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Problem 1 (20 points)
X-Ray Manufacturing has the following revenues and costs:
Sales
Fixed overhead
Direct labor
Direct materials
Selling expenses
Administrative expenses
Variable overhead
Interest expense
Income tax

\$4,340,000
\$1,020,000
\$458,000
\$620,000
\$365,000
\$489,000
\$224,000
\$118,000
\$366,000

Prepare a contribution margin income statement with both dollars and percentages of sales displayed.

Problem 2 (20 points)
Presented below are selected budget data items for Globe Corporation for a three-month period:

Sales
Direct materials
Direct labor
Variable overhead
Fixed overhead
Selling and admin. costs
Fixed loan payments

OCTOBER
\$820,000
\$123,000
\$90,000
\$65,600
\$140,000
\$312,000
\$155,000

NOVEMBER
\$780,000
\$119,000
\$85,000
\$62,400
\$140,000
\$310,000
\$155,000

DECEMBER
\$850,000
\$125,000
\$96,000
\$68,000
\$140,000
\$315,000
\$155,000

Sales were \$770,000 in August and \$790,000 in September. Material usage was \$115,000 in August and
\$118,000 in September. All sales are on account, and accounts receivable is historically collected 15% in
the month of sale, 65% in the month following sales, and the remainder two months after the sale.
Materials are paid for 40% in the month used and 60% the following month. All other expenses are paid in
the month incurred. The cash balance was \$35,000 at the beginning of October, and management wants
to determine if the company will have enough cash to pay a year-end bonus.
Prepare a three-month cash budget, including a schedule for cash collections and material payments.

Problem 3 (10 points)

Olympic Products Inc. manufactures and distributes barbecue grills. The company normally sells 1,000 of
these grills each month for a price of \$140 each. The material cost for a grill is \$44 and the direct labor is
\$22. The variable overhead cost is \$13 per grill, and the fixed overhead cost is \$30,000 per month. A
contract manufacturer has approached the company and offered to supply the grills ready to sell for \$85
each. The company management believes that if it accepts this offer, Olympic Products will be able to
lease unused factory space for \$10,000 per month.
Perform a make-versus-buy analysis.