The Foundational 15 [LO2-1, LO2-2, LO2-3, LO2-4]

[The following information applies to the questions displayed below.]

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments—Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):

Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month.

Required:

For questions 1-8, assume that Sweeten Company uses a plantwide predetermined overhead rate with machine-hours as the allocation base. For questions 9-15, assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments.

1. What was the company’s plantwide predetermined overhead rate? (Round your answer to 2 decimal places.)

2. How much manufacturing overhead was applied to Job P and how much was applied to Job Q? (Do not round intermediate calculations.)

3. What was the total manufacturing cost assigned to Job P? (Do not round intermediate calculations.)

4. If Job P included 20 units, what was its unit product cost? (Do not round intermediate calculations. Round your final answer to nearest whole dollar.)

5. What was the total manufacturing cost assigned to Job Q? (Do not round intermediate calculations.)

6. If Job Q included 30 units, what was its unit product cost? (Do not round intermediate calculations. Round your final answer to nearest whole dollar.)

7. Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis assuming 20 units were produced for Job P and 30 units were produced for Job Q? (Do not round intermediate calculations. Round your final answers to nearest whole dollar.)

8. What was Sweeten Company’s cost of goods sold for March? (Do not round intermediate calculations.)

Suppose that you produce and sell children's tables in a local market. Past experience enables you to estimate your demand and marginal cost schedules. This information is presented in the accompanying table.

Complete the following table by computing the total cost of producing each quantity. Then, compute the total revenue earned at each price level and the marginal revenue earned at each price level.

Assuming you are currently charging $25 per table set, what should you do if you want to increase profits?

Increase the price

Leave the price unchanged

Decrease the price

Given your demand and cost estimates, you should charge a price of    if you want to maximize your weekly profit. At this price, your output will be

tables, and you will earn a weekly profit of

.

M&M buys surgical supplies from manufacturers and resells these supplies to hospitals. In the face of declining profits, M&M decided to implement an activity-based costing system to improve its understanding of costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as indicated:

a. Compute the activity rate for each cost pool

b. Compute the total activity cost that would be assigned to City General and County General respectively

Required information

[The following information applies to the questions displayed below.]

Professor John Morton has just been appointed chairperson of the Finance Department at Westland University. In reviewing the department’s cost records, Professor Morton has found the following total cost associated with Finance 101 over the last five terms:

Professor Morton knows that there are some variable costs, such as amounts paid to graduate assistants, associated with the course. He would like to have the variable and fixed costs separated for planning purposes.

3-a. Assume that because of the small number of sections offered during the Winter Term this year, Professor Morton will have to offer eight sections of Finance 101 during the Fall Term. Compute the expected total cost for Finance 101.

3-b. Can you see any problem with using the cost formula from (2) above to derive this total cost figure?

Snowden Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows:

Expected activity for each product follows:

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

• Required A
• Required B

Determine the overhead cost allocated to each product. (Round intermediate calculations to 2 decimal places.)

Latrisa International Inc. manufactures outdoor clothing apparel. They have developed a forecast for their sandal Line. They have hired you to help them develop their production schedule for the next six months. Please use the information below to develop the production schedule and answer the questions below.

Full time employee                  10 employees

Hourly pay rate (8hrs)              $ 8.00

Labor-hours per unit                 4 hours per unit

Subcontracting cost                  $ 20.00

Inventory carrying cost             $ 7.00

Production per hour               ________________

Production rate per day          ________________

Total inventory carrying cost ________________

Total regular production cost ________________

Total subcontracting cost       ________________

Total cost of plan                    ___________________

Refer to the cubic total cost (TC) function given in equation below Y_i=β_1+β_2 X_i+β_3 X_i^2+β_4 X_i^3 ……….

(1) (Y_i ) ̂=141.7667+63.4776X_i-12.9615X_i^2+0.9396X_i^3………..(2) se= (6.3753) (4.7786) (0.9857) (0.0591) R^2=0.9983 Y X 193 1 226 2 240 3 244 4 257 5 260 6 274 7 297 8 350 9 420 10 The marginal cost (MC) is the change in the TC for a unit change in output; that is, it is the rate of change of the TC with respect to output. (Technically, it is the derivative of the TC with respect to X, the output). Derive this function from regression (1) and (2) The average variable cost (AVC) is the total (TVC) divided by total output. Derive the AVC function from regression in (1) and (2) The average cost (AC) of production is the TC of production divided by total output. For the function given in regression (1) and (2), derive the AC function. Plot the various cost curves previously derived and confirm that they resemble the stylized textbook cost curves.

The total capital investment for a conventional chemical plant is $1,500,000, and the

plant produces 3 million kg of product annually. The selling price of the product is

$0.82/kg. Working capital amounts to 15 percent of the total capital investment. The

investment is from company funds, and no interest is charged. Raw-materials costs

for the product are $0.09/kg, labor $0.08/kg, utilities $0.05/kg, and packaging

$0.008/kg. Distribution costs are 5 percent of the total product cost. Estimate the

following:

(a) Manufacturing cost per kilogram of product.

(b) Total product cost per year.

(c) Profit per kilogram of product before taxes.

(d) Profit per kilogram of product after taxes (use current rate)