Cost of Production Report

The Cutting Department of Karachi Carpet Company provides the following data for January. Assume that all materials are added at the beginning of the process.

a. Prepare a cost of production report for the Cutting Department. If an amount is zero or a blank, enter in "0". For the cost per equivalent unit computations, round your answers to two decimal places.

b. Compute and evaluate the change in the costs per equivalent unit for direct materials and conversion from the previous month (December). If required, round your answers to two decimal places.

The controller for Tulsa Medical Supply Company has established the following activity cost pools and cost drivers.

An order for 5,000 boxes of medical-testing agent has the following production requirements.

Required:
1. Compute the total overhead that should be assigned to the medical-testing agent order.
2. What is the overhead cost per box of testing agent?
3. Suppose Tulsa Medical Supply Company were to use a single predetermined overhead rate based on machine hours. Compute the rate per hour.
4. Under the approach in requirement 3, how much overhead would be assigned to the medical-testing agent order?
a. In total.
b. Per box of testing agent.

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

• Req 1 and 2
• Req 3
• Req 4

Compute the total overhead that should be assigned to the medical-testing agent order. What is the overhead cost per box of testing agent? (Round "Overhead cost" to 2 decimal places.)

Suppose Tulsa Medical Supply Company were to use a single predetermined overhead rate based on machine hours. Compute the rate per hour. (Round your answer to 2 decimal places.)

Under the approach in requirement 3, how much overhead would be assigned to the medical-testing agent order?

a. In total.

b. Per box of testing agent. (Round your answer to 2 decimal places.)

Fitzgerald Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 80,000 units per month is as follows:

Direct Materials $26.30

Direct Labor $4.10

Variable Manufacturing Overhead $2.00

Fixed Manufacturing Overhead $11.00

Variable Selling and Administrative Expense $2.00

Fixed Selling and Administrative Expense $10.10

The normal selling price of the product is $55.90 per unit. Direct Labor is a variable Cost in this company. The company has excess capacity buy only enough to accept one of the special orders below.

Special Order #1

An order has been received from an overseas customer for 1,900 units to be delivered this month at a special discounted price. The order would have no effect on the company's normal sales and would not change the total amount of the company's fixed cost. The variable selling and administrative expense would be $0.95 less per unit on this order than on normal sales. The customer has offered to pay $51.50 per unit.

Special Order #2

An order has been received from an overseas customer for 2,300 units to be delivered this month at a special discounted price. This order would have no effect on the companys normal sales but would increase the total amount of the company's fixed cost by $1,500. The variable selling and administrative expense remain at the normal cost per unit. The customer has offered to pay $53.50 per unit.

Special Order #3

An order has been received from an overseas customer for 2,100 units to be delivered this month at a special discounted price. This order would have no effect on the companys normal sales but would increase the total amount of the company's fixed cost by $4,100. The variable selling and administrative expense would be $0.75 less per unit on this order than on normal sales. The customer has offered to pay $54.75 per unit.

Required: Create an analysis of each special order including the incremental revenue, incremental cost, total variable cost, total fixed cost, total incremental cost and the financial advantage or disadvantage of accepting the order. This analysis should help you decide which special order should be accepted ( put the scenarios side by side). Make sure to include Per Unit and Total Cost.

Cost of Production Report

The Cutting Department of Karachi Carpet Company provides the following data for January. Assume that all materials are added at the beginning of the process.

a. Prepare a cost of production report for the Cutting Department. If an amount is zero or a blank, enter in "0". For the cost per equivalent unit computations, round your answers to two decimal places.

b. Compute and evaluate the change in the costs per equivalent unit for direct materials and conversion from the previous month (December). If required, round your answers to two decimal places.

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: Cost Pools Costs Activity Drivers Incoming inspection $ 255,000 Direct material cost Production 1,650,000 Machine-hours Machine setup 720,000 Setups Shipping 495,000 Units shipped 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: Products 308 510 Total direct material costs $ 50,000 $ 35,000 Total direct labor costs $ 176,000 $ 206,000 Total machine-hours 52,000 98,000 Total number of setups 54 90 Total pounds of material 18,600 9,600 Total direct labor-hours 6,600 9,600 Number of units produced and shipped 35,000 20,000 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? (Round intermediate calculations and "Per unit cost" answers to 2 decimal places.) 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? (Round your answers to 2 decimal places.) 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? (Round intermediate calculations and final answers to 2 decimal places.) d. If management should decide to implement an activity-based costing system, what benefits should it expect? If management implemented an activity-based costing system it should be provided with a more thorough understanding of product costs. If management implemented an activity-based costing system it will increase the sales of the company.

Winder, Knotter, and Nale is a small law firm that has 10 partners and 10 support people. The firm employs a job-order costing system to accumulate costs chargeable to each client, and it is organized into two departments—the Research and Documents Department and the Litigation Department. The firm uses predetermined overhead rates to charge the costs of these departments to its clients. At the beginning of the current year, the firm’s management made the following estimates for the year:

The predetermined overhead rate in the Research and Documents Department is based on research-hours, and the rate in the Litigation Department is based on direct lawyer cost.

The costs charged to each client are made up of three elements: materials and supplies used, direct lawyer costs incurred, and an applied amount of overhead from each department in which work is performed on the case.

Case 618-3 was initiated on February 10 and completed on June 30. During this period, the following costs and time were recorded on the case:

Required:

1. Compute the predetermined overhead rate used during the year in the Research and Documents Department. Compute the rate used in the Litigation Department.

2. Compute the total overhead cost applied to Case 618-3.

3. What is the total cost charged to Case 618-3? Show computations by department and in total for the case.

4. At the end of the year, the firm’s records revealed the following actual cost and operating data for all cases handled during the year:

Determine the amount of underapplied or overapplied overhead cost in each department for the year.

Which of the following represents a firm’s demand curve for a resource?

​Average fixed cost curve

​Average total cost curve

​Average variable cost curve

​Marginal revenue product curve

​Marginal resource cost curve

In one model, draw out the following curves explaining their meaning and shape:

a. fixed

b. variable

c. average fixed cost

d. average variable cost

e. average total cost

f. marginal cost

An investor is reviewing two proposals, assuming similar risk profiles and a 14% required return, which one should the investor buy? Why?

Lee Vista:

Purchase Price: $464,000

Cash flows from operations:

Year 1 $48,000

Year 2 $49,440

Year 3 $50,923

Year 4 $52,451

Year 5 $54,025

Cash flow from sale on year 5 $560,000

Colony Park:

Purchase Price: $500,000

Cash flows from operations:

Year 1 $56,000

Year 2 $57,400

Year 3 $58,835

Year 4 $60,306

Year 5 $61,814

Cash flow from sale on year 5 $597,000