are produced, what is the variable cost per unit? Variable cost is the same
regardless of number of units produced so variable cost is still $35
C. If 21,000 units are produced, what are the total variable costs? $35 * 21,000 = $735,000
D. If 29,000 units are produced, what are the total variable costs? $35 * 29,000 = $1,015,000
E. If 17,000 units are produced, what are the total manufacturing overhead costs incurred?
($3 * 17,000) + ($2 * 17,000) + ($25,000 * 6) = $235,000
F. If 23,000 units are produced, what are the total manufacturing overhead costs incurred?
($3 * 23,000) + ($2 * 23,000) + ($25,000 * 6) = $265,000
 G. If 30,000 units are produced, what are the per unit manufacturing overhead costs
incurred? $3 + $2 + ((6*25,000)/30,000) = $10 per unit
H. If 15,000 units are produced, what are the per unit manufacturing overhead costs
incurred? $3 + $2 + ((6 * 25,000)/15000) = $15 per unit

Module 3

ESTIMATING COSTS

Problem 1

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

A. 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.
B. Predict the overtime wages if 9,000 invoices are processed.
C. Predict the overtime wages if 6,500 invoices are processed.

Problem 2

This cost data from Hickory Furniture is for the year 2017.
 A. Using the high-low method, express the factory utility expenses as an equation
where x represents number of chairs produced. 3,369 – 1,659/ 875 – 425 = 3.8 chairs
produced
3369= x + 3.8( 875)
3,369 – 3,325 = x
1,659 = x + 3.8(425)
1,659 – 1,615 =x
X = 44
Y = 44 + 3.8x
B. Predict the utility costs if 900 chairs are produced.
Y= 44 + (3.8 * 900)
Y= 44 + 3,420
Utility costs = $3,464
C. Predict the utility costs if 750 chairs are produced
Y= 44 + (3.8 * 750)
Y= 44 + 2,850
Utility costs = $2,894