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1.Donald’s Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows:

                                      Direct materials                              $ 20,000
                                      Direct labor                                           5,000
                                      Variable overhead costs                   15,000
                                      Fixed overhead costs                        10,000
                                             Total costs                                 $50,000

The maximum price that Donald’s Engine Company should be willing to pay the outside supplier is?

2.Willis Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company’s manufacturing overhead data:

Budgeted output units                                                                                               30,000 units
Budgeted machine-hours                                                                                        10,000 hours
Budgeted variable manufacturing overhead costs for 30,000 units                     $322,500

Actual output units produced                                                                                   44,000 units
Actual machine-hours used                                                                                     14,400 hours
Actual variable manufacturing overhead costs                                                         $484,000

What is the budgeted variable overhead cost rate per output unit?

3.Meale Company makes a household appliance with model number X500. The goal for 2012 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of X500 units that can be produced. The industry market size for appliances increased 10% from 2011 to 2012. The following additional data are available for 2011 and 2012:

                                                                                                        2011                   2012
        Units of X500 produced and sold                                  10,000                11,000
        Selling price                                                                          $100                      $95
        Direct materials (square feet)                                       30,000                29,000
        Direct material costs per square foot                               $10                      $11
        Manufacturing capacity for X500 (units)                     12,500                12,000
        Total conversion costs                                               $250,000           $240,000
        Conversion costs per unit of capacity                               $20                      $20

What is operating income for 2011?

What is operating income for 2012?


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