This exercise deals with the case where price is not a constant but related to quantity demanded. The demand (price) function is P = 50 − 2.5Q, where Q is the quantity demanded. The revenue function is

TR = QxP =50Q -2.5Q²

and the total cost function is

TC = 25+25Q.

Using Excel, develop a table showing columns for Q, P, TR, TC, and Profit (TR-TC). Graph the total cost and total revenue functions at the values of Q: 0, 1, 2, 3, 4, 5, 6, 7, 8, and 9. Indicate approximately on the graph the break-even output levels where total cost equals total revenue. Distinguish between these two output levels.

Orange, Inc. has identified the following cost drivers for its expected overhead costs for the year:

Total overhead budgeted = $200,000

Total direct labor hours budgeted = 2,000 hours

Actual direct labor hours worked on Job 21 = 100

Actual direct materials = $5,000 total

Actual direct labor = $3,000 total

Actual units completed = 100

The totoal cost of Job 21 is:

The Total Cost of Job 21 per Unit is:

west medic wing Inc., a manufacturer of disposable medical supplies, prepared the following factory overhead cost budget for the Assembly Department for October of the current year. The company expected to operate the department at 100% of normal capacity of 6,200 hours.

During October, the department operated at 6,600 standard hours, and the factory overhead costs incurred were indirect factory wages, $22,660; power and light, $12,310; indirect materials, $10,800; supervisory salaries, $12,690; depreciation of plant and equipment, $32,560; and insurance and property taxes, $9,930.

Required:

Prepare a factory overhead cost variance report for October. To be useful for cost control, the budgeted amounts should be based on 6,600 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your per unit computations to the nearest cent, if required. If an amount box does not require an entry, leave it blank.

Factory Overhead Cost Variance Report

Feeling Better Medical Inc., a manufacturer of disposable medical supplies, prepared the following factory overhead cost budget for the Assembly Department for October of the current year. The company expected to operate the department at 100% of normal capacity of 6,700 hours.

Variable costs:
   Indirect factory wages $21,440
   Power and light 15,477
   Indirect materials 13,467
    Total variable cost $50,384
Fixed costs:
   Supervisory salaries $11,250
   Depreciation of plant and equipment 28,860
   Insurance and property taxes 8,800
    Total fixed cost 48,910
Total factory overhead cost $99,294

During October, the department operated at 7,100 standard hours, and the factory overhead costs incurred were indirect factory wages, $22,950; power and light, $16,110; indirect materials, $14,600; supervisory salaries, $11,250; depreciation of plant and equipment, $28,860; and insurance and property taxes, $8,800.

Required:

Prepare a factory overhead cost variance report for October. To be useful for cost control, the budgeted amounts should be based on 7,100 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your per unit computations to the nearest cent, if required. If an amount box does not require an entry, leave it blank.

Feeling Better Medical Inc.
Factory Overhead Cost Variance Report—Assembly Department
For the Month Ended October 31
Normal capacity for the month 6,700 hrs.
Actual production for the month 7,100 hrs.
Budget Actual Favorable Variances Unfavorable Variances
Variable costs:
Indirect factory wages $ $ $
Power and light $
Indirect materials
Total variable cost $ $
Fixed costs:
Supervisory salaries $ $
Depreciation of plant and equipment
Insurance and property taxes
Total fixed cost $ $
Total factory overhead cost $ $
Total controllable variances $ $
$

Excess hours used over normal at the standard rate for fixed factory overhead
$

Feeling Better Medical Inc., a manufacturer of disposable medical supplies, prepared the following factory overhead cost budget for the Assembly Department for October of the current year. The company expected to operate the department at 100% of normal capacity of 6,200 hours.

During October, the department operated at 6,600 standard hours, and the factory overhead costs incurred were indirect factory wages, $22,660; power and light, $12,310; indirect materials, $10,800; supervisory salaries, $12,690; depreciation of plant and equipment, $32,560; and insurance and property taxes, $9,930.

Required:

Prepare a factory overhead cost variance report for October. To be useful for cost control, the budgeted amounts should be based on 6,600 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your per unit computations to the nearest cent, if required. If an amount box does not require an entry, leave it blank.

Factory Overhead Cost Variance Report

Feeling Better Medical Inc., a manufacturer of disposable medical supplies, prepared the following factory overhead cost budget for the Assembly Department for October of the current year. The company expected to operate the department at 100% of normal capacity of 8,700 hours.

During October, the department operated at 9,200 standard hours, and the factory overhead costs incurred were indirect factory wages, $29,730; power and light, $21,500; indirect materials, $19,500; supervisory salaries, $16,410; depreciation of plant and equipment, $42,090; and insurance and property taxes, $12,840.

Required:

Prepare a factory overhead cost variance report for October. To be useful for cost control, the budgeted amounts should be based on 9,200 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your per unit computations to the nearest cent, if required. If an amount box does not require an entry, leave it blank.

ALASKA MANUFACTURING produces widgets, which they sell for $5 each. They are preparing their budget for production costs for February 2017. Actual production costs in the previous month, January 2017, were as follows, when production was 20,000 widgets: Raw materials (variable) $ 50,000 Labor costs (variable) 20,000 Factory rent (fixed) 12,000 Equipment depreciation (fixed) 16,000 Other production costs (fixed) 2,000 Total $ 100,000 REQUIRED: 1) What was the prime cost for January, both total AND per-unit? 2) What was the conversion cost of January, both total AND per-unit? 3) ALASKA anticipates that production will rise to 25,000 widgets in February. Using the above numbers as your guide, what would be the expected production cost for February? 4) Does your February budget suggest that additional workers will be needed? Assuming the wage rate is $20 per hour, how many additional labor hours are indicated for February? 5) What was the actual production cost per unit for the January? What is the expected production cost for February? Explain WHY the total production cost per unit changed in the direction that it did. 6) What is the “formula” that you could use to determine the total production cost for ALASKA for any particular month? 7) What formula could you use to determine the profit for any particular month? What is the anticipated profit for February? (Assume that there are no other expenses other than those mentioned above.) 8) What is the “formula” that you could use to determine the total production cost for ALASKA for the year? 9) Prepare a graph which shows ALASKA’s monthly production costs. Show $(cost) on the Y axis and PRODUCTION on the x axis. The graph should separately show: variable costs, fixed cost and total cost. Include points for BOTH January (actual) and February (budgeted). You may do this graph BY HAND and it need NOT be “to scale”.

1. Activity Based Costing

Duncan Company recently introduced a markers to complement their other product, pencils. Accountants accumulate all overhead in a single cost pool and allocate it based on machine-hours. With the recent addition of an expanded computer system, Duncan decided to begin implementing ABC. A study reveals much overhead cost related to machine setups and batch changes. They select the number of setups and the number of batch changes as the activity driers for the two new cost pools. They will continue to use machine-hours as the base for allocating all remaining overhead. Accountants provide the following information about Duncan Company’s most recent year of operations:

                                                                Pencils                      Markers                              Total

Units produced                                           5,000 1,000                            6,000

Direct material cost per unit               $            5 $      3                  

Direct labor cost                                    200,000 $300,000                     $500,000

Machine hours                                           4,000 6,000                          10,000

Machine setups                                               30 50                                 80

Batch changes                                               300 700                            1,000

Overhead:

            Machine setup-related                                                                                     $   200,000

            Batch-related                                                                                                        500,000

            Other                                                                                                               1,500,000

                                                                                                                                    $2,200,000

                                                                                                                                    ========   

Required:

Using the current costing system (Absorption costing), determine the total and unit cost for each product line.

Using the ABC costing system, determine the total and unit cost for each product line.

If you were the manager of the pencil department, which method would you prefer and why?

Product Costs using the Current Costing System

(Absorption Costing)

OHR =

                                 Pencils Markers Total

Direct Material       $                                              $ $

Direct Labor

Overhead                                         

(OHR x AV)

Total Cost            $ $ $

                                                                                      =======

÷Units produced                                          

Cost per unit

                             =======             =======            

Product Costs using the ABC Costing System

         OHR #1 = ____________ =                               

OHR #2 = ____________ =                               

OHR #3 = ____________ =                               

                                 Pencils              Markers               Total

Direct Material       $                                              $                                              $

Direct Labor

Overhead                                         

(OHR x AV)

Total Cost            $                           $                           $

÷Units produced =======

Cost per unit

       =======             =======

Factory Overhead Cost Variance Report

Feeling Better Medical Inc., a manufacturer of disposable medical supplies, prepared the following factory overhead cost budget for the Assembly Department for October of the current year. The company expected to operate the department at 100% of normal capacity of 7,200 hours.

During October, the department operated at 7,600 standard hours, and the factory overhead costs incurred were indirect factory wages, $24,560; power and light, $13,580; indirect materials, $11,800; supervisory salaries, $14,900; depreciation of plant and equipment, $38,230; and insurance and property taxes, $11,670.

Required:

Prepare a factory overhead cost variance report for October. To be useful for cost control, the budgeted amounts should be based on 7,600 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your per unit computations to the nearest cent, if required. If an amount box does not require an entry, leave it blank.