Direct Materials Variances LO10–1 Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost the company $171,000. According to the standard cost card, each helmet should require 0.6 kilograms of plastic, at a cost of $8 per kilogram.

2.

     Alternatively, the variances can be computed using the formulas:

         Materials quantity variance = SP (AQ – SQ)

            = $ _____per Kilogram (_______ Kilogram – _____ Kilogram)

            = $______ __

         Materials price variance = AQ (AP – SP)

            = _____ Kilogram ($____ per Kilogram* – $___ per Kilogram)

            = $____ __

            *$171,000 / 22,500 Kilogram = $____ per Kilogram.

After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 100,000 units of the Sport model and 40,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 25 percent.

Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility

Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility

Required:

a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900.

please show explanation

After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 115,000 units of the Sport model and 47,500 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 20 percent.

Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility

Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility

Required:

a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900.

After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 120,000 units of the Sport model and 50,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 15 percent.

Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility

Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility

Required:

a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900.

Sport: ?

Pro: ?

Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $14 per hour. Iguana has the following inventory policies:

Ending finished goods inventory should be 40 percent of next month’s sales.

Ending raw materials inventory should be 30 percent of next month’s production.

Expected unit sales (frames) for the upcoming months follow:   

Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,500 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold.

     Iguana, Inc., had $11,200 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the credit sales, 50 percent is collected during the month of the sale, and 50 percent is collected during the month following the sale.

     Of raw materials purchases, 80 percent is paid for during the month purchased and 20 percent is paid in the following month. Raw materials purchases for March 1 totaled $4,500. All other operating costs are paid during the month incurred. Monthly fixed manufacturing overhead includes $340 in depreciation. During April, Iguana plans to pay $3,500 for a piece of equipment.

1:

Compute the following for Iguana, Inc., for the second quarter (April, May, and June).

3:

Step 1: Compute the budgeted cash receipts for Iguana

Step 2: Compute the budgeted cash payments for Iguana.

PA8-4 Preparing Operating Budget Components [LO 8-3a, b, c, d]

Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $30. Wesley expects the following unit sales:

Wesley’s ending finished goods inventory policy is 20 percent of the next month’s sales.
       Suppose each handisaw takes approximately .75 hours to manufacture, and Wesley pays an average labor wage of $20 per hour.
       Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $5.00 each. The company has an ending raw materials inventory policy of 25 percent of the following month’s production requirements. Materials other than the housing unit total $4.50 per handisaw.
       Manufacturing overhead for this product includes $72,000 annual fixed overhead (based on production of 27,000 units) and $1.20 per unit variable manufacturing overhead. Wesley’s selling expenses are 7 percent of sales dollars, and administrative expenses are fixed at $18,000 per month.

Required:
1. Compute the following for the first quarter: (Do not round your intermediate calculations.)

PA8-4 Preparing Operating Budget Components [LO 8-3a, b, c, d]

Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $50. Wesley expects the following unit sales:

Wesley’s ending finished goods inventory policy is 30 percent of the next month’s sales.
       Suppose each handisaw takes approximately .60 hours to manufacture, and Wesley pays an average labor wage of $26 per hour.
       Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $8.00 each. The company has an ending raw materials inventory policy of 30 percent of the following month’s production requirements. Materials other than the housing unit total $4.50 per handisaw.
       Manufacturing overhead for this product includes $72,000 annual fixed overhead (based on production of 27,000 units) and $1.20 per unit variable manufacturing overhead. Wesley’s selling expenses are 7 percent of sales dollars, and administrative expenses are fixed at $18,000 per month.

Required:
1. Compute the following for the first quarter: (Do not round your intermediate calculations.)

PA8-4 Preparing Operating Budget Components [LO 8-3a, b, c, d]

Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $44. Wesley expects the following unit sales:

Wesley’s ending finished goods inventory policy is 30 percent of the next month’s sales.
       Suppose each handisaw takes approximately .60 hours to manufacture, and Wesley pays an average labor wage of $20 per hour.
       Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $7.00 each. The company has an ending raw materials inventory policy of 20 percent of the following month’s production requirements. Materials other than the housing unit total $4.50 per handisaw.
       Manufacturing overhead for this product includes $72,000 annual fixed overhead (based on production of 27,000 units) and $1.20 per unit variable manufacturing overhead. Wesley’s selling expenses are 7 percent of sales dollars, and administrative expenses are fixed at $18,000 per month.
Required:
1. Compute the following for the first quarter: (Do not round your intermediate calculations.)

January February March 1st Quarter total

1.Budgeted Sales Revenue

2.Budgeted Production in Units

3.Budgeted Cost of Raw Material Purchases for the Plastic Housings

4.Budgeted Direct Labor Cost

Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $36. Wesley expects the following unit sales:

Wesley’s ending finished goods inventory policy is 20 percent of the next month’s sales.
       Suppose each handisaw takes approximately .75 hours to manufacture, and Wesley pays an average labor wage of $26 per hour.
       Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $7.00 each. The company has an ending raw materials inventory policy of 25 percent of the following month’s production requirements. Materials other than the housing unit total $4.50 per handisaw.
       Manufacturing overhead for this product includes $72,000 annual fixed overhead (based on production of 27,000 units) and $1.20 per unit variable manufacturing overhead. Wesley’s selling expenses are 7 percent of sales dollars, and administrative expenses are fixed at $18,000 per month.

Required:
1. Compute the following for the first quarter: (Do not round your intermediate calculations.)

PA8-4 Preparing Operating Budget Components [LO 8-3a, b, c, d]

Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $68. Wesley expects the following unit sales:

Wesley’s ending finished goods inventory policy is 30 percent of the next month’s sales.
       Suppose each handisaw takes approximately .60 hours to manufacture, and Wesley pays an average labor wage of $30 per hour.
       Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $7.00 each. The company has an ending raw materials inventory policy of 20 percent of the following month’s production requirements. Materials other than the housing unit total $4.50 per handisaw.
       Manufacturing overhead for this product includes $72,000 annual fixed overhead (based on production of 27,000 units) and $1.20 per unit variable manufacturing overhead. Wesley’s selling expenses are 7 percent of sales dollars, and administrative expenses are fixed at $18,000 per month.

Required:
1. Compute the following for the first quarter: (Do not round your intermediate calculations.)

January   February   March   1st Quarter total
1.   Budgeted Sales Revenue _______ _______ _______   $0
2.   Budgeted Production in Units _______   _______   _______ 0

3.   Budgeted Cost of Raw Material Purchases for the Plastic Housings _______ _______ _______ $0
4.   Budgeted Direct Labor Cost _______   _______   _______ $0