Maglie Company manufactures two video game consoles: handheld and home. The handheld consoles are smaller and less expensive than the home consoles. The company only recently began producing the home model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing.

Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was $1,222,000 based on production of 340,000 handheld consoles and 89,000 home consoles. Direct labor and direct materials costs were as follows.

Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows.

Required:

a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product?

b. How much overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product?

Hiram’s Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified three major activities and then completed the first-stage allocations of costs to the activity cost pools. The results appear below. Activity Cost Pool Activity Measure Total Cost Total Activity Serving a party of diners Number of parties served $ 12,960 5,400 parties Serving a diner Number of diners served $ 101,600 12,700 diners Serving drinks Number of drinks ordered $ 26,520 10,200 drinks The above costs include all of the costs of the restaurant except for organization-sustaining costs such as rent, property taxes, and top-management salaries. Some costs, such as the cost of cleaning the linens that cover the restaurant's tables, vary with the number of parties served. Other costs, such as washing plates and glasses, depend on the number of diners served or the number of drinks served. Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant. She knew that the total cost for the month (including organization-sustaining costs) was $180,000 and that 12,000 diners had been served. Therefore, the average cost per diner was $15.

Required: 1&2. According to the activity-based costing system, what is the total cost and average cost per diner for serving each of the following parties of diners?

Manufacturing Income Statement, Statement of Cost of Goods Manufactured

Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December:

On
CompanyOff
Company

Materials inventory, December 1$75,080 $96,850

Materials inventory, December 31(a) 109,440

Materials purchased190,700 (a)

Cost of direct materials used in production201,210 (b)

Direct labor283,050 217,910

Factory overhead87,840 108,470

Total manufacturing costs incurred in December(b) 626,620

Total manufacturing costs716,250 716,250

Work in process inventory, December 1144,150 233,410

Work in process inventory, December 31121,630 (c)

Cost of goods manufactured(c) 620,810

Finished goods inventory, December 1126,890 108,470

Finished goods inventory, December 31132,890 (d)

Sales1,106,680 968,500

Cost of goods sold(d) 626,620

Gross profit(e) (e)

Operating expenses144,150 (f)

Net income(f) 215,010

Required:

1. Determine the amounts of the missing items, identifying them by letter. Enter all amounts as positive numbers.

LetterOn CompanyOff Company

a.$$

b.$$

c.$$

d.$$

e.$$

f.$$

2. Prepare On Company's statement of cost of goods manufactured for December.

On Company

Statement of Cost of Goods Manufactured

For the Month Ended December 31

$

Direct materials:

$

$

$

Total manufacturing costs incurred during December

Total manufacturing costs$

$

3. Prepare On Company's income statement for December.

On Company

Income Statement

For the Month Ended December 31

$

Cost of goods sold:

$

$

$

$

wardsworth, inc., manufactures and sells two products: product I9 and product Z9. data concerning the expected production of each product and the expected total direct labor hours (DLHs) required to produce that output appear below: expected production direct labor hours per unit total direct labor hours

product I9 700 6.0 4,200

products Z9 900 8.0 7,200

total direct labor hours 11,400

the direct labor rate is $26.00 per DLH. the direct materials cost per unit for each product is given below:

direct materials cost per unit

product I9 $226.10

product Z9 $151.20 the company is considering adopting an activity based costing system with the following activity cost pools, activity measures, and expected activity: expected activity

activity cost pools activity measures estimated overhead cost product I9 product Z9 total

labor related DLHS $463,980 4,200 7,200 11,400

machine setups setups 9,814 300 400 700

order size MHs 105,792 4,400 4,300 8,700

$579,586

the unit product cost of product Z9 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor hours is closet to: and

the unit product cost of product I9 under activity based costing is closet to:and

the unit product cost of product Z9 under activity based costing is closet to:   

Case 4

Natha Corporation manufacturers two types of travel mugs: Simple, and Sophisticated. The company budgets to produce 20,000 units of the Simple mugs and 10,000 units of the Sophisticated mugs. Manufacturing takes place in two production departments: Machining and Assembly. The Simple mugs are produced in batches of 200 units; however, due to the more intricate detail included on the Sophisticated mugs, they are produced in batches of 50 units.

The company’s Controller has asked you to compare the plantwide, departmental, and activity- based cost allocation methods. To assist in your analysis, the Controller has provided you with the budgeted cost information for the 2020 fiscal year.

Required:

1. Assume that the corporation is using a single plantwide overhead rate based on machine hours.
   1. Calculate the manufacturing overhead rate.
   2. Calculate the total manufacturing cost for each product line.
   3. Calculate the total manufacturing cost per unit for each product line.

For each job, complete the job cost worksheet with the following information:

Job P

Our customer ordered 38 windows for us to install. The following is the information and documentation related to the direct materials and direct labor costs for the job:

Material requisition #1006 for $6,500 of direct materials

Labor sheet #2795 for 1,350 direct labor hours

Material requisition #1008 for $7,500 of direct materials

Labor sheet #2802 for 520 direct labor hours

Job Q

Our customer ordered 23 windows for us to install. The following is the information and documentation related to the direct materials and direct labor costs for the job:

Materials requisition #999 for $3,500 of direct materials

Labor sheet #2681 for 485 direct labor hours

Materials requisition #1007 for $4,500 of direct materials

Labor sheet #2796 for 249 direct labor hours

Manufacturing overhead is applied based on direct labor hours. You will need to calculate the predetermined overhead rate based on the estimates provided on the cost flow diagram.

For both jobs, find the following costs:

Total direct materials

Total direct labor

Total manufacturing overhead applied

Total job cost

Average unit cost

For each job, what should the price be to generate a 60% markup on cost?

For the Cost Flow Diagram: Complete the cost flows through the diagram for both jobs. Create the journal entries for each of the cost flows from both jobs all the way through the sale.

Is the remaining amount of Manufacturing Overhead underapplied or overapplied? Create the entry to close Manufacturing Overhead.

Contribution Margin Analysis

Mathews Company manufactures only one product. For the year ended December 31, the contribution margin increased by $10,864 from the planned level of $464,436. The president of Mathews Company has expressed some concern about this increase and has requested a follow-up report.

The following data have been gathered from the accounting records for the year ended December 31:

Required:

1. Prepare a contribution margin analysis report for the year ended December 31.

Alternative Inventory Methods

Frate Company was formed on December 1, 2018, and uses the periodic inventory system. The following information is available from Frate's inventory records for Product Ply:

A physical inventory on March 31, 2019, shows 8,800 units on hand.

Required:

Prepare schedules to compute the ending inventory at March 31, 2019, under each of the following inventory methods.

1. FIFO

2. LIFO

3. Weighted average

Mathews Company manufactures only one product. For the year ended December 31, the contribution margin increased by $41,616 from the planned level of $764,784. The president of Mathews Company has expressed some concern about this increase and has requested a follow-up report.

The following data have been gathered from the accounting records for the year ended December 31:

Required:

1. Prepare a contribution margin analysis report for the year ended December 31.

Please explain why its correct

17. Since the marginal product
quantity of output divided by the change in the quantity of labor, it stands to reason that:

a. a firm would never operate in the range where marginal product is negative.
b. a firm would never operate in the range where marginal product is decreasing.

c. marginal product will continually increase as the firm produces more.
d. there is no predictable relationship between marginal revenue and marginal cost.

Answer: _____

18. Adding more fixed inputs to the production process shifts the total product curve _______ and the marginal product curve _______.

measured on the horizontal axis
measured on the horizontal axis

of labor equals the change in the

a. upward; upward
      b. upward; downward
      c. downward; upward
      d. downward; downward

Answer: _____

19. The total product curve for blueberries slopes _______ reflecting that as more workers are employed more blueberries are produced, and becomes ______ because the marginal product of labor declines as more and more workers are employed.

      a. upward; flatter
      b. upward; steeper
      c. downward; flatter
      d. downward; steeper

Answer: _____

20. Which of the following
FALSE?

      a. The marginal cost
      cost curve.
      b. The marginal cost
      marginal returns.

statements about the marginal cost curve is

curve is equal to the slope of the total

curve slopes upward because of diminishing

c. Marginal cost is equal to the change in total cost generated by producing one more unit of output.
d. Marginal cost depends upon the level of fixed costs.

Answer: _____