As of the end of June, the job cost sheets at Racing Wheels, Inc., show the following total costs accumulated on three custom jobs.

As of the end of June, the job cost sheets at Racing Wheels, Inc., show the following total costs accumulated on three custom jobs.

 

	Job 102	Job 103	Job 104
Direct materials	$ 26,000	$ 73,000	$ 55,000
Direct labor	12,000	27,200	41,000
Overhead	5,160	11,696	17,630

 

Job 102 was started in production in May and the following costs were assigned to it in May: direct materials, $14,000; direct labor, $2,900; and overhead, $1,247. Jobs 103 and 104 are started in June. Overhead cost is applied with a predetermined rate based on direct labor cost. Jobs 102 and 103 are finished in June, and Job 104 is expected to be finished in July. No raw materials are used indirectly in June. Using this information, answer the following questions. (Assume this company’s predetermined overhead rate did not change across these months).

 

1&2.

Complete the given below table to calculate the cost of the raw materials requisitioned and direct labor cost incurred during June for each of the three jobs? Explanation: 1. The cost of direct materials requisitioned in the month equals the total direct materials costs accumulated on the three jobs less the amount of direct materials cost assigned to Job 102 in May:             Job 102 $ 26,000           Less prior costs   (14,000 ) $ 12,000              Job 103         73,000      Job 104         55,000                Total materials used (requisitioned)       $ 140,000                  2. Direct labor cost incurred in the month equals the total direct labor costs accumulated on the three jobs less the amount of direct labor cost assigned to Job 102 in May:                     Job 102 $ 12,000           Less prior costs   (2,900 ) $ 9,100             Job 103         27,200     Job 104         41,000               Total direct labor       $ 77,300                3. The predetermined overhead rate equals the ratio of the amount of overhead assigned to jobs divided by the amount of direct labor cost assigned to them. Since the same rate is used for all jobs started and completed within a month, the ratio for any one job equals the rate that was applied. This table shows the ratio for jobs 102 and 104:        Job 102   Job 104     Overhead $ 5,160   $ 17,630     Direct labor   12,000     41,000     Ratio   43 %   43 %

Just Dew It Corporation reports the following balance sheet information for 2014 and 2015.

Problem 3-17 Calculating Financial Ratios [LO2]

Just Dew It Corporation reports the following balance sheet information for 2014 and 2015.

 

JUST DEW IT CORPORATION 2014 and 2015 Balance Sheets
Assets									Liabilities and Owners’ Equity
	2014				2015					2014				2015
Current assets									Current liabilities
Cash	$	11,025			$	11,970			Accounts payable	$	43,750			$	47,250
Accounts receivable		22,225				26,670			Notes payable		24,325				24,780
Inventory		44,625				51,450
Total	$	77,875			$	90,090			Total	$	68,075			$	72,030
									Long-term debt	$	35,000			$	21,000
									Owners’ equity
									Common stock and paid-in surplus	$	42,000			$	42,000
									Retained earnings		204,925				284,970
Net plant and equipment	$	272,125			$	329,910			Total	$	246,925			$	326,970
Total assets	$	350,000			$	420,000			Total liabilities and owners’ equity	$	350,000			$	420,000

 

Based on the balance sheets given for Just Dew It:

   

a.	Calculate the current ratio for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)

   

	2014	2015
Current ratio	times	times

  

b.	Calculate the quick ratio for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)

   

	2014	2015
Quick ratio	times	times

 

c.	Calculate the cash ratio for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)

   

	2014	2015
Cash ratio	times	times

 

d.	Calculate the NWC to total assets ratio for each year. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

    

	2014	2015
NWC ratio	%	%

 

e.	Calculate the debt–equity ratio and equity multiplier for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)

 

	2014	2015
Debt-equity ratio	times	times
Equity multiplier

   

f.	Calculate the total debt ratio and long-term debt ratio for each year. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)

 

	2014	2015
Total debt ratio	times	times
Long-term debt ratio	times	times

Explanation:

 a.

Current ratio	=	Current assets / Current liabilities
Current ratio 2014	=	$77,875 / $68,075 = 1.14 times
Current ratio 2015	=	$90,090 / $72,030 = 1.25 times

 
b.

Quick ratio	=	(Current assets – Inventory) / Current liabilities
Quick ratio 2014	=	($77,875 − 44,625) / $68,075 = .49 times
Quick ratio 2015	=	($90,090 − 51,450) / $72,030 = .54 times

 
c. 

Cash ratio	=	Cash / Current liabilities
Cash ratio 2014	=	$11,025 / $68,075 = .16 times
Cash ratio 2015	=	$11,970 / $72,030 = .17 times

 
d.

NWC ratio	=	NWC / Total assets
NWC ratio 2014	=	($77,875 – 68,075) / $350,000 = .0280, or 2.80%
NWC ratio 2015	=	($90,090 − 72,030) / $420,000 = .0430, or 4.30%

 
e.

Debt-equity ratio	=	Total debt / Total equity
Debt-equity ratio 2014	=	($68,075 + 35,000) / $246,925 = .42 times
Debt-equity ratio 2015	=	($72,030 + 21,000) / $326,970 = .28 times

   

Equity multiplier	=	1 + D/E
Equity multiplier 2014	=	1 + .42 = 1.42
Equity multiplier 2015	=	1 + .28 = 1.28

 
f.

Total debt ratio	=	(Total assets – Total equity) / Total assets
Total debt ratio 2014	=	($350,000 − 246,925) / $350,000 = .29 times
Total debt ratio 2015	=	($420,000 − 326,970) / $420,000 = .22 times

 

Long-term debt ratio	=	Long-term debt / (Long-term debt + Total equity)
Long-term debt ratio 2014	=	$35,000 / ($35,000 + 246,925) = .12 times
Long-term debt ratio 2015	=	$21,000 / ($21,000 + 326,970) = .06 times

Problem 21-1A Contribution margin income statement and contribution margin ratio LO A1 The following costs result from the production and sale of 1,000 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $500 each. The company has a 25% income tax rate.

Problem 21-1A Contribution margin income statement and contribution margin ratio LO A1

The following costs result from the production and sale of 1,000 drum sets manufactured by Tom Thompson Company for the year ended December 31, 2013. The drum sets sell for $500 each. The company has a 25% income tax rate.

    

Variable production costs
Plastic for casing	$	17,000
Wages of assembly workers		82,000
Drum stands		26,000
Variable selling costs
Sales commissions		15,000
Fixed manufacturing costs
Taxes on factory		5,000
Factory maintenance		10,000
Factory machinery depreciation		40,000
Fixed selling and administrative costs
Lease of equipment for sales staff		10,000
Accounting staff salaries		35,000
Administrative management salaries		125,000

  

Required:

1.	Prepare a contribution margin income statement for the company.
	Explanation: 1. Sales ($500 × 1,000) = $500,000 Income tax (135,000 × 25%) = $33,750