# (TCO 6) T-Tunes, Inc. is considering the introduction of a new music player with the following price and cost characteristics

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## Product Description

1. (TCO 6) T-TunesIncis considering the introduction of a new music player with the following priceand cost characteristics

Sales price per unit: \$125
Variable cost per unit: \$75
Annual fixed costs: \$180,000

(a) How many units must T-Tunes sell to break even?
(b) How many units must T-Tunes sell to make an operating profit of \$120,000 for the year?
(c) What will the operating profit beassuming that the projected sales for the year are 7,500 units?

Consider requirements (b) and (c) independent of each other. (Points : 30)

Question 2. 2. (TCO 4) Kramer Company has decided to use a predetermined rate to assign factory overhead toproductionThe following predictions have been made for 2010:

 Total factory overhead costs \$180,000 Direct labor hours 50,000 hours Direct labor costs \$250,000 Machine hours 60,000 hours

Compute the predetermined factory overhead rate under three different bases: (1) direct labor hours, (2) directlabor costsand (3) machine hours.

(Points : 30)

Question 3. 3. (TCO 1) The Boyceville Machining Company provided you with the following information forthe fiscal year ending on December 31:

 Work-in-process inventory, 12/31 \$28,950 Finished goods inventory, 1/1 153,700 Direct labor costs incurred 502,150 Manufacturing overhead costs 1,364,700 Direct materials inventory, 1/1 125,400 Finished goods inventory, 12/31 255,500 Direct materials purchased 875,100 Work-in-process inventory, 1/1 50,500 Direct materials inventory, 12/31 84,700

(a) Compute the total manufacturing costs incurred during the year.
(b) Compute the total work-in-process during the year.
(c) Compute the cost of goods manufactured during the year.
(d) Compute the cost of goods sold during the year.

(Points : 30)

Question 4. 4. (TCO 5) The following information relates to a product produced by Bayfield Company:

 Direct materials \$50 Direct labor 35 Variable overhead 30 Fixed overhead 40 Unit cost \$155

Fixed selling costs are \$1,000,000 per yearAlthough production capacity is 900,000 units per yearBayfieldexpects to produce only 800,000 units next yearThe product normally sells for \$180 each. A customer hasoffered to buy 60,000 units for \$150 eachCompute the effect on the net income if Bayfield accepts the specialorder. (Points : 20)

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