Required information

Exercise 2-15 Plantwide and Departmental Predetermined Overhead Rates; Job Costs [LO2-1, LO2-2, LO2-3, LO2-4]

[The following information applies to the questions displayed below.]

Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:

During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:

Delph had no underapplied or overapplied manufacturing overhead during the year.

2. Assume Delph uses departmental predetermined overhead rates based on machine-hours.

a. Compute the departmental predetermined overhead rates.

b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.

c. If Delph establishes bid prices that are 150% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200?

d. What is Delph’s cost of goods sold for the year?

required 2A- compute the departmental predetermined overhead rates. (Round the final answers to 2 decimal places.)

required 2B- Compute the total manufacturing cost assigned to Job D-70 and Job C-200. (Round your intermediate calculations to 2 decimal places. Round your final answers to nearest whole dollar amount.)

required 2C- If Delph establishes bid prices that are 150% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200? (Round your intermediate calculations to 2 decimal places. Round your final answers to nearest whole dollar amount.)

required 2D- What is Delph’s cost of goods sold for the year? (Round your intermediate calculations to 2 decimal places. Round your final answer to nearest whole dollar amount.)

Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 23% each of the last three years. He has computed the cost and revenue estimates for each product as follows:

The company’s discount rate is 15%.

Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor using tables.

Required:

1. Calculate the payback period for each product. (Round your answers to 2 decimal places.)

2. Calculate the net present value for each product. (Round discount factor(s) to 3 decimal places.)

3. Calculate the internal rate of return for each product. (Round percentage answers to 1 decimal place. i.e. 0.1234 should be considered as 12.3% and round discount factor(s) to 3 decimal places.)

4. Calculate the project profitability index for each product. (Round discount factor(s) to 3 decimal places. Round your answers to 2 decimal places.)

5. Calculate the simple rate of return for each product. (Round percentage answers to 1 decimal place. i.e. 0.1234 should be considered as 12.3%.)

6a. For each measure, identify whether Product A or Product B is preferred.

6b. Based on the simple rate of return, Lou Barlow would likely:

Alternative Production Procedures and Operating Leverage
Assume Paper Mate is planning to introduce a new executive pen that can be manufactured using either a capital-intensive method or a labor-intensive method. The predicted manufacturing costs for each method are as follows:

Paper Mate's market research department has recommended an introductory unit sales price of $30. The incremental selling costs are predicted to be $500,000 per year, plus $2 per unit sold.

(a) Determine the annual break-even point in units if Paper Mate uses the:

1. Capital-intensive manufacturing method.
Answer

units

2. Labor-intensive manufacturing method.
Answer

units

(b) Determine the annual unit volume at which Paper Mate is indifferent between the two manufacturing methods.
Answer

units


2. Compute operating leverage for each alternative at a volume of 270,000 units. Round your answers two decimal places.

Capital-Intensive operating leverage Answer

Labor-Intensive operating leverage Answer

Cost of Production Report

The Cutting Department of Karachi Carpet Company provides the following data for January. Assume that all materials are added at the beginning of the process.

a. Prepare a cost of production report for the Cutting Department. If an amount is zero or a blank, enter in "0". For the cost per equivalent unit computations, round your answers to two decimal places.

b. Compute and evaluate the change in the costs per equivalent unit for direct materials and conversion from the previous month (December). If required, round your answers to two decimal places.

the role of materiality as it is related to fraud. Compare and contrast how you think the idea of materiality would impact both civil and criminal cases?

1. Bradley Corporation's required rate of return is 14%. The company has an opportunity to be the exclusive distributor of a very popular consumer item. No new equipment would be needed, but the company would have to use one-fourth of the space in a warehouse it owns. The warehouse cost $200,000 new. The warehouse is currently half-empty and there are no other plans to use the empty space. In addition, the company would have to invest $100,000 in working capital to carry inventories and accounts receivable for the new product line. The company would have the distributorship for only 5 years. The distributorship would generate a $17,000 annual net cash inflow. (Ignore income taxes in this problem.)
   
   
   What is the net present value of the project? What is the project’s internal rate of return?

Please show all steps.

As a facilities supervisor, you would like to be able to estimate maintenance costs using machine hours as the cost driver. To do this, you perform a linear regression with machine hours as the independent (X) variable, and maintenance costs as the dependent (Y) variable. This results in the following output:

A. What percentage of the variation in maintenance costs can be explained by machine hours?

B. How much maintenance cost should we expect if a factory has zero (0) machine hours?

C. By how much should we estimate maintenance costs to increase for every one hour increase in machine hours?

Label and place your final answer for A-C.

Financial data for Beaker Company for last year appear below:

The company paid dividends of $199,000 last year. The "Investment in Cedar Company" on the statement of financial position represents an investment in the stock of another company.

Required:

a. Compute the company's margin, turnover, and return on investment for last year.

b. The Board of Directors of Beaker Company has set a minimum required return of 45%. What was the company's residual income last year?

Equivalent Units and Related Costs; Cost of Production Report; Entries

Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals.

The balance in the account Work in Process—Filling was as follows on January 1:

The following costs were charged to Work in Process—Filling during January:

During January, 57,600 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 5,000 units, 40% completed.

Required:

1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.

Feedback

1. Calculate equivalent units for materials and conversion costs. Calculate the cost per equivalent unit for materials and conversion costs. Calculate the costs assigned to the beginning inventory, the units started and completed, and the ending inventory.

2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost transferred from Filling to Finished Goods.

Feedback

2. Remember that there are three types of inventory; materials, work in process, and finished goods. What costs are captured in the work in process account? Are these units 100% complete or are they being transferred to another department?

3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places.

4. Discuss the uses of the cost of production report and the results of part (3).

The cost of production report may be used as the basis for allocating product costs between   and  . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

Feedback

3 and 4. Compare the costs per equivalent unit for December and January. Review the benefits of the cost of production report.

Government and Not for Profit Accounting Even programs involving relatively subjective judgments can readily be audited.

A Department of Housing and Urban Development (HUD) program is aimed at conserving and rehabilitating blighted but salvageable urban areas. One element of the program provides that HUD will make rehabilitation grants and low-interest loans to property owners to help them finance the repairs needed to bring their properties into compliance with housing codes.

When Congress authorized the program, it did not establish specific criteria as to what constitutes a "blighted but salvageable" area; it left that up to HUD.

A preliminary survey by the GAO has indicated that HUD is directing funds to areas that were far too deteriorated for conservation and rehabilitation to work.

Suppose that you are assigned to the engagement. Outline an approach that you would take to support (or reject) the findings of the preliminary survey.

1. Present entries to record the following summarized operations related to production for a company using a job order cost system:
   

   (a)	Materials purchased on account		$176,000
   (b)	Prepaid expenses incurred on account		12,200
   (c)	Materials requisitioned:
   	For production orders		153,700
   	For general factory use		2,700
   (d)	Factory labor used:
   	On production orders		141,300
   	For general factory purposes		12,000
   (e)	Depreciation on factory equipment		37,000
   (f)	Expiration of prepaid expenses, chargeable to factory		6,100
   (g)	Factory overhead costs incurred on account		76,000
   (h)	Factory overhead applied, based on machine hours		105,300
   (i)	Jobs finished		415,300
   (j)	Jobs shipped to customers:
   	Selling price (assume all sold on account)		638,000
   	Cost of goods sold		412,000

   If an amount box does not require an entry, leave it blank.

   a.	Accounts Payable Cash Factory Overhead Materials Work in Process
   	Accounts Payable Cash Factory Overhead Materials Work in Process
   b.	Accounts Payable Cash Factory Overhead Prepaid Expenses Work in Process
   	Accounts Payable Cash Factory Overhead Prepaid Expenses Work in Process
   c.	Accounts Payable Cash Materials Prepaid Expenses Work in Process
   	Accounts Payable Cash Factory Overhead Finished Goods Materials
   	Accounts Payable Cash Factory Overhead Materials Work in Process
   d.	Accounts Payable Cash Materials Wages Payable Work in Process
   	Cash Cost of Goods Sold Factory Overhead Materials Wages Payable
   	Accounts Payable Factory Overhead Materials Wages Payable Work in Process
   e.	Accumulated Depreciation-Factory Equipment Cost of Goods Sold Depreciation Expense Factory Equipment Factory Overhead
   	Accumulated Depreciation-Factory Equipment Cost of Goods Sold Depreciation Expense Factory Equipment Factory Overhead
   f.	Accounts Payable Cash Factory Overhead Prepaid Expenses Work in Process
   	Accounts Payable Cash Factory Overhead Prepaid Expenses Work in Process
   g.	Accounts Payable Cash Factory Overhead Materials Work in Process
   	Accounts Payable Cash Factory Overhead Materials Work in Process
   h.	Accounts Payable Cash Factory Overhead Materials Work in Process
   	Accounts Payable Cash Factory Overhead Materials Work in Process
   i.	Cash Cost of Goods Sold Factory Overhead Finished Goods Work in Process
   	Cash Cost of Goods Sold Factory Overhead Finished Goods Work in Process
   j. Sale	Accounts Receivable Cash Finished Goods Sales Work in Process
   	Accounts Receivable Cash Finished Goods Sales Work in Process
   Cost	Cash Cost of Goods Sold Factory Overhead Finished Goods Work in Process
   	Cash Cost of Goods Sold Factory Overhead Finished Goods Work in Process

1.) Blossom, Inc. prepared the following master budget items for July:Production and sales48,000unitsVariable manufacturing costs: Direct materials$72,000 Direct labor$96,000 Variable manufacturing overhead$120,000Fixed manufacturing costs $200,000Total manufacturing costs$488,000 During August, Blossom actually sold 72,000 units. Prepare a flexible budget for Blossom based on actual sales.

Ringing Bell Telephone Company has implemented an affirmative action plan in compliance with the Equal Employment Opportunity Commission. Under the current plan, to eliminate discrimination based on sex, women must be placed in jobs traditionally held by men. Therefore, the human resource department has emphasized recruiting and hiring women for such positions. Women who apply for craft positions are encouraged to try for outdoor craft jobs, such as those titled installer-repairer and line worker.
All employees hired as outside technicians must first pass basic installation school, which includes a week of training for pole climbing. During this week, employees are taught to climb 30-foot telephone poles. At the end of the week, they must demonstrate the strength and skills necessary to climb the pole and perform exercises while on it, such as lifting heavy tools and using a pulley to lift a bucket. Only those who pass this first week of training are allowed to advance to the segment dealing with installation.

Records have been maintained on the rates of success or failure for employees who attend the training school. For men, the failure rate has remained fairly constant at 30 percent. However, it has averaged 70 percent for women.
The human resource department has become concerned because hiring and training employees who must resign at the end of one week is a tremendous expense. In addition, the goal of placing women in outdoor craft positions is not being reached.
As a first step in solving the problem, the human resource department has started interview- ing the women who have failed the first week of training. Each employee is asked her reasons for seeking the position and encouraged to discuss probable causes for failure. Interviews over the last two months disclosed that employees were motivated to accept the job because of their wishes to work outdoors, work without close supervision, obtain challenging work, meet the public, have variety in their jobs, and obtain a type of job unusual for women. Reasons for failure were physical inability to climb the pole, fear of height while on it, an accident dur- ing training such as a fall from the pole, and change of mind about the job after learning that strenuous work was involved.
In many instances, the women who mentioned physical reasons also stated they were not physically ready to undertake the training; many had no idea it would be so difficult. Even though they still wanted the job, they could not pass the physical strength test at the end of one week.
Some stated that they felt “influenced” by their interviewer from the human resource depart- ment to take the job; others said they had accepted it because it was the only job available with the company at the time.
Questions
1. What factors would you keep in mind in designing an effective selection process for the position of outdoor craft technician?
2. What would you recommend to help Ringing Bell reduce the failure rate among women trainees?

Cane Company manufactures two products called Alpha and Beta that sell for $190 and $155, respectively. Each product uses only one type of raw material that costs $8 per pound. The company has the capacity to annually produce 122,000 units of each product. Its average cost per unit for each product at this level of activity are given below:

The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.

a. Assume that Cane normally produces and sells 74,000 Betas and 94,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 14,000 units. What is the financial advantage (disadvantage) of discontinuing the Beta product line?

b. Assume that Cane expects to produce and sell 94,000 Alphas during the current year. A supplier has offered to manufacture and deliver 94,000 Alphas to Cane for a price of $136 per unit. What is the financial advantage (disadvantage) of buying 94,000 units from the supplier instead of making those units?

c. Assume that Cane expects to produce and sell 69,000 Alphas during the current year. A supplier has offered to manufacture and deliver 69,000 Alphas to Cane for a price of $136 per unit. What is the financial advantage (disadvantage) of buying 69,000 units from the supplier instead of making those units?

d. How many pounds of raw material are needed to make one unit of each of the two products?