1)Freedom Manufacturing Company needs to know its anticipated cash inflows for the next

quarter by month. Cash sales are 20 percent of total sales each month. Historically, sales on
account have been collected as follows: 50 percent in the month of the sale, 35 percent in the
month after the sale, and the remaining 15 percent two months after the sale. Sales for the quarter
are projected as follows: January, $60,000; February, $30,000; and March, $90,000.
Accounts receivable on December 31 were $45,000.
The expected cash collections of Freedom Manufacturing Company for March are: Be sure to
show all work

($90,000  0.20) + ($90,000  0.80  0.50) + ($30,000  0.80  0.35) + ($60,000  0.80  0.15) =
$69,600

2) Yo Department Store incurred $4,000 of indirect advertising costs for its operations. The
following data has been collected for 2011 for its three departments:
Shoes Cosmetics Crafts
Sales $160,000 $120,000 $120,000
Direct advertising costs $ 7,000 $ 10,000 $ 3,000
Newspaper ad space 62% 20% 18%
1)How much of the indirect advertising costs will be allocated to the Shoes Department if
newspaper ad space is the activity driver?
2)How much of the indirect advertising costs will be allocated to the Cosmetics Department if
direct advertising costs is the activity driver?
Be sure to show all work.

1)

62% ´ $4,000 = $2,480

2)

[10,000/(7,000 + 10,000 + 3,000)] ´ $4,000 = $2,000

Wilson and Lewis, a large law firm, utilizes an internal centralized printing center to serve its
three departments: Individuals, Corporate, Trust. The costs of the printing department include
fixed costs of $69,190 and variable costs of $0.04 per page. Total estimated print pages are
estimated to be 330,000 pages. Individuals are estimated to use 130,000; Corporate will use
165,000 and 35,000 from the trust area.
1) Assuming a single charging rate is used, what would be the charge per page? (round to the
nearest cent)
2) If the Corporate Department used 190,000 pages, what would be the printing charges for the
Corporate Department? (round to the nearest cent)

1)

$69,190 + ($0.04 × 330,000) = $82,390/330,000 = $.24966 = $.25

2)

$69,190 + ($0.04 × 330,000) = $82,390/330,000 = $.24966 = $.25

$.25 × 190,000 = $47,500