Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:
| Molding | Fabrication | Total | |||||
| Machine-hours | 22,000 | 32,000 | 54,000 | ||||
| Fixed manufacturing overhead costs | $ | 740,000 | $ | 220,000 | $ | 960,000 | |
| Variable manufacturing overhead cost per machine-hour | $ | 5.50 | $ | 5.50 | |||
During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:
| Job D-70: | Molding | Fabrication | Total | |||
| Direct materials cost | $ | 374,000 | $ | 326,000 | $ | 700,000 |
| Direct labor cost | $ | 240,000 | $ | 160,000 | $ | 400,000 |
| Machine-hours | 16,000 | 6,000 | 22,000 | |||
| Job C-200: | Molding | Fabrication | Total | |||
| Direct materials cost | $ | 290,000 | $ | 270,000 | $ | 560,000 |
| Direct labor cost | $ | 150,000 | $ | 300,000 | $ | 450,000 |
| Machine-hours | 6,000 | 26,000 | 32,000 | |||
Delph had no underapplied or overapplied manufacturing overhead during the year.
2. Assume Delph uses departmental predetermined overhead rates based on machine-hours.
a. Compute the departmental predetermined overhead rates.
b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.
c. If Delph establishes bid prices that are 140% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200?
d. What is Delph’s cost of goods sold for the year?
In: Accounting
Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:
| Molding | Fabrication | Total | ||||
| Machine-hours | 26,000 | 36,000 | 62,000 | ||||
| Fixed manufacturing overhead costs | $ | 750,000 | $ | 290,000 | $ | 1,040,000 | |
| Variable manufacturing overhead cost per machine-hour | $ | 5.80 | $ | 5.80 | |||
During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:
| Job D-70: | Molding | Fabrication | Total | |||
| Direct materials cost | $ | 373,000 | $ | 326,000 | $ | 699,000 |
| Direct labor cost | $ | 220,000 | $ | 160,000 | $ | 380,000 |
| Machine-hours | 16,000 | 10,000 | 26,000 | |||
| Job C-200: | Molding | Fabrication | Total | |||
| Direct materials cost | $ | 220,000 | $ | 250,000 | $ | 470,000 |
| Direct labor cost | $ | 150,000 | $ | 220,000 | $ | 370,000 |
| Machine-hours | 10,000 | 26,000 | 36,000 | |||
Delph had no underapplied or overapplied manufacturing overhead during the year.
2. Assume Delph uses departmental predetermined overhead rates based on machine-hours.
a. Compute the departmental predetermined overhead rates.
b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.
c. If Delph establishes bid prices that are 140% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200?
d. What is Delph’s cost of goods sold for the year?
In: Accounting
Problem 9-62 and 9-63 (Algo)
PART ONE
Cain Components manufactures and distributes various plumbing products used in homes and other buildings. Over time, the production staff has noticed that products they considered easy to make were difficult to sell at margins considered reasonable, while products that seemed to take a lot of staff time were selling well despite recent price increases. A summer intern has suggested that the cost system might be providing misleading information.
The controller decided that a good summer project for the intern would be to develop, in one self-contained area of the plant, an alternative cost system with which to compare the current system. The intern identified the following cost pools and, after discussion with some plant personnel, appropriate cost drivers for each pool. There were:
| Cost Pools | Costs | Activity Drivers | |
| Receiving | $ | 600,000 | Direct material cost |
| Manufacturing | 5,500,000 | Machine-hours | |
| Machine setup | 900,000 | Production runs | |
| Shipping | 1,000,000 | Units shipped | |
In this particular area, Cain produces two of its many products: Standard and Deluxe. The following are data for production for the latest full year of operations.
| Products | ||||||
| Standard | Deluxe | |||||
| Total direct material costs | $ | 150,000 | $ | 250,000 | ||
| Total direct labor costs | $ | 650,000 | $ | 440,000 | ||
| Total machine-hours | 112,000 | 138,000 | ||||
| Total number of setups | 170 | 30 | ||||
| Total pounds of material | 8,500 | 18,500 | ||||
| Total direct labor-hours | 6,950 | 4,700 | ||||
| Number of units produced and shipped | 19,000 | 6,000 | ||||
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? (Do not round intermediate calculations and round "Unit cost" answers to 2 decimal places.)
| Standard | Deluxe | |
| Direct Costs | $ | $ |
| Overhead | $ | $ |
| Total Costs | $ | $ |
| Number of Units | ||
| Unit Cost | $ | $ |
b. The intern suggests an ABC system using the cost drivers identified above. What unit product costs will be reported for the two products if the ABC system is used? (Do not round intermediate calculations and round "Unit cost" answers to 2 decimal places.)
| Standard | Deluxe | |
| Direct Costs | $ | $ |
| Overhead: | ||
| Receiving | $ | $ |
| Manufacturing | $ | $ |
| Machine Setup | $ | $ |
| Shipping | $ | $ |
| Total Costs | $ | $ |
| Number of Units | ||
| Unit Cost | $ | $ |
PART TWO
The intern decides to look more closely at the manufacturing activity and determines that it can be broken down into two activities: production and engineering. Production covers the costs of ongoing manufacturing while engineering includes those activities dealing with engineering changes, design modifications, and so on.
The costs attributed to production are $10,526,400 and the costs attributed to engineering are $10,092,000. After discussion with plant engineers, the intern decides that the best cost driver for engineering is setups, because most of the work arises from changes in the way the product is run.
c. Compute the totals of the cost driver rates shown below. (Round intermediate calculations and "Manufacturing" answer to 2 decimal places.)
| Receiving | . | % of material dollars |
| Production | . | Per Machine-Hour |
| Engineering | . | Per Setup |
| Machine Setup | Per Setup | |
| Shipping | Per Unit |
d. What unit product costs will be reported for the two products if the revised ABC system is used? (Round "Unit cost" answers to 2 decimal places.)
| Standard | Deluxe | |
| Direct Costs | $ | $ |
| Overhead: | ||
| Receiving | $ | $ |
| Production | $ | $ |
| Engineering | $ | $ |
| Machine Setup | $ | $ |
| Shipping | $ | $ |
| Total Costs | $ | $ |
| Number of Units | $ | $ |
| Unit Cost |
In: Accounting
Hugle Corporation's activity-based costing system has three activity cost pools-Machining, Setting Up, and Other. The company's overhead costs have already been allocated to these cost pools as follows:
| Machining | $ | 15, 200 |
| Setting up | $ | 44,800 |
| Other | $ | 16,000 |
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. The following table shows the machine-hours and number of batches associated with each of the company's two products:
| MHs Batches | ||
| Product E8 | 2,000 800 | |
| Product V8 | 8,000 200 | |
| Total | 10,000 1,000 |
Additional data concerning the company's products appears below:
| Product E8 Product V8 | ||||
| Sales (total) | $ | 220,700 | $ | 165,500 |
| Direct materials (total) | $ | 78,600 | $ | 83,100 |
| Direct labor (total) | $ | 89,600 | $ | 58,000 |
Required:
a. Calculate activity rates for each activity cost pool using
activity-based costing.(5 points)
b. Determine the amount of overhead cost that would be assigned to each product using activity-based costing. (8 points)
c. Determine the product margins for each product using activity-based costing. (7 points)
In: Accounting
The Wright Company recorded the following inventory information during the month of October:
|
UNITS |
UNIT COST |
TOTAL COST |
UNITS ON HAND |
|
|
Balance on October 1 |
2,000 |
$1.00 |
$2,000 |
2,000 |
|
Purchased on October 8 |
1,200 |
$3.00 |
$3,600 |
3,200 |
|
Sold on October 20 |
1,500 |
1,700 |
||
|
Purchased on October 22 |
2,000 |
$4.00 |
$8,000 |
3,700 |
|
Sold on October 28 |
2,200 |
1,500 |
||
|
Purchase on October 29 |
1,000 |
$5.00 |
$5,000 |
2,500 |
Part B: Using the partially computed tables on the next three pages, compute the cost of goods sold and the cost of the 2,500 units in ending inventory under each of the assumptions given above.
LIFO – Perpetual
|
Date |
Purchases |
Sales |
Inventory on Hand |
||||||
|
Units |
Cost |
Total |
Units |
Cost |
Total |
Units |
Cost |
Total |
|
|
10/1 |
2,000 |
$1.00 |
$2,000 |
||||||
|
10/8 Purchased 1,200 units |
1,200 |
$3.00 |
$3,600 |
2,000 1,200 3,200 |
$1.00 $3.00 |
$2,000 $3,600 $5,600 |
|||
|
10/20 Sold 1,500 units |
1,200 300 1,500 |
$3.00 $1.00 |
$3,600 $ 300 $3,900 |
1,700 |
$1.00 |
$1,700 |
|||
|
10/22 Purchased 2,000 units |
|||||||||
|
10/28 Sold 2,200 units |
|||||||||
|
10/29 Purchased 1,000 units |
|||||||||
|
TOTALS |
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In: Accounting
THE MARKET FOR APPLE PIES IN THE CITY ECTENCIA IS COMPETITIVE AND HAS THE FOLLOWING DEMAND SCHEDULE.
|
DEMAND SCHEDULE PRICE (DOLLARS) |
DEMAND SCHEDULE QUANITY DEMANDED (PIES) |
| 1 | 1200 |
| 2 | 1100 |
| 3 | 1000 |
| 4 | 900 |
| 5 | 800 |
| 6 | 700 |
| 7 | 600 |
| 8 | 500 |
| 9 | 400 |
| 10 | 300 |
| 11 | 200 |
| 12 | 100 |
| 13 | 0 |
EACH PRODUCER IN THE MARKET HAS A FIXED COST OF $9 AND THE FOLLOWING MARGINAL COST.
| QUANITY (PIES) | MARGINAL COST (DOLLARS) |
| 1 | 2 |
| 2 | 4 |
| 3 | 6 |
| 4 | 8 |
| 5 | 10 |
| 6 | 12 |
COMPLETE THE FOLLOWING TABLE BY COMPUTING THE TOTAL COST AND AVERAGE TOTAL COST FOR EACH QUANITY PRODUCED.
| QUANITY (PIES) | TOTAL COST (DOLLARS) | AVERAGE TOTAL COST (DOLLARS) |
| 1 | ??? | ??? |
| 2 | ??? | ??? |
| 3 | ??? | ??? |
| 4 | ??? | ??? |
| 5 | ??? | ??? |
| 6 | ??? | ??? |
THE PRICE OF THE PIE IS NOW $11
AT A PRICE OF $11, ___??? PIES ARE SOLD IN THE MARKET. EACH PRODUCER MAKES___ ???PIES. SO THERE ARE ____?? PRODUCERS IN THIS MARKET, EACH MAKING A PROFIT OF $____???
TRUE OR FALSE: THE MARKET IS IN LONG RUN EQUILIBRIUM
SUPPOSE IN THE LONG RUN THERE IS FREE ENTRY AND EXIT.
IN THE LONG RUN, EACH PRODUCER EARNS A PROFIT OF $_____???. THE MARKET PRICE IS $____???. AT THIS PRICE, ___??? PIES ARE SOLD IN THIS MARKET, AND EACH PRODUCER MAKES ___??? PIES, SO THERE ARE ____??? PRODUCERS OPERATING.
In: Economics
The market for apple pies in the city of Ectenia is competitive and has the following demand schedule:
Demand Schedule
|
Price |
Quantity Demanded |
|---|---|
|
(Dollars) |
(Pies) |
| 1 | 1,200 |
| 2 | 1,100 |
| 3 | 1,000 |
| 4 | 900 |
| 5 | 800 |
| 6 | 700 |
| 7 | 600 |
| 8 | 500 |
| 9 | 400 |
| 10 | 300 |
| 11 | 200 |
| 12 | 100 |
| 13 | 0 |
Each producer in the market has a fixed cost of $6 and the following marginal cost:
|
Quantity |
Marginal Cost |
|---|---|
|
(Pies) |
(Dollars) |
| 1 | 1 |
| 2 | 3 |
| 3 | 8 |
| 4 | 10 |
| 5 | 12 |
| 6 | 14 |
Complete the following table by computing the total cost and average total cost for each quantity produced.
|
Quantity |
Total Cost |
Average Total Cost |
|---|---|---|
|
(Pies) |
(Dollars) |
(Dollars) |
| 1 | ||
| 2 | ||
| 3 | ||
| 4 | ||
| 5 | ||
| 6 |
The price of a pie is now $11. At a price of $11, pies are sold in the market. Each producer makespies, so there areproducers in this market, each making a profit of. True or False: The market is in long-run equilibrium. True False Suppose that in the long run there is free entry and exit. In the long run, each producer earns a profit of. The market price is. At this price, pies are sold in this market, and each producer makespies, so there areproducers operating. |
In: Economics
A firm in a competitive market is a price taker (recall that this is true for every firm and every customer in a perfectly competitive market). For this example, the market equilibrium price is $6. The firm’s total cost (TC) function is made up of Fixed Cost (FC, which does not vary with quantity) and Variable Cost (VC, which does vary with quantity). The TC function for this firm is: TC = 10 + 2Q – 0.2Q2 + 0.01Q3 a) Find the equation for the marginal cost curve (MC). Recall that MC = TC/Q. b) Find the equation for the Average Variable Cost (AVC). Recall that AVC = VC/Q. c) Find the equation for the Average Total Cost (ATC). Recall that ATC = TC/Q. d) Find the fixed cost. Recall that Total Cost = Fixed Cost + Variable Cost. e) Find the Q at which profit is maximized. Recall that this point is where Marginal Revenue ($6, the unit price of the good) is equal to Marginal Cost (for which you found the formula in part a). f) At the profit maximizing point, find the economic revenue (TR – TC at the profit maximizing Q). g) Find the shutdown price, where the Marginal Cost curve intersects the AVC curve (MC= AVC) and the AVC curve is at its lowest point (AVC/Q = 0).
In: Economics
Problem 2-19 Multiple Predetermined Overhead Rates; Applying Overhead [LO2-1, LO2-2, LO2-4]
High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company provided the following estimates:
| Department | |||||||
| Molding | Painting | ||||||
| Direct labor-hours | 34,500 | 52,600 | |||||
| Machine-hours | 80,000 | 38,000 | |||||
| Fixed manufacturing overhead cost | $ | 152,000 | $ | 473,400 | |||
| Variable manufacturing overhead per machine-hour | $ | 3.00 | - | ||||
| Variable manufacturing overhead per direct labor-hour | - | $ | 5.00 | ||||
Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:
| Department | |||||||
| Molding | Painting | ||||||
| Direct labor-hours | 89 | 127 | |||||
| Machine-hours | 310 | 73 | |||||
| Direct materials | $ | 948 | $ | 1,160 | |||
| Direct labor cost | $ | 740 | $ | 970 | |||
Required:
1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department.
2. Compute the total overhead cost applied to Job 205.
3-a. What would be the total manufacturing cost recorded for Job 205?
3-b. If the job contained 31 units, what would be the unit product cost?
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In: Accounting
Cost of Quality and Value-Added/Non-Value-Added Reports for a Service Company
Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are identified as follows:
a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added.
| Quality Control Activities | Activity Cost | Quality Cost Classification | Value-Added/ Non-Value-Added Classification |
|
| Billing error correction | $41,200 | External failure | Non-value-added | |
| Cable signal testing | 99,400 | Appraisal | Value-added | |
| Reinstalling service (installed incorrectly the first time) | 88,500 | External failure | Non-value-added | |
| Repairing satellite equipment | 49,700 | Internal failure | Non-value-added | |
| Repairing underground cable connections to the customer | 26,800 | External failure | Non-value-added | |
| Replacing old technology cable with higher quality cable | 149,100 | Prevention | Value-added | |
| Replacing old technology signal switches with higher quality switches | 170,400 | Prevention | Value-added | |
| Responding to customer home repair requests | 49,400 | External failure | Non-value-added | |
| Training employees | 35,500 | Prevention | Value-added | |
| Total activity cost | $710,000 | |||
Feedback
Correct
b. Prepare a cost of quality report. Assume that sales are $2,840,000. If required, round percentages to one decimal place.
| Three Rivers Inc. | |||
| Cost of Quality Report | |||
| Quality Cost Classification |
Quality Cost | Percent of Total Quality Cost |
Percent of Total Sales |
| Prevention | $ | % | % |
| Appraisal | % | % | |
| Internal failure | % | % | |
| External failure | % | % | |
| Total | $ | % | % |
Feedback
c. Prepare a value-added/non-value-added analysis.
| Three Rivers Inc. | ||
| Value-Added/Non-Value-Added Activity Analysis | ||
| Category | Amount | Percent |
| Value-added | $ | % |
| Non-value-added | % | |
| Total | $ | % |
In: Accounting