Cost of Production Report: Average Cost Method

Use the average cost method with the following data:

Prepare a cost of production report for the Cutting Department of Dalton Carpet Company for January using the average cost method. If required, round your cost per equivalent unit answer to two decimal places.

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 6,800 units of product were as follows: Standard Costs Actual Costs Direct materials 8,800 lb. at $6.00 8,700 lb. at $5.80 Direct labor 1,700 hrs. at $18.00 1,740 hrs. at $18.20 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,770 direct labor hrs.: Variable cost, $3.90 $6,560 variable cost Fixed cost, $6.20 $10,974 fixed cost Each unit requires 0.25 hour of direct labor. Required: a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Price variance $ Quantity variance $ Total direct materials cost variance $ b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Rate variance $ Time variance $ Total direct labor cost variance $ c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Variable factory overhead controllable variance $ Fixed factory overhead volume variance $ Total factory overhead cost variance $

amou Company makes filing cabinets of two varieties, applying overhead at the rate of $85 per machine hour. Total actual overhead for the year is $1,500,000. Production data are as follows: Unit A Unit B Direct Material Cost $40 $50 Direct Labor Cost $25 $40 Budgeted Units Produced 4,000 7,500 Mamou is considering changing its overhead application method to an activity based system. A study uncovers three overhead activities budgeted as follows: Manufacturing set ups (total cost $320,000); Machine costs (total cost $936,000); and Engineering costs (total cost $264,000). Data on appropriate budgeted drivers are shown below:

UnitA UnitB

Number of Setups

100 60

Machine Hours

8,000 10,000

Engineering Shifts (8 hrs)

120 100

a. Calculate the total cost to make one of each type of filing cabinet, including material, labor, and overhead, applying overhead using the single overhead cost driver of $85 per machine hour: UnitA ___________ UnitB ____________

b. Will overhead be over- or underapplied, and by how much, using this approach? Overapplied _____ Underapplied _____ Amount ___________

c. What will you do with the amount of overapplied or underapplied overhead? (Choose one of the following actions)

1. Do nothing-leave it in the cost of the goods in inventory. _________

2. Adjust the cost of goods sold or related inventory accounts. ________

3. Report it as a separate item on the income statement. __________

d. Calculate the total cost to make one of each type of filing cabinet, including material, labor, and overhead, applying overhead using activity based costing and the drivers indicated in the problem: UnitA ____________ UnitB ____________

1) List the five characteristics of pure monopoly.

2) Describe the demand curve facing a pure monopoly and how it differs from that facing a firm in a purely competitive market.

3) Explain why the marginal revenue is equal to the price in pure competition but not in monopoly.

4) Use the chart to solve the following:

Calculate the Marginal Cost at Q 100?

Calculate the Marginal Cost at Q 200?

Calculate the Marginal Cost at Q 300?

Calculate the Average Total Cost at Q 100?

Calculate the Average Total Cost at Q 200?

Calculate the Average Total Cost at Q 300?

1. Explain the theory of a firm.

2. Describe the objective of the firm as presented in standard economics: profit maximisation.

3. Define opportunity cost, explicit and implicit cost.

4. Distinguish accounting and economic profit.

5. Differentiate cost minimisation and profit maximisation and compare and

contrast the complexity of the two problems.

6. Analyse the link between a firm’s production process and its total costs.

7. Distinguish the relationship between short-run and long-run costs.

8. Explain the meaning of competition.

9. Describe the profit maximisation behaviour of competitive firms.

10. Describe short-run production function, total product, average product, and marginal product and explain and illustrate how they are related to each other.

12. Explain the concepts of increasing, diminishing, and negative marginal returns and explain the law of diminishing marginal returns.

13. Describe total variable cost, total fixed cost, total cost, average variable cost, average fixed cost, average total cost, and marginal cost and explain and illustrate how they are related to each other.

14. Explain and illustrate how the product and cost curves are related to each other and to determine in what ranges on these curves marginal returns are increasing, diminishing, or negative.

15. Apply the marginal decision rule to explain how a firm chooses its mix of factors of production in the long run.

16. Define the long-run average cost curve and explain how it relates to economies and diseconomies or scale.

17. Explain the characteristics of perfect competition.

18. Identify output determination in the short run.

19. Discuss marginal revenue, price and demand for the firm.

20. Differentiate the economic and accounting concepts of profit and loss.

21. Identify the basic assumptions of the model of perfect competition and explain why they imply price-taking behaviour.

A company manufacturing bicycles has a current annual demand of 1,500 bikes. In buying bike tires, they pay $14 per tire with an estimated carrying cost of 20% of the tire’s cost. Each order cost $25 to process. Orders are placed on the first of each month for an equal amount every month. Determine the current ordering cost, carrying cost and total inventory cost each year using the current order quantity. Calculate the EOQ. Determine the current ordering cost, carrying cost and total inventory cost each year using the quantity found from the EOQ calculation.

QUESTION FOUR

4.1 Complete Table 4.1 given below showing quantity, fixed cost, variable cost, total cost and marginal cost.

2. 4.2 Using examples distinguish between fixed costs and variable costs.

3. 4.3 Differentiate between marginal cost and marginal revenue.

4. 4.4 Compare and contrast accounting and economic profits.

Presidio, Inc. produces one model of mountain bike. Partial information for the company follows:

Required: 1. Complete Presidio’s cost data table. (Round your Cost per Unit answers to 2 decimal places.)

2. Calculate Presidio’s contribution margin ratio and its total contribution margin at each sales level indicated in the cost data table assuming the company sells each bike for $610. (Round your Margin Ratio percentage answers to 2 decimal places (i.e. .1234 should be entered as 12.34%.))

3. Calculate net operating income (loss) at each of the sales levels assuming a sales price of $610. (Round your answers to the nearest whole dollar amount.)

Presidio, Inc. produces one model of mountain bike. Partial information for the company follows: Required:

1. Complete Presidio’s cost data table. (Round your Cost per Unit answers to 2 decimal places.)

Bikes produced and sold   390 Units   850 Units   1270 Units Total Costs           Variable costs   $124,800       Fixed costs           Total Costs           Cost per unit           Variable cost per unit           Fixed cost per unit           Total Cost per unit       $558  

2. Calculate Presidio’s contribution margin ratio and its total contribution margin at each sales level indicated in the cost data table assuming the company sells each bike for $610. (Round your Margin Ratio percentage answers to 2 decimal places (i.e. .1234 should be entered as 12.34%.))

390 units       850 Units       1270 Units   Total Contribution Margin                       Contribution Margin Ratio       %       %       %

3. Calculate net operating income (loss) at each of the sales levels assuming a sales price of $610. (Round your answers to the nearest whole dollar amount.)

390 Units   850 Units   1270 Units Net Operating Income (Loss)

Use the following data for problems #1 & #2:

Belsky Corporation manufactures x-ray machines and has provided the following data from its activity-based costing system:

1. Calculate an activity rate for each of Belsky’s three activities that it would use in the final stage of allocating costs to its products. (Hint: See Exhibit 7-7 on page 323 of the text for an example.)

2. Each year Belsky makes 500 units of its X-ray Machines requiring a total of 1,000 machine-hours, 60 orders, and 20 inspection-hours per year. In addition to the costs allocated through the activity pool, the product's direct materials cost is $50 per unit and its direct labor cost is $20 per unit.

Use this information and the activity rates calculated in Problem #1 to find the Unit Cost for one X-ray Machine. (Hint: Your final answer must give the total unit cost for one x-ray machine not the total cost of 500 machines!)