1. The Mixing Department is the third department in the MZS Inc. factory. During January, there were 4,000 units of beginning inventory in the Mixing Department, and 90,000 units were transferred in from the prior process. There were 8,000 units in ending inventory. The transferred-in cost in the beginning inventory was $170,000 and there was $600,000 in transferred-in cost during the month.

What is the cost per equivalent unit for transferred-in cost?

2. Assume that we are manufacturing a product and assume that the sales price per unit is $60 and the variable cost is $20 per unit and the fixed cost is $80,000; a) how many units would we need to sell to break even? b) How many units would we need to sell to earn a profit of $120,000? c) How many units do we need to sell to double that profit to $240,000? D) Why didn’t the number of units double from Part B to Part C?

3. Sivan Co. manufactures and sells one product. For the year, they started with no opening inventory; produced 100,000 units, but only sold 70,000 units. The selling price per each unit is $70.

The variable costs per unit were:
Direct materials…………………….7
Direct Labor ………………………..6
Variable manufacturing overhead….5
Variable selling and administrative….6
Fixed costs per year:
Fixed manufacturing Overhead …………….$700,000
Fixed Selling and Administrative expenses….$300,000

(a) Prepare the Income Statement using Absorption Costing.
(b) Prepare the Income Statement using Variable Costing. 

4. At Long Co., electricity cost starts with a minimum fixed cost, and after that, there is a perfectly variable expense. Using estimated machine hours:

Machine hours             Cost
50,000                             $98,000
60,000                             $112,000

What is the a) estimated variable cost per machine hour and what is the b) estimated TOTAL fixed cost?

5. North Company produces a small part that it uses in the production of its Product H. The company’s unit product cost for the part, based on a production of 100,000 parts per year, is as follows:

………………………………………….Per part ………………..Total
Direct Materials………………………. $7.00………..$700,000
Direct Labor …………………………….6.00…………$600,000
Variable Manufacturing Overhead 2.00………..$200,000
Plus:
Fixed manufacturing Overhead, (Traceable or avoidable) $400,000 TOTAL, equal to $4 per unit
Fixed manufacturing Overhead,( Common—not traceable to any product. Will stay even if no product is manufactured) allocated on basis of labor-hours 5.00)     $500,000 Total

Unit Product Cost……………………… $24.00 (7+ 6+ 2, variable of $15. Plus Fixed  4+ 5=9, total)

An outside supplier has offered to supply parts to the North Company for only $21.25 per part.(it appears to the President of the company that he could save $2.75 per unit.
100 percent of the traceable or avoidable fixed manufacturing cost is supervisor salaries and other costs that can be ELIMINATED if the parts are purchased. The decision to buy the parts from the outside supplier would have no effect on the common fixed costs of the company, and the space being used to produce the parts would otherwise be idle. Ignore the impact of income taxes in your calculation. 
How much would profits increase or decrease as a result of purchasing the parts from the
outside supplier rather than making them inside the company? 

6. Harry Corp buys equipment for $222,474 that will last for 10 years. The equipment will generate cash flows of $41,000 per year and will have no salvage value at the end of its life. Ignore taxes. Use 12% required rate of return.

(a) What is the Present Value (PV) of this investment (at 12%)?

(b) What is the NET Present Value (NPV) of this investment? If you need 12% should you buy the equipment?

(c) What is the Internal Rate of Return (IRR) of this investment? 
(d) What is the payback period?

7. Tanya Corp. sells its products on both credit and cash basis. Monthly sales are sold 20% for cash, 80% for credit. Credit sales are collected 65% in the month of sale and 35% the following month. Sales for the first quarter are BUDGETED as follows: January, $250,000; February, $360,000; March, $300,000.  

Compute cash collections budgeted for February. How much cash was collected in the month?