This year Amber opened a factory to process and package landscape mulch. At the end of...

This year Amber opened a factory to process and package landscape mulch. At the end of the year, Amber’s accountant prepared the following schedule for allocating manufacturing costs to the mulch inventory, but her accountant is unsure of what costs need to be allocated to the inventory under UNICAP rules. Approximately 20 percent of management time, space, and expenses are spent on this manufacturing process. At the end of the year, Amber’s accountant indicated that the business had processed 10,600 bags of mulch but only 2,120 bags remained in the ending inventory.

What is Amber’s tax basis in her ending inventory after applying the UNICAP rules to allocate indirect costs to inventory? (Assume direct costs are allocated to inventory according to the level of ending inventory. In contrast, indirect costs are first allocated by time spent and then according to level of ending inventory.

		Costs	Tax Inventory
Material:	Mulch and packaging	$8,200
	Administrative supplies	650
Salaries:	Factory labor	12,700
	Sales & advertising	5,150
	Administration	5,950
Property taxes:	Factory	9,000
	Offices	5,000
Depreciation:	Factory	12,200
	Offices	3,800
	Total		$0.00

Solutions

Expert Solution

Total bags processed = 10600 Bags

Total inventory = 2120 Bags

% of ending inventory = 2120 / 10600 = 20%

% of management times spend = 20%

Direct cost allocated as per the % of ending inventory

Direct cost = Material, Taxes, Labor and Depreciation.

Indirect cost allocated as firstly on the basis of time spend and then as per the ending inventory.

Indirect cost = Administration and office cost

Sales and advertisement is not required to allocate on the inventory.

Particular		Cost	Tax Inventory
Material	Mulch and packaging	$8,200.00	$1,640.00
	Administration supplies	$650.00	$26.00
Salaries	Factory Labor	$12,700.00	$2,540.00
	Sales and Advertising	$5,150.00	$0.00
	Administration	$5,950.00	$238.00
Property Taxes	Factory	$9,000.00	$1,800.00
	Office	$5,000.00	$200.00
Depreciation	Factory	$12,200.00	$2,440.00
	Office	$3,800.00	$152.00
	Total		$9,036.00

jeff jeffy answered 6 months ago

Next > < Previous

Related Solutions

Explain why the Factory Overhead Balance must be disposed of at year end?

7. Boston’s Dairy has just opened its main yogurt factory in upstate Massachusetts. This main factory...

7. Boston’s Dairy has just opened its main yogurt factory in upstate Massachusetts. This main factory can produce 3,500 boxes of yogurt monthly (each box contains twelve 6-oz cups). Due to overwhelming demand for the company’s product Boston’s Dairy had signed a contract to rent a new factory, which can produce up to 8,000 boxes per month. The monthly total fixed costs are $40,000 in the main factory and $18,000 in the new factory. The variable product cost of yogurt...

Boston’s Dairy has just opened its main yogurt factory in upstate Massachusetts. This main factory can...

Boston’s Dairy has just opened its main yogurt factory in upstate Massachusetts. This main factory can produce 3,500 boxes of yogurt monthly (each box contains twelve 6-oz cups). Due to overwhelming demand for the company’s product, Boston’s Dairy has signed a contract to rent a new factory, which can produce up to 8,000 boxes per month. The monthly total fixed costs are $40,000 in the main factory and $16,000 in the new factory. The variable production cost of yogurt is...

Landscape fragmentation is the process by which habitat is altered or converted to other habitat types;...

Landscape fragmentation is the process by which habitat is altered or converted to other habitat types; for example, patches of forest may be converted to agriculture. As a result, habitat patches (forest in our example) usually become smaller and spaced farther apart as fragmentation progresses. Fragmentation has many effects on local communities. This could be due to several reasons, some of which we will discuss in class on Thursday. How would MacArthur and Wilson’s Equilibrium Theory of Island Biogeography (ETIB)...

A bonus package pays an employee $1,000 at the end of the firstyear, $1,500 at...

A bonus package pays an employee $1,000 at the end of the first year, $1,500 at the end of the second year, $2,000 at the end of the third year, and so on, continuing to increase by $500 every year for the first nine years of employment. What is the present value today of the bonus package at 9% interest?

Smith Ltd. was in the process of preparing year-end adjusting entries for the year ended December...

Smith Ltd. was in the process of preparing year-end adjusting entries for the year ended December 31, 2018. Smith Ltd. had the following balance in their books (ledger): Dr. Cr. Accounts Receivable $91,000 Allowance for Sales Discounts $4,500 Allowance for Sales Returns 3,300 Allowance for doubtful accounts 12,200 Additional Information: Total Credit Sales during 2018: $66,000 The Company estimated the following for the year-end December 31, 2018 purposes: Expected Sales discounts $3,500 Expected Sales returns 4,100 Accounts receivable should...

Conduct a three factor DuPont analysis for Starbucks and Cheesecake Factory for 2016 and 2017 end-of-fiscal-year...

Conduct a three factor DuPont analysis for Starbucks and Cheesecake Factory for 2016 and 2017 end-of-fiscal-year results. Use the information from financial statements provided in the section of the 2017 annual report titled: Item 8. Financial Statements and Supplementary Data. Use your analysis to provide a brief (1-2 paragraph) discussion of the change ROE from 2016 to 2017 for each firm and a comparison of the two firms in 2017. Financials: SBUX (MM) CAKE (000) Year 2017 2016 2017 2016...

A company decided to expand, so it opened a factory, generating 455 jobs. For the white-collar...

A company decided to expand, so it opened a factory, generating 455 jobs. For the white-collar positions, 200 males and 200 females applied. Of the females who applied, 20% were hired, while only 15% of the males were hired. Of the 400 males applying for blue-collar positions, 75% were hired while 85% of the 100 females who applied were hired. How does looking at the white-collar and blue collar positions separately suggest a preference for hiring women? Do the overall...

A company assigned overhead to work in process. At year end, what does the amount of...

A company assigned overhead to work in process. At year end, what does the amount of overapplied overhead mean? The overhead assigned to work in process is greater than the estimated overhead costs. The overhead assigned to work in process is less than the estimated overhead costs. The overhead assigned to work in process is less than the actual overhead. The overhead assigned to work in process is greater than the overhead incurred.

Item Beginning of Year End of Year Raw Materials Inventory $15,000 $25,000 Work in Process Inventory...

Item Beginning of Year End of Year Raw Materials Inventory $15,000 $25,000 Work in Process Inventory $40,000 $31,000 Finished Goods Inventory $10,000 $25,000 During the Year Purchases of Raw Material $82,000 Direct Labor Costs $95,000 Manufacturing Overhead $50,000 Answer……………………………………..Calculations $__________1. Direct Materials Used ________________________________ $__________2. Total Manufacturing Costs Incurred ____________________________ $__________3. Total Manufacturing Cost__________________ $__________4. Cost of Goods Manufactured___________________________ $__________5. Cost of Goods Sold___________________________________

Subjects