1.

The Adams Company, a merchandising firm, has budgeted its activity for November
according to the following information:
 Sales at $450,000, all for cash
 Merchandise inventory on October 31 was $200,000.
 The cash balance November 1 was $18,000.
 Selling and administrative expenses are budgeted at $60,000 for November and are paid for in
cash.
 Budgeted depreciation for November is $25,000.
 The planned merchandise inventory on November 30 is $230,000.
 The cost of goods sold is 70% of the selling price.
 All purchases are paid for in cash.
Prepare the budgeted net income for November

2. The constraint at Crumedy Inc. is an expensive milling machine. The three products listed
below use this constrained resource.

a. Rank the products in order of their current profitability from the most profitable to the least
profitable. In other words, rank the products in the order in which they should be emphasized.
Show your work!
b. Assume that sufficient constraint time is available to satisfy demand for all but the least
profitable product. Up to how much should the company be willing to pay to acquire more of the
constrained resource? 
3. Ries Corporation has received a request for a special order of 8,000 units of product R34 for
$34.20 each. The normal selling price of this product is $35.70 each, but the units would need to
be modified slightly for the customer. The normal unit product cost of product R34 is computed
as follows:

   
Direct labor is a variable cost. The special order would have no effect on the company's total
fixed manufacturing overhead costs. The customer would like some modifications made to
product R34 that would increase the variable costs by $6.30 per unit and that would require a
one-time investment of $40,000 in special molds that would have no salvage value. This special
order would have no effect on the company's other sales. The company has ample spare capacity
for producing the special order.
Determine the effect on the company's total net operating income of accepting the special order.

4. Wrape Urban Diner is a charity supported by donations that provides free meals to the
homeless. The diner's budget for April was based on 2,100 meals. The diner's director has
provided the following cost data to use in the budget: groceries, $2.55 per meal; kitchen
operations, $4,700 per month plus $1.70 per meal; administrative expenses, $3,300 per month
plus $0.60 per meal; and fundraising expenses, $1,000 per month. The director has also provided
the diner's statement of actual expenses for the month:

   
Prepare a performance report showing both the activity variances and the spending variances for
each of the expenses and for total expenses for April. Label each variance as favorable (F) or
unfavorable (U).

5. Tilson Company has projected sales and production in units for the second quarter of the
coming year as follows:

   
Cash-related production costs are budgeted at $7 per unit produced. Of these production costs,
40% are paid in the month in which they are incurred and the balance in the following month.
Selling and administrative expenses will amount to $110,000 per month, paid in cash. The
accounts payable balance on March 31 totals $193,000, which will be paid in April.
All units are sold on account for $16 each. Cash collections from sales are budgeted at 60% in
the month of sale, 30% in the month following the month of sale, and the remaining 10% in the
second month following the month of sale. Accounts receivable on April 1 totaled $520,000
$(100,000 from February's sales and the remainder from March).
a. Prepare a schedule for each month showing budgeted cash disbursements for Tilson Company.
b. Prepare a schedule for each month showing budgeted cash receipts for Tilson Company. 

6. Data concerning Emmanuel Corporation's single product appear below:

   
Fixed expenses are $650,000 per month. The company is currently selling 8,000 units per month.
The marketing manager would like to introduce sales commissions as an incentive for the sales
staff. The marketing manager has proposed a commission of $12 per unit. In exchange, the sales
staff would accept an overall decrease in their salaries of $79,000 per month. The marketing
manager predicts that introducing this sales incentive would increase monthly sales by 300 units.
What should be the overall effect on the company's monthly net operating income of this
change?
7. Data concerning Sonderegger Company's operations last year appear below:

   
Required:
a. Prepare an income statement for the year using absorption costing.
b. Prepare a contribution format income statement for the year using variable costing.
c. Prepare a report reconciling the difference in net operating income between absorption and
variable costing for the year. 

8. Tefil Ltd has the following standard cost card for its budgeted 10,000 units of wooden toys for
the month of April 2014.
Unit
cost
Direct materials: 0.5kg @ $60.00 per kg $30.00
Direct Manufacturing labour: 0.4hour @ $20.00 per hour $ 8.00
Fixed Manufacturing $20.00
overhead:
The following are the summary of the actual results on the production of 9,500 units
Total Cost
Direct materials: 5,000 kg purchased $310,000
4,800 kg used
Direct Manufacturing labour: 3,900 hours $ 85,800
Fixed Manufacturing $198,000
overhead

Assume that there were no beginning inventories of direct materials and finished goods.
Required
a. Calculate the appropriate variances and
b. Comment on these variances.