1) Recher Corporation\'s common stock has a par value of $3 per share and has be

Question

1) Recher Corporation's common stock has a par value of $3 per share and has been stable at a total value of $270,000 on the company's balance sheet for several years. The total stockholders' equity at the end of this year was $1,023,000 and at the beginning of the year was $1,010,000. Net income for the year was $17,500. Dividends on common stock during the year totaled $4,500. The market price of common stock at the end of the year was $3.76 per share. The company's price-earnings ratio is closest to:

a) 19.79

b) 0.51

c) 8.36

d) 12.53

Can you please show the formula and calculation for this one. No calculators are allowed.

2) Biery Corporation makes a product with the following standard costs:

Standard for Direct Labor Hours = 0.6

Standard for Direct Labor Rate = $19.00/hour

The company produced 4,100 units in April using 5,380 liters of direct material and 2,610 direct labor-hours. During the month, the company purchased 6,000 liters of the direct material at $5.80 per liter. The actual direct labor rate was $19.80 per hour and the actual variable overhead rate was $2.90 per hour. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The labor efficiency variance for April is:

a) $2,850 F

b) $2,850 U

c) $2,970 F

d) $2,970 U

Please show calculation. No calculators allowed.

Explanation / Answer

1 Recher Corporation Par Value of shares                                3 Book Value of common shares                   270,000 No of common shares outstanding=270000/3                     90,000 Total stock holders equity beginning               1,010,000 Add Net Income for year                     17,500 Less dividends                        4,500 Closing Stock holder's equity               1,023,000 EPS =17500/90000=                          0.19 Price per share                        3.760 PE ratio= 3.76/0.19=                        19.79 So answer is a. 2 Std Direct Labor Hrs /unit                          0.60 Std Direct Labor rate /hr                              19 Actual direct labor hrs                        2,610 Units produced                        4,100 Std Direct Labor Hrs for actua output=                        2,460 Labor Efficiency Variance= Std Direct Labor rate/he*(Actual labor Hrs-Std Labor Hrs for actual Production) =19*(2610-2460) =19*150=                        2,850 U So answer b. is correct.

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