Perpetual Inventory Using LIFO

Beginning inventory, purchases, and sales data for portable game players are as follows:

The business maintains a perpetual inventory system, costing by the last-in, first-out method.

Determine the cost of merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 4.

Under LIFO, if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit Cost column.

Mastery Problem: Process Cost Systems

Grainy Goodness Company

Grainy Goodness Company manufactures granola cereal by a series of three processes, beginning materials such as oats, sweeteners, and nuts being introduced in the Mixing Department. From the Mixing Department, the materials pass through the Baking and Packaging departments, emerging as boxed granola cereal ready for shipment to retail outlets. Direct materials are added at the beginning of each process, and conversion costs are incurred evenly throughout production in each department.

During March, the President and sole stockholder, Jonathan Groat, reviewed the Cost of Production Report for the Mixing Department. He is concerned that the Mixing Department may not be operating efficiently, and asks for your help.

Cost of Production

Jonathan has noticed that his production manager has omitted some of the data on the Cost of Production. Determine the missing information. If there is no amount or an amount is zero, enter "0". Round your per-unit computations to the nearest cent, if required.

Grainy Goodness Company

Cost of Production Report-Mixing Department

For the Month Ended March 31

Unit Information

Units charged to production:

Inventory in process, March 12,000

Received from materials storeroom38,000

Total units accounted for by the Mixing Department40,000

Units to be assigned costs:

Equivalent Units

Whole
UnitsDirect
Materials
Conversion

Inventory in process, March 1 (40% completed)2,000

Started and completed in March35,00035,00035,000

Transferred to Baking Department in March37,000

Inventory in process, March 31 (90% completed)3,000

Total units to be assigned costs40,000

Cost Information

Cost per equivalent unit:

Direct
Materials
Conversion

Total costs for March in Mixing Department$40,660$36,955

Total equivalent units÷÷

Cost per equivalent unit$$

Costs assigned to production:

Direct
Materials
Conversion
Total

Inventory in process, March 1$2,200$600$2,800

Costs incurred in March77,615

Total costs accounted for by the Mixing Department$80,415

Cost allocated to completed and partially completed units:

Inventory in process, March 1-balance$2,800

To complete inventory in process, March 11,1401,140

Cost of completed March 1 work in process$3,940

Started and completed in March37,45033,25070,700

Transferred to Baking Department in March$

Inventory in process, March 313,2102,565

Total costs assigned by the Mixing Department$

February Cost Analysis

Determine the cost per unit of direct materials and for conversion for the month of February using the completed data on the Cost of Production. Round your per-unit computations to the nearest cent, if required.

Cost Analysis for February - Mixing Department

AmountEquivalent UnitsCost per Unit

Direct Materials in inventory in process, March 1$$

Conversion costs in inventory in process, March 1

Total cost per unit$

March Cost Analysis

Determine the cost per unit of direct materials and for conversion for the month of March using the completed data on the Cost of Production. Round your per-unit computations to the nearest cent, if required.

Cost Analysis for March- Mixing Department

AmountEquivalent UnitsCost per Unit

Costs for March: Direct Materials$$

Costs for March: Conversion

Total cost per unit$

Mixing Dept. Evaluation

After reviewing your work on the February Cost Analysis and March Cost Analysis, assist Jonathan Groat in evaluating the Mixing Department’s performance by answering the following questions:

In March, was the Mixing Department’s total cost per unit higher or lower than in February?

For which component was the cost per unit for March higher than in February?

What is most probably your recommendation to Jonathan Groat given your computations?

Journal

On March 31, using the data provided on the Cost of Production, journalize the entry to move the appropriate amount of cost from the Mixing Department to the Baking Department. If an amount box does not require an entry, leave it blank.

Mar. 31

The following data pertains to Efficient Market Investment software packages in the inventory of the Investment Software division of Efficient Market Investment Outlets:  

Answer each of the questions:

1. 1(a). Determine the cost of the inventory on December 31 and the cost of goods sold for the year ending on that date under the FIFO method.

2. 1(b). Determine the cost of the inventory on December 31 and the cost of goods sold for the year ending on that date under the LIFO method.

3. 1(c). Determine the unit cost, cost of the inventory on December 31 and the cost of goods sold for the year ending on that date under the average cost method.

4. 2. Assume that the replacement cost of each unit on December 31 is $107.25. Using the lower of cost or market rule, find the inventory amount under each of the methods given in 1.

Analyze:
What is the difference between the cost and market value of the inventory using the LIFO method?

Complete this question by entering your answers in the tabs below.

• Req 1A
• Req 1B
• Req 1C
• Req 2
• Analyze

Determine the cost of the inventory on December 31 and the cost of goods sold for the year ending on that date under the FIFO method.

Utica Manufacturing (UM) was recently acquired by MegaMachines, Inc. (MM), and organized as a separate division within the company. Most manufacturing plants at MM use an ABC system, but UM has always used a traditional product costing system. Bob Miller, the plant controller at UM, has decided to experiment with ABC and has asked you to help develop a simple ABC system that would help him decide if it was useful. The controller’s staff has identified costs for the first month in the four overhead cost pools along with appropriate cost drivers for each pool.

The company manufactures two basic products with model numbers 308 and 510. The following are data for production for the first month as part of MM.

Required:

a. The current cost accounting system charges overhead to products based on machine-hours. What unit product costs will be reported for the two products if the current cost system continues to be used?
b. A consulting firm has recommended using an activity-based costing system, with the activities based on the cost pools identified by the cost accountant. What are the cost driver rates for the four cost pools identified by the cost accountant?
c. What unit product costs will be reported for the two products if the ABC system suggested by the cost accountant’s classification of cost pools is used?
d. If management should decide to implement an activity-based costing system, what benefits should it expect?

Helix Corporation uses the weighted-average method in its process costing system. It produces prefabricated flooring in a series of steps carried out in production departments. All of the material that is used in the first production department is added at the beginning of processing in that department. Data for May for the first production department follow: Percent Complete Units Materials Conversion Work in process inventory, May 1 66,000 100 % 50 % Work in process inventory, May 31 46,000 100 % 30 % Materials cost in work in process inventory, May 1 $ 53,900 Conversion cost in work in process inventory, May 1 $ 15,400 Units started into production 248,400 Units transferred to the next production department 268,400 Materials cost added during May $ 103,300 Conversion cost added during May $ 221,648 Required:

1. Calculate the first production department's equivalent units of production for materials and conversion for May.

2. Compute the first production department's cost per equivalent unit for materials and conversion for May.

3. Compute the first production department's cost of ending work in process inventory for materials, conversion, and in total for May. 4. Compute the first production department's cost of the units transferred to the next production department for materials, conversion, and in total for May.

Compute the first production department's cost per equivalent unit for materials and conversion for May. (Round your answers to 2 decimal places.)

Compute the first production department's cost of ending work in process inventory for materials, conversion, and in total for May. (Round your intermediate calculations to 2 decimal places.)

Compute the first production department's cost of the units transferred to the next production department for materials, conversion, and in total for May. (Round your intermediate calculations to 2 decimal places.)

PA5-4 Predicting Cost Behavior, Calculating Contribution Margin and Contribution Margin Ratio, Calculating Profit [LO 5-1, 5-5]

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 $600. (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 $600. (Round your answers to the nearest whole dollar amount.)

Question 3

Barbie Sdn Bhd (BSB) manufactures and sells a single product which is a barbie doll. Following information are provided below:

RM

Manufacturing costs:

Direct materials cost per unit 55

Direct labor cost per unit 45

Variable overhead cost per unit 36

Fixed overhead cost in total 51,000

Selling expenses:

Variable selling expenses per unit 14

Fixed selling expenses in total 18,000

The selling price for each unit of barbie doll is RM220.00.

Required:

a) Differentiate between variable cost and fixed cost. Calculate the total variable cost per unit and total fixed costs for the year.

b) Calculate the contribution margin per unit and contribution ratio.

c) Calculate the break-even in unit and in Ringgit Malaysia (RM).

d) Assume that BSB managed to sold 3,650 units, calculate the profit of the company for the current year.

e) What is the total sales that must be generated for the company to earn a profit of RM230,000?

f) Compute the margin of safety in unit and in RM.

g) Compute a new break-even point (unit and RM) if BSB decided to increase the selling price by 20% and an increase in additional advertising cost of RM45,000. Explain what is the changes of your new break-even point (unit and RM) with previous break-even point (unit and RM).

Two suppliers have been contracted by a government agency to train agency employees learning to use a new computer system. The marginal cost curve of firm 1 is MC1=160+2Q1, while the marginal cost curve for Firm 2 is MC2=100+Q2, where Q is hours of training per week. Originally, each firm provides 60 hours of training services each week.

What is the total cost to firm 1 of providing 60 hours of training each week?

What is the total cost to firm 2 of providing 60 hours of training each week?

An economically-literate manager suggests it would be better to state a price that the government is willing to pay for an hour of training, and let each firm provide the number of hours they are willing to at this price.

What price should the government set to cost-effectively distribute the number of hours between the two firms while maintaining the total training provided at 120 hours per week?

How many hours of training will firm 1 provide at this price?

What is firm 1’s total cost?

How many hours will firm 2 provide at this price?

What is firm 2’s total cost?

How large is the cost savings resulting from the price rationed system relative to the original allocation of 60 training hours for each firm?

Loretta Scholten bought a home for $210,000 with a down payment of $30,000. Her rate of interest is 6% for 35 years. Calculate the total cost of interest for Loretta Scholten. (Round your answer to the nearest cent.)