Graber and Johnson, Attorneys at Law, recently opened a law practice in the Northwest. Their goal is to generate a monthly net income of $10,000. They have initially set their billing rate at $150 per hour. Their billable hours in the first month of operations (January) were 150 and in the second month of operations (February), 175 billable hours. The costs incurred at these levels for January and February are given below. 150 billable hours 175 billable hours Salaries: Mr. Graber $10,000.00 $10,000.00 Ms. Johnson 10,000.00 10,000.00 Legal Secretary 4,000.00 4,000.00 Depreciation (Furniture) 500.00 500.00 Supplies 450.00 525.00 Rent 1,000.00 1,000.00 Utilities 412.00 449.50 Total cost $26,362.00 $26,474.50 Required: B. Use the high-low method to separate mixed costs into their fixed and variable components. If required, round your answers to two decimal places. $ per billable hour $ fixed utility cost C. Compute the net income/loss for January and February. If required, round your answers to two decimal places. January Net income Net loss $ February Net income Net loss $ D. If they expect to average 200 billable hours each month what do they need to set as a billing rate per hour to achieve their goal of generating $10,000 of monthly net income? Round your asnwer to two decimal places. $ Aaron Company provided the following data for next month: Selling price per unit $400 Variable manufacturing costs per unit $100 Fixed manufacturing costs per unit $80 Variable selling costs per unit $60 Fixed selling costs per unit $40 Expected production and sales 1,800 units What are the sales in dollars needed to obtain an operating income of $20,000? $ rounded Top Notch Music Inc. produces car stereos. During the year Top Notch Music produced 7,000 stereos. Materials and labor standards for producing these units are as follows: Direct materials (1 electronic component kit @ $185) $185 Direct materials (2 plastic casings @ $45) 90 Direct labor (8 hours @ $15) 120 Required: A. Compute the standards hours allowed for a volume of 7,000 stereos and the planned cost. Standards hours Planned cost $ B. Compute the standard number of kits and casings allowed for a value of 7,000 units and the planned cost for each direct material. Standard Quantity Planned Cost Electronic kits $ Plastic casings $ Pop’s Drive-Thru Burger Heaven produces and sells quarter-pound hamburgers. Each burger is wrapped and put in a “burger bag,” which also includes a serving of fries and a soft drink. The price for the burger bag is $3.50. During December, 10,000 burger bags were sold. The restaurant employs college students part-time to cook and fill orders. There is one supervisor (the owner, John Peterson). Pop’s maintains a pool of part-time employees so that the number of employees scheduled can be adjusted to the changes in demand. Demand varies on a weekly as well as a monthly basis. A janitor is hired to clean the building early each morning. Cleaning supplies are used by the janitor, as well as the staff, to wipe counters, wash cooking equipment, and so on. The building is leased from a local real estate company; it has no seating capacity. All orders are filled on a drive-thru basis. The supervisor schedules work, opens the building, counts the cash, advertises, and is responsible for hiring and firing. The following costs were incurred during December: Hamburger meat $4,500 Buns, lettuce, pickles, and onions 800 Frozen potato strips 1,250 Wrappers, bags, and condiment packages 600 Other ingredients 660 Part-time employees’ wages 7,250 John Peterson’s salary 3,000 Utilities 1,500 Rent 1,800 Depreciation, cooking equipment and fixtures 600 Advertising 500 Janitor’s wages 520 Janitorial supplies 150 Accounting fees 1,500 Taxes 4,250 Pop’s accountant, Elena DeMarco, does the bookkeeping, handles payroll, and files all necessary taxes. She noted that there were no beginning or ending inventories of materials. To simplify accounting for costs, Elena assumed that all part-time employees are production employees and that John Peterson’s salary is selling and administrative expense. She further assumed that all rent and depreciation expense on the building and fixtures are part of product cost. Finally, she decided to put all taxes into one category, taxes, and to treat them as administrative expense. Required: Be sure to read the instructions on each panel for additional guidance. 1. Classify each of the costs for Pop’s December operations using the table provided. If an amount is zero, enter “0”. Be sure to total the amounts in each column. 2. Prepare an income statement for the month of December. Label and Amount Descriptions Refer to the list below for the exact wording of a label or an amount description within your income statement. Labels Add Less Amount Descriptions Cost of goods sold Direct labor Direct materials Gross margin Manufacturing overhead Net income Net loss Sales Selling and administrative expense Classify each of the costs for Pop’s December operations using the table provided. Hamburger meat ($4,500) is classified as an example. If an amount is zero, enter “0”. Be sure to total the amounts in each column. Question not attempted. Pop’s Drive-Thru Burger Heaven 1 Cost Direct Materials Direct Labor Manufacturing Overhead Selling and Administrative 2 Hamburger meat $4,500.00 $0.00 $0.00 $0.00 3 Buns, lettuce, pickles, and onions 4 Frozen potato strips 5 Wrappers, bags, and condiment packages 6 Other ingredients 7 Part-time employees’ wages 8 John Peterson’s salary 9 Utilities 10 Rent 11 Depreciation, cooking equipment and fixtures 12 Advertising 13 Janitor’s wages 14 Janitorial supplies 15 Accounting fees 16 Taxes 17 Totals Solution Pop’s Drive-Thru Burger Heaven Prepare an income statement for the month of December. Refer to the list of Labels and Amount Descriptions for the exact wording of text items within your income statement. No costs are split. Question not attempted. Pop’s Drive-Thru Burger Heaven Income Statement For the Month of December 1 2 3 4 5 6 7 8 9

Still stressed from student homework?

Get quality assistance from academic writers!

Order now