ACCT 221 help A Guide to career/Snaptutorial ACCT 221 help A Guide to career/Snaptutorial | Page 13

Clarke manufactures and sells two products. The first product is a
disposable shaving razor blade that lasts about 7 days. The second
product is shaving cream. Customers of the first product use one
bottle of shaving cream every 28 days. As a result, razor blades
outsell shaving cream by a 4:1 ratio. Shaving Cream sells for $8 per
bottle, and has a contribution margin ratio of 50%. The razor blades
sell for $3 per blade, but only generate variables costs of $1.50. The
company’s total fixed costs are $3,500,000.
Requirements:
a. What level of total sales is necessary to achieve break even?
b. If a competitor began selling razors that forced Clarke to reduce the
price for its razors to $2.50 (to maintain market share and the 4:1 ratio
of razors to shaving cream), how many Razor sets must be sold for
the company to break even?
Question 4
Cyber Inc manufactures networking devices for personal computer
systems, using just-in-time methods. After receiving an order for 300
devices, the company bought materials (for cash) costing $14,000 to
fill this order. It incurred labor and overhead costs of $48,000, of
which $10,000 was for wages and the rest overhead.
After the production was finished, but before all goods were sold, the
company needed to compute an inventory cost for financial statement
purposes. The cost of finished goods inventory was $2,480.
Requirements:
a. Use T-accounts to show the flow of costs under traditional costing
system
b. Prepare journal entries for these transactions using backflush
costing.
c. Use T-accounts to show the flow of costs using a JIT system with
backflush costing.