Bierce Corporation has two manufacturing departments--Machining and Finishing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:

During the most recent month, the company started and completed two jobs--Job B and Job K. There were no beginning inventories. Data concerning those two jobs follow:

Required:

a. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate that overhead rate. (Round your answer to 2 decimal places.)

b. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job B. (Do not round intermediate calculations.)

c. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job K. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

d. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. What is the departmental predetermined overhead rate in the Machining department? (Round your answer to 2 decimal places.)

e. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. What is the departmental predetermined overhead rate in the Finishing department? (Round your answer to 2 decimal places.)

f. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job B? (Do not round intermediate calculations.)

g. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job K?. (Do not round intermediate calculations.)

Which of the following are not typical problems of traditional costing approaches (as compared to Activity-Based Costing)?

Under-costing of low-volume, high-complexity products

Over-costing of high-volume, low-complexity products

Over-producing unprofitable products

Under-producing profitable products

None of the above

Under variable costing, Gross Profit is equal to:

Sales - Variable Costs

Sales - Fixed Costs

Sales - Variable Costs - Fixed Costs

Contribution Margin - Fixed Costs

Variable costing does not calculate Gross Profit

Which of the following is not a factor to consider when deciding whether to accept a special order?

Whether this order will hurt the brand name of the company

Whether other potential orders would be more profitable

Whether additional fixed costs would need to be incurred

Whether the offered price is sufficient to cover prime costs and fixed overhead allocated

All of the above

If a company has sufficient excess capacity, which of the following costs are relevant to the decision to make or buy a new product?

Direct materials

Variable overhead

Fixed overhead

Costs of buying from the outside vendor

A, B, and D only

QUESTION 2: What challenges do multinational companies face in a global economy? What opportunities do multinational companies face in a global economy?

Module 9 Prompt: What is forensic Auditing? What is Internal auditing?

Module 10 Prompt: Compare and contrast a horizontal analysis and vertical analysis Identify and Explain factors that affect quality of earnings Identify what each type of ratio measures liquidity ratios Solvency ratios Profitability ratios

The above data is the cost and price of the event of Annual Dinner . As a cost controller, using the data above briefly explain and analyze how the company can maximize the profit and minimize the cost using the below method?

a. Job Costing

b. Hybrid Costing

c. Process costing

d. Historical costing

e. Operating Costing

As the economy goes through highs and lows, investors with stock in various companies face significant risk. How do you see the stock market affecting your own investing plans in the future? What types of risks do investors take? How can investors minimize their risk?

At the end of the year, a company offered to buy 4,520 units of a product from X Company for a special price of $12.00 each instead of the company's regular price of $17.00 each. The following information relates to the 66,200 units of the product that X Company made and sold to its regular customers during the year:

Fixed cost of goods sold for the year were $141,668, and fixed period costs were $69,510. Variable period costs include selling commissions equal to 2% of revenue.

6. Profit on the special order is

7. Assume the following two changes for the special order: 1) variable cost of goods sold will decrease by $0.84 per unit, and 2) there will be no selling commissions. What would be the effect of these two changes on the special order profit?

8. There is concern that regular customers will find out about the special order, and X Company's regular sales will fall by 600 units. As a result of these lost sales, X Company's profits would fall by

1. Construct a table showing the first-year costs, annual costs, and the annual benefits for the following investment proposal:

Costs:

• Initial investment (software, hardware, implementation) $180,000, incurred in year zero.
• Software maintenance (starting in year two) $30,000 per year, increasing at a rate of 3% per year thereafter

Benefits:

• Labor savings $140,000 per year, starting in year two
• Equipment savings $55,000, year one only.
• Increased clinic revenue, $50,000 per year, starting in year one.
• All yearly savings increase at the rate of inflation, assumed to be 3% per year.

Calculate the Net Present Value of this proposed investment at the end of the five-year planning cycle using a discount rate of 5%. Show your work. Assume that one-time costs are incurred in year zero, and annual costs and savings are incurred in years 1 through 5.

In this assignment, you will play the role of a senior analyst.

You work for Blackhawk Company, a lighting fixture manufacturer.

Upper management at Blackhawk is concerned with the traditional costing system it has relied on for the past few years. In particular, upper management is concerned about the accuracy of cost information and thus has ordered a “pilot” test of an activity-based costing approach.

You will receive an analysis prepared by your junior staff. Your task is to interpret the analysis, and communicate related implications and other considerations.

Note: Please read all of the provided information, including the required deliverables, before beginning the assignment.

Case Information

Use the information provided here to answer the questions.

Blackhawk Company manufactures and sells many different types of lighting fixtures.

Historically, indirect costs have been allocated to products based on direct labor dollars, via a traditional costing system. The overhead rate is pre-determined, based on budgeted volumes and budgeted direct labor.

For the upcoming year, Blackhawk compiled the following projected per-unit information for its deluxe model – one of many products that Blackhawk produces and sells.

Product Information (Traditional Costing System)

Selling price $900

Direct materials $250

Direct labor $120

Indirect costs $340

Profit per unit $190

The CFO has suggested that an activity-based costing system could be valuable to help facilitate strategic and operational decisions for the coming year. She ordered a pilot test of the activity-based costing system using the deluxe product.

Your staff obtained the following information to compute an activity-based version of the deluxe product’s cost.

Note: These totals are company-wide (i.e., not just for the deluxe model).

In addition, the following information is known for the deluxe model.

Number of units per batch = 125

Number of machine hours per unit = 10

Number of units per shipment = 1

Analysis

A junior staff member provided the following analysis.

Activity Pool Rates

Setups: $500,000 / 725 batches = $689.66 per batch

Machine time: $44,100,000 / 650,000 machine hrs = $67.85 per machine hr

Packing: $5,000,000 / 250,000 shipments = $20 per shipment

Using the activity pool rates and the estimated usage of each activity by the deluxe model, the junior analyst provided the following cost estimate on a per unit basis:

Setups: $689.66 per batch / (125 units per batch) = $5.52 per unit

Machine time: $67.85 per machine hour x 10 machine hours per unit = $678.50 per unit

Packing: $20 per shipment / (1 unit per shipment) = $20 per unit

Total per unit cost = $5.52 + $678.50 + $20 = 704.02

The analyst also provided the revised profit per unit information:

Selling price = $900

Revised costs (rounded) (per activity-based costing) = $704

Profit per unit = $900 - 704 = $196

The analyst noted that the per-unit cost, as well as the profit per unit were approximately equivalent across the two systems (i.e., the original/traditional system and the activity-based costing system).

Given this small difference, the analyst concluded that the original system is reasonably accurate, and that activity-based costing may not be worthwhile for Blackhawk Company.

Question 1:

Write a critique of the analysis and conclusion prepared by your analyst.

In particular, is the analyst’s conclusion (i.e., that activity-based costing is not worthwhile for Blackhawk Company) correct?

Question 2:

Prepare a memo to Blackhawk’s upper management regarding the advantages and disadvantages of activity-based costing.

Use an example scenario to communicate the advantages and disadvantages.

Pacific Ink had beginning work-in-process inventory of $802,560 on October 1. Of this amount, $335,200 was the cost of direct materials and $467,360 was the cost of conversion.The 59,000 units in the beginning inventory were 25 percent complete with respect to both direct materials and conversion costs.

During October, 124,000 units were transferred out and 41,000 remained in ending inventory.The units in ending inventory were 75 percent complete with respect to direct materials and 35 percent complete with respect to conversion costs. Costs incurred during the period amounted to $3,094,000 for direct materials and $3,893,400 for conversion.

a-1. Compute the cost of goods transferred out and the cost of ending inventory using the FIFO method. (Round intermediate calculations to 2 decimal places.)
COST OF GOODS TRANSFERRED OUT ????????
COST OF ENDING INVENTORY ????????????

Haas Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:

During its first year of operations, Haas produced 60,000 units and sold 60,000 units. During its second year of operations, it produced 75,000 units and sold 50,000 units. In its third year, Haas produced 40,000 units and sold 65,000 units. The selling price of the company’s product is $62 per unit.

Required:

1. Compute the company’s break-even point in unit sales.

2. Assume the company uses variable costing:

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

3. Assume the company uses absorption costing:

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 31,100 units but sold 34,100 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.

Chapter 7 - problem 18

Activity cost Pool                                         Activity Measure                       Total Activity

Removing asbestos ………………. Thousands of square feet              800 thousand square feet

Equipment and job steps…………. Number of jobs                              500 jobs

Working on nonroutine jobs………. Number of jobs nonroutine jobs    100 nonroutine jobs                   

Other organization-sustaining costs and idle capacity costs …………… None

Note The 100 nonrountine jobs are included in the total of 500 jobs. Both nonroutine jobs and routine jobs require estimating and steps.

Cots for the Year

Wages and salaries ……………………………………………… $300,000

Disposal fees ……………………………………………………… 700,000

Equipment depreciation …………………………………………. 90,000

One-site suppliers ………………………………………………… 50,000

Office expenses …………………………………………………… 200,000

License and insurance ……………………………………………. 400,000

Total cost …………………………………………………………… 51,740,000

Distribution of Resource Consumption across Activities

                                                                      Estimating               Working on

                                             Removing         and job steps          Nonroutine jobs        

                                               Asbestos                                                                  other   Total

Wages and salaries                  50%                10%                    30%                     10%    100%

Disposal fees                            60%                 0%                     40%                      0%      100%

Equipment depreciation           40%                  5%                     20%                      35%    100%

One-site suppliers                   60%                 30%                   10%                       0%      100%

Office expenses                       10%                 35%                    25%                      30%    100%

License and insurance             30%                 0%                     50%                      20%     100%

Require

1. Using Exhibit 7-6 as a guide, perform the first-stage allocation of costs to the activity cost pools.
2. Using Exhibit 7-7 as a guide, compute the activity rates for the activity cost pools.
3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system.

1. A routine 1.000-square-foot asbestos removal job.
2. A routine 2.000-square-foot asbestos removal job
3. A nonroutine 2 000-square-foot asbestos removal job.

4. Given the results you obtained in (3) above, do you agree with the estimator that the company's present policy for bidding on jobs is adequate?

Cash Disbursement
Timber Company is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 70 percent of sales. Lumber purchases and payments are to be made during the month preceding the month of sale. Wages are estimated at 15 percent of sales and are paid during the month of sale. Other operating costs amounting to 10 percent of sales are to be paid in the month following the month of sale. Additionally, a monthly lease payment of $14,000 is paid for computer services. Sales revenue is forecast as follows

Required
Prepare a schedule of cash disbursements for April, May, and June.
Do not use a negative sign with your answers.

LIFO Perpetual Inventory

The beginning inventory at Midnight Supplies and data on purchases and sales for a three-month period ending March 31 are as follows:

1. Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4, using the last-in, first-out method. Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Goods Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column. Round unit cost to two decimal places, if necessary.