A manager is trying to determine which of three production processes to implement to produce a component for a new product line. Process A would entail a variable cost of $17 per unit and an annual fixed cost of $150,000. Process B would entail a variable cost of $11 per unit and an annual fixed cost of $250,000. Process C would entail a variable cost of $20 per unit and an annual fixed cost of $180,000.
Develop three separate models in your spreadsheet to calculate Total cost for each process. The models must be flexible and able to calculate Total cost for any Quantity produced.
Create a Cost-Volume graph that shows total cost lines for all three options. (Volume should range from 0 to 30,000)
Write an interpretation of your graph
In: Operations Management
A manager is trying to determine which of three production processes to implement to produce a component for a new product line. Process A would entail a variable cost of $17 per unit and an annual fixed cost of $150,000. Process B would entail a variable cost of $11 per unit and an annual fixed cost of $250,000. Process C would entail a variable cost of $20 per unit and an annual fixed cost of $180,000.
a. Develop three separate models in your spreadsheet to calculate Total cost for each process.
The models must be flexible and able to calculate Total cost for any Quantity produced.
b. Create a Cost-Volume graph that shows total cost lines for all three options.
(Volume should range from 0 to 30,000)
c. Write an interpretation of your graph
In: Operations Management
Inventory Costing Methods—Periodic Method Archer Company is a retailer that uses the periodic inventory system.
August 1 Beginning inventory 80 units of Product A @ $1,600 total cost
5 Purchased 100 units of Product A @ $2,116 total cost
8 Purchased 200 units of Product A @ $4,416 total cost
11 Sold 165 units of Product A @ $4,800 total sale
Calculate the August cost of goods sold and the ending inventory at August 31 using (a) first-in, first-out, (b) last-in, first-out, and (c) the weighted-average cost methods. Do not round until your final answers. Round your final answers to the nearest dollar.
In: Accounting
The balance in Work-in-Process Inventory on January 1 was $141,800 at J Company which uses a job order costing system. Direct materials used in January were $174,500. Direct labor used in January was $162,500. Overhead is applied at a rate of 140 percent of direct labor dollars. The following jobs were completed in January: Job #84 had a total cost of $198,780. Job #85 had a total cost of $102,520. Job #86 had a total cost of $119,450. Job #87 had a total cost of $93,150. The only job not finished at the end of January was Job #88 that had $72,400 of material cost to date.
How much overhead had been applied to Job 88?
In: Accounting
Consider the following independent situations, all of which apply to audits of entities for the year ending 31 December 20X7:
(i) Slipway Limited, a listed company, has been experiencing declining sales over the last 2 years. Cost cutting has proved difficult due to the high level of imported machinery used in Slipway’s operations and consequently margins have been falling. While the bankers are presently happy to continue providing Slipway with loan facilities, they do expect to see improved results in the next financial report. Articles about Slipway’s expected financial results appearing in recent press reports all had quite a pessimistic tone.
(ii) Discount Foods Limited is a large supermarket chain with offices in all capital cities around Australia. Until 30 June 20X7 data processing relating to payroll transactions will be carried out in each capital city by an independent computer service bureau. \
(iii) Getaway Pty. Limited is a long established firm which has been operating a boutique hotel in the Blue Mountains for over 20 years. During this time, it has adopted a conservative business strategy that has seen it produce adequate, though slightly unimpressive, results. A new CEO has been appointed to run the firm from 1 September 20X7. He has already released his plans for renovating the hotel, despite not officially serving as CEO yet. You have also heard him discuss the implementation of a new marketing strategy to boost occupancy rates.
(iv) Angora Pty. Limited is a small primary producer specializing in the production of angora wool. Angora’s recent display at a trade show has seen orders flood in from overseas buyers. The accountant, Michael, has done his best to satisfy the orders as quickly as possible while maintaining the appropriate (foreign currency) accounting records. However, from some of the questions he has been asking you, you suspect he is out of his depth.
(v) Kings Pty. Limited has been manufacturing uniforms for the Australian market for the last 40 years. The government’s recent tariff reduction policy has placed Kings in direct competition with cheaper uniforms manufactured overseas. In a bid to retain market share, Kings has been selling part of its school uniform range at less than cost. However, overall profit figures remain buoyant.
Required: For each of the above independent situations describe the overall impact on audit risk and identify the specific component(s) of audit risk affected.
In: Accounting
Freisleven Corporation has undertaken a cost study of its
operations. One area of concern to the company is the total cost of
labor, particularly the cost of employee benefits. Prepare a list
of the different kinds of costs that a company might incur as part
of its “total package” salary cost. Support your analysis
In: Accounting
Simpson Manufacturing has the following standard cost sheet for one of its products: TotalDirect materials5 pounds at $2 per pound$10 Direct labor2 hours at $25 per hour 50 Variable factory overhead2 hours at $5 per hour 10 Fixed factory overhead2 hours at $20 per hour 40 Cost per unit $110 The company uses a standard cost system and applies factory overhead cost based on direct labor hours and determines the factory overhead rate based on a practical capacity of 400 units of the product. Simpson has the following actual operating results for the year just completed: Units manufactured376 Direct materials purchased and used1,880pounds $20,680 Direct labor incurred830hours 22,410 Variable factory overhead incurred 5,312 Fixed factory overhead incurred 15,800 Before closing the periodic accounts, the (standard cost) entries in selected accounts follow: AccountDebit (total) Credit (total)Work-in-process inventory$177,000 $142,640 Finished goods inventory 142,640 119,690 Cost of goods sold 119,690
Required:
1. Determine for the period the following items:a. Flexible budget for variable factory overhead cost based on output for the period.b. Total variable overhead cost applied to production during the period.c. Total budgeted fixed factory overhead cost.d. Total fixed factory overhead cost applied to production during the period.
2. Compute the following factory overhead cost variances using a four-variance analysis:a. Total variable overhead cost variance.b. Variable overhead spending variance.c. Variable overhead efficiency variance.d. Total underapplied or overapplied variable overhead.e. Fixed overhead spending variance.f. Fixed overhead production volume variance.g. Total fixed overhead cost variance.h. Total underapplied or overapplied fixed overhead.
3. Compute the following factory overhead cost variances using three-variance analysis:a. Overhead spending variance.b. Overhead efficiency variance.c. Fixed overhead production volume variance.
4. Compute the total overhead flexible-budget variance and the fixed overhead production volume variance using a two-variance analysis.
5. Using a single overhead account (e.g., Factory Overhead), make proper journal entries for:a. Incurrence of factory overhead costs.b. Application of factory overhead costs to production.c. Identification of overhead variances assuming that the firm uses the four-variance analysis identified in requirement 2.d. Close all factory overhead cost items and their variances of the period if:(1) The firm closes all variances to the Cost of Goods Sold account.(2) The firm prorates variances to the inventory accounts and the Cost of Goods Sold account.
In: Accounting
Vargis Corporation has a machining capacity of 217,000 hours per year. Utilization of capacity is normally 85%; it has been as low as 30% and as high as 90%. An analysis of the accounting records revealed the following selected costs:
At a 30% Utilization Rate At a 90% Utilization Rate
Cost A:
Total$457,000 $457,000
Per hour$7.20 ?
Cost B:
Total ? $1,961,000
Per hour$12.50 $12.50
Cost C:
Total$765,000 $1,347,000
Per hour$17.00 $9.09
Vargis uses the high-low method to analyze cost behavior.
Required:
Classify each of the costs as being either variable, fixed, or semivariable.
Calculate amounts for the two unknowns in the preceding table. (Round "Cost A" to 2 decimal places.)
Calculate the total amount that Vargis would expect at a 85% utilization rate for Cost A, Cost B, and Cost C. (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.)
In: Accounting
Vargis Corporation has a machining capacity of 215,000 hours per year. Utilization of capacity is normally 75%; it has been as low as 40% and as high as 90%. An analysis of the accounting records revealed the following selected costs:
| At a 40% Utilization Rate | At a 90% Utilization Rate | ||||||
| Cost A: | |||||||
| Total | $ | 455,000 | $ | 455,000 | |||
| Per hour | $ | 7.00 | ? | ||||
| Cost B: | |||||||
| Total | ? | $ | 1,959,000 | ||||
| Per hour | $ | 12.30 | $ | 12.30 | |||
| Cost C: | |||||||
| Total | $ | 755,000 | $ | 1,345,000 | |||
| Per hour | $ | 16.00 | $ | 8.89 | |||
Vargis uses the high-low method to analyze cost behavior.
Required:
In: Accounting
In: Economics