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.
