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Du Page Company and The Campus Barber Shop

Du Page Company manufactures a nutrient, Everlife, through two manufacturing processes: Blending and Packaging. All materials are entered at the beginning of each process. On August 1, 2005, inventories consisted of Raw Materials $5,000, Work in Process?Blending $0, Work in Process?Packaging $3,945, and Finished Goods $7,500. The beginning inventory for Packaging consisted of 500 units, two-fifths complete as to conversion costs and fully complete as to materials. During August, 9,000 units were started into production in Blending, and the following transactions were completed.
1. Purchased $25,000 of raw materials on account.
2. Issued raw materials for production: Blending $18,930 and Packaging $7,140.
3. Incurred labor costs of $20,770.
4. Used factory labor: Blending $13,320 and Packaging $7,450.
5. Incurred $41,500 of manufacturing overhead on account.
6. Applied manufacturing overhead at the rate of $30 per machine hour. Machine hours were Blending 900 and Packaging 300.
7. Transferred 8,200 units from Blending to Packaging at a cost of $54,940.
8. Transferred 8,600 units from Packaging to Finished Goods at a cost of $72,490.
9. Sold goods costing $62,000 for $90,000 on account.
Journalize transactions.
(SO 3, SO 4)

Instructions
Journalize the August transactions.

P23-1A The Campus Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $2,200 per month. The other barbers are paid $1,400 per month. In addition, each barber is paid a commission of $4 per haircut. Other monthly costs are: store rent $700 plus 60 cents per haircut, depreciation on equipment $500, barber supplies 40 cents per haircut, utilities $300, and advertising $100. The price of a haircut is $10.

Determine variable and fixed costs, compute break-even point, prepare a CVP graph, and determine net income.
(SO 1, SO 3, SO 5, SO 6)

Instructions
a. Determine the variable cost per haircut and the total monthly fixed costs.
b. Compute the break-even point in units and dollars.
c. Prepare a CVP graph, assuming a maximum of 1,800 haircuts in a month. Use increments of 300 haircuts on the horizontal axis and $3,000 increments on the vertical axis.
d. Determine the net income, assuming 1,700 haircuts are given in a month.

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Du Page Company manufactures a nutrient, Everlife, through two manufacturing processes: Blending and Packaging. All materials are entered at the beginning of each process. On August 1, 2005, inventories consisted of Raw Materials $5,000, Work in Process?Blending $0, Work in Process?Packaging $3,945, and Finished Goods $7,500. The beginning inventory for Packaging consisted of 500 units, two-fifths complete as to conversion costs and fully complete as to materials. During August, 9,000 units were started into production in Blending, and the following transactions were completed.
1. Purchased $25,000 of raw materials on account.
2. Issued raw materials for production: Blending $18,930 and Packaging $7,140.
3. Incurred labor costs of $20,770.
4. Used factory labor: Blending $13,320 and Packaging $7,450.
5. Incurred $41,500 of manufacturing overhead on account.
6. Applied manufacturing overhead at the rate of $30 per machine hour. Machine hours were ...

Solution Summary

This solution is comprised of journal entries for Du Page Company, determine the variable cost per haircut and the total monthly fixed costs, compute the break-even point in units and dollars, prepare a CVP graph, assuming a maximum of 1,800 haircuts in a month. Use increments of 300 haircuts on the horizontal axis and $3,000 increments on the vertical axis, and determine the net income, assuming 1,700 haircuts are given in a month.

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