1. Joleen Harmon, CPA, has two clients. Client A requires 20 hours of partner time and 100
hours of staff time. Client B will use 12 hours of partner time and 80 hours of staff time.
Partners are paid $85 an hour and bill support time at 60% of their hourly rate. Staff are
paid $25 an hour and bill support time at $20 per billable hour.
On a separate sheet of paper, calculate the total charge to each of these clients if profit is
added at 20% over cost. Label each answer carefully and show all of your work. (This question is worth 10 points.)
2. The Tijama Manufacturing Company has determined the cost of manufacturing a unit of product to be as follows, based on annual production of 50,000 units per year:
Direct materials $20.00
Direct labor 15.00
Variable factory overhead 10.00
Fixed factory overhead 12.00
Operating statistics for the month of August and September are as follows:
Units produced 4,200 3,500
Units sold 3,500 4,200
Selling and administrative expenses $25,000 $35,000
The selling price is $75 a unit. There were no inventories on August 1, and there is no work in process at September 30.
Prepare comparative income statements for each month under both absorption costing
and direct costing. Use the forms at the end of this examination to complete this problem.
(This question is worth 25 points.)
3. The Donal Company has sales of $800,000, variable costs of $300,000, and fixed costs
On a separate sheet of paper, compute the following. Label each answer carefully and
show all of your work.
a. Contribution margin ratio
b. Break-even sales volume
c. Margin of safety ratio
d. Net income as a percentage of sales
(This question is worth 20 points, 5 points for each part.)
4. Complete Problem 9-6 on page 416 in your textbook. Use the
forms provided in the Study Guide/Working Papers booklet on
pages WP-283 and WP-284. (This question is worth 25 points.)
5. Complete the Chapter 10 Mini-Case on page 461 in your
textbook. Use a separate sheet of paper. Label each answer
and show all of your work. (This question is worth 20 points.)
Service Businesses; Decision Making
Pages 118 – 124
Please apply the solution of question 2 to the balance sheet, pages 123 – 124
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