In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the cost of goods manufactured is computed according to which of the following equations?

Multiple Choice

Cost of goods manufactured = Total manufacturing costs + Beginning finished goods inventory – Ending finished goods inventory

Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory – Ending work in process inventory

Cost of goods manufactured = Total manufacturing costs + Ending work in process inventory – Beginning work in process inventory

Cost of goods manufactured = Total manufacturing costs + Ending finished goods inventory – Beginning finished goods inventory

Please discuss the cost of quality as a combination of cost of conformance and cost of no conformance

PLEASE INCLUDE EXCEL FORMULAS OR WORK

• Prepare (7) operating budgets for the year by quarter & budgeted Income Statement for the Candy business
• Sales Information:
  • Company advertises that it will match the competition (Internal factor)
  • Five year historical selling total units per year: 220k, 210k, 180k, 196k, & 200k
  • Surrounding shopping area includes discount stores (i.e. Target, Walmart) selling similar product for $15, $20 respectively (external factor)
  • Stock Market down 25% in last 3 months, oil per barrel at record low (external factor)
  • Prepare a budget with the following:
    • Sales in units Q1 – 20,000, Q2 – 40,000, Q3 – 30,000, Q4 – 10,000
    • Selling price per unit: $10
• Production information:
  • Company’s desired level of ending finished goods inventory is 15% of next quarters budgeted unit sales.
  • Q1 beginning inventory would be PY Q4 ending. Which means that when calculating Q4 PY ending you would look at CY Q1 sales units.
  • When calculating Q4 ending you would need to know next years Q1 sales units. It is estimated that Q1 sales units for the following year will be a 10% increase to current year Q1.
• Direct materials information:
  • 12 ounces (oz) of chocolate per unit
  • Chocolate costs $.10 per ounce (oz)
  • Company’s desired level of ending material inventory is 20% of next quarters budgeted direct material needs.
  • Q1 beginning & Q4 ending use the same method as used during the production budget.
• Direct labor information:
  • Fifteen minutes per unit (15 minutes/60 minutes = .25/hr per unit)
  • Employees are paid $8/hour
• Overhead information:
  • Production supervisor salary for the year is $40,000
  • Machinery depreciation for the year using straight line is $13,000
  • Factory supplies is $2.00 per DL hour
  • Maintenance & repairs is $4.00 per DL hour
  • Utilities is $2.50 per DL hour
• Selling, General & Administrative (SG&A) information:
  • Executive salary for the year is $50,000
  • Taxes & insurance for the year is $7,500
  • Delivery expense is $.30 per sold unit
  • Other administrative expenses is $.10 per unit sold
• Cost of Goods Manufactured information:
  • WIP, beginning $180,000 & ending $155,000
• Income Statement
  • Income tax 40% on net income before taxes (NIBT)

Mike is a manufacturing supplier. Mike’s products are both bought in and purchased internally from its manufacturing division Manuf. The transfer price used by Manuf to sell internally its products to Mike is set by head office and is currently under some discussion. The current policy is for Manuf to sell internally at its variable cost plus 30% margin. Manuf argues however that it should be calculated as full cost plus margin, and even offers to reduce the margin to 10% in this case. Manuf has provided the following information to enable a price comparison between the two possible pricing strategies:

a)      Steel: each product needs 0.4 kg of steel in the final product, knowing that it loses 5% of the steel put in. Steel costs $4,000 per tonne.

b)      Other materials are bought in and have a list price of $3 per kg, although Manuf enjoys a 10% volume discount; each products consumes 0.1 kg of such materials.

c)      The labour time required to make one product is 0.25 hours, paid $10 per hour.

d)     Variable overheads are absorbed at the rate of 150% of labour rates, and fixed overheads are 80% of the variable overheads.

e)      Delivery is made by an outsourced distributor that charges Manuf $0.50 per product.

Required:

a)      Calculate the price that Manuf would charge for its product under the existing policy based on the variable cost   

b)      Calculate the price that Manuf would charge for its product if the new policy based on the full cost would be implemented   

c)      Comment on the 1) general implications of setting a transfer price within a business ; 2) advise on the adequacy of changing the transfer price for this specific case

d)     Mike is using the price information in its annual budgeting process, built in an incremental approach. Explain 2 alternative budgeting techniques that Mike might consider implementing, given the critiques you raise of the traditional budgetary process   

A Chemical company has to expand its production capacity to cater its growing local and international market .

it has to decide between a large plant and a small plant to be built to address the increasing demand. This is all that must be decided now. But if the company chooses to build a small plant, and then finds demand high during the initial period for two years, it has to expand its plant further. In making decisions, company executives must take account of the probabilities, costs, and returns which appear likely. On the basis of the data now available to them and assuming no important changes in the company’s situation, perform the following;

(i) Develop a decision tree analysis for the Chemical company for this potential investment;

(ii) Determine the net expected monetary value EMV (revenue – cost), and decide which alternative should the company

Table Q4-1

Table Q4-2 : Alternatives, Probabilities & Payoffs when building a Small plant with High initial average demand

(succeeding 8 years)

Consider cost theory.

a. Prove that marginal cost and average cost are equal where average cost is minimized.

b. Respecting the standard U-shaped long-run average cost curve, briefly provide two distinct explanations for the downward sloping part of the curve, and an explanation for the upward sloping part.

c. Suppose an electricity distribution firm purchases a number of metal poles for inventory at a price of ?? per pole. Sometime later, metal poles become obsolete in the industry in favour of fiberglass poles, and command a price of ?? per pole in the scrap metal market. By the time the firm switches to fiberglass poles, some of the metal poles previously purchased remain in the firm’s inventory. The price of a fiberglass pole is ??. Assume that 0 < ?? < ?? < ??. In terms of these variables, quantify the accounting and economic costs of each of the following activities:

i. Past purchase of a metal pole for inventory.

ii. Current purchase of a fiberglass pole for inventory.

iii. Keeping a fiberglass pole in inventory.

iv. Keeping a metal pole in inventory.

v. Selling an uninstalled metal pole for scrap. Briefly explain which of the quantified costs are sunk.

Consider cost theory.

a. Prove that marginal cost and average cost are equal where average cost is minimized.

b. Respecting the standard U-shaped long-run average cost curve, briefly provide two distinct explanations for the downward sloping part of the curve, and an explanation for the upward sloping part.

c. Suppose an electricity distribution firm purchases a number of metal poles for inventory at a price of ?? per pole. Sometime later, metal poles become obsolete in the industry in favour of fiberglass poles, and command a price of ?? per pole in the scrap metal market. By the time the firm switches to fiberglass poles, some of the metal poles previously purchased remain in the firm’s inventory. The price of a fiberglass pole is ??. Assume that 0 < ?? < ?? < ??. In terms of these variables, quantify the accounting and economic costs of each of the following activities:

i. Past purchase of a metal pole for inventory.

ii. Current purchase of a fiberglass pole for inventory.

iii. Keeping a fiberglass pole in inventory.

iv. Keeping a metal pole in inventory.

v. Selling an uninstalled metal pole for scrap. Briefly explain which of the quantified costs are sunk.

Briefly explain which of the quantified costs are sunk.

Given the quantity and total cost, calculate for total fixed cost, total variable cost, average fixed cost, average total cost, average variable cost, and marginal cost.

Excel formulas would be nice but not required.

(a) Complete the blank columns.

(b)    Assume the price of this product equals $10. What’s the profit-maximizing output (q)?  Note: managers maximize profits by setting MR=MC and under perfectly competitive markets, MR=Price. Thus, maximize profit by producing q where P=MC.

(c)    What is the profit?

NewTech Medical Devices is a medical devices wholesaler that commenced business on June 1, 2019. NewTech Medical Devices purchases merchandise for cash and on open account. In June 2019, NewTech Medical Devices engaged in the following purchasing and cash payment activities:

Required:
Journalize the transactions in a general journal.


Analyze:
What was the amount of trade discounts received on the June 15 purchase from Park Research?