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ACCT 434 MidTerm - Spring 2016 (TCO 1) For each of the following drivers identify an appropriate activity. 1. (TCO 2) Favata Company has the following information Month Budgeted Sales June $60,000 July 51,000 August 40,000 September 70,000 October 72,000 In addition, the cost of goods sold rate is 70% and the desired inventory level is 30% of next month's cost of sales. Prepare a purchases budget for July through September. 2. (TCO 3) As part of his job as cost analyst, Max Thompson collected the following information concerning the operations of the Machining Department: Observation Machine-hours Total Operating Costs January 4,000 $45,000 February 4,600 49,500 March 3,800 45,750 April 4,400 48,000 May 4,500 49,800 Use the high-low method to determine the estimating cost function with machine-hours as the cost driver. (TCO 5) Collier Bicycles has been manufacturing its own wheels for its bikes. The company is operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of direct labor cost. The direct materials and direct labor cost per unit to make the wheels are $1.50 and $1.80, respectively. Normal production is 200,000 wheels per year. A supplier offers to make the wheels at a price of $4 each. If the bicycle company accepts this offer, all variable manufacturing costs will be eliminated, but the $42,000 of fixed manufacturing overhead being charged to the wheels will have to be absorbed by other products. A. Prepare an incremental analysis for the decision to make or buy the wheels. B. Should Collier Bicycles buy the wheels from the outside supplier? Justify your answer. 3.