elow is selected information from Chipset's cost of production report:

The ending inventory of work-in-process is complete as to materials.

The cost of conversion in the ending inventory is:

Manning Manufacturing produces small microwaves.

Required:

Identify the following costs as PRODUCT COST or PERIOD COST. for product cost, indicate whether it is direct materials (DM), direct labor (DL), manufacturing overhead (MOH). For a period cost, indicate whether it is selling or administrative.

EXTRA CREDIT: Indicate whether the cost is variable (V) or fixed (F) with respect to behavior.

A. Commissions paid to salespeople
B. Straight-line depreciation on the factory building
C. Salary of the plant supervisor
D. Wages of the assembly-line workers
E. Machine lubricant used in production activities
F. Metal used in making the boats
G. Advertising placed in trade journals
H. Lease payments for the president's automobile
I. Property taxes paid on the factory facilities

J. Straight line depreciation on the office copy machine

K. Salary of the office janitor

L. Salary of the factory janitor

M. Cost of boxes used in shipping the boats to customers

USE OF AVERAGE COST METHOD

Capital cost ($) Annual operating cost ($) Lifetime (years) Salvage value ($) Annual electricity supplied (MWh) 300 000 27 200 25 40 000 400 1.1 Using the table above, calculate the lifecycle cost of the technology over an assessment period of 25 years at a real discount rate of 5% 1.2 Calculate the average unit cost of the power in present value terms (in cents/kWh) supplied by the technology over its lifetime at this real discount rate. 1.3 What is the corresponding Levelised Cost of Electricity (LCOE) (in cents/kWh)? Why is this value higher than that obtained in question 1.2

Cost of Production Report: Average Cost Method

Sunrise Coffee Company roasts and packs coffee beans. The process begins in the Roasting Department. From the Roasting Department, the coffee beans are transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at December 31:

Required:

Prepare a cost of production report, using the average cost method, and identify the missing amounts for Work in Process—Roasting Department. If required, round your cost per equivalent unit answer to the nearest cent.

Feedback

Explain the concept of cost of capital. How may cost of capital affect long-term financial decisions? Would a company prefer to have a high or low cost of capital? Why? What was the effect of cost of capital on long-term financial decisions for your company?

Cost of Production Report: Average Cost Method

Sunrise Coffee Company roasts and packs coffee beans. The process begins in the Roasting Department. From the Roasting Department, the coffee beans are transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at December 31:

Required:

Prepare a cost of production report, using the average cost method, and identify the missing amounts for Work in Process—Roasting Department. If required, round your cost per equivalent unit answer to two decimal places.

Integrative Exercise
Cost System Choices, Budgeting, and Variance Analyses for Sacred Heart Hospital

The Two Cost Systems

Sacred Heart Hospital (SHH) faces skyrocketing nursing costs, all of which relate to its two biggest nursing service lines—the Emergency Room (ER) and the Operating Room (OR). SHH's current cost system assigns total nursing costs to the ER and OR based on the number of patients serviced by each line. Total hospital annual nursing costs for these two lines are expected to equal $300,000. The table below shows expected patient volume for both lines.

Required:

1. Using the current cost system, calculate the hospital-wide rate based on number of patients.

$ per patient

2. Calculate the amount of nursing costs that the current cost system assigns to the ER and to the OR.

3. Using the results from Requirement 2, calculate the cost per OR nursing hour under the current cost system.
$ per OR hour

After discussion with several experienced nurses, Jack Bauer (SHH’s accountant) decided that assigning nursing costs to the two service lines based on the number of times that nurses must check patients’ vital signs might more closely match the underlying use of costly hospital resources. Therefore, for comparative purposes, Jack decided to develop a second cost system that assigns total nursing costs to the ER and OR based on the number of times nurses check patients’ vital signs. This system is referred to as the “vital-signs costing system.” The earlier table also shows data for vital signs checks for lines.

4. Using the vital-signs costing system, calculate the hospital-wide rate based on the number of vital signs checks.
$ per vital signs check

5. Calculate the amount of nursing costs that the vital-signs costing system assigns to the ER and to the OR.

6. Using the results from Requirement 5, calculate the cost per OR nursing hour under the vital-signs costing system.
$ per OR hour

Budgeting and Variance Analysis

In an effort to better plan for and control OR costs, SHH management asked Jack to calculate the flexible budget variance (i.e., flexible budget costs - actual costs) for OR nursing costs, including the price variance and efficiency variance. Given that Jack is interested in comparing the reported costs of both systems, he decided to prepare the requested OR variance analysis for both the current cost system and the vital-signs costing system. In addition, Jack chose to use each cost system’s estimate of the cost per OR nursing hour as the standard cost per OR nursing hour. Jack collected the following additional information for use in preparing the flexible budget variance for both systems:

Actual number of surgeries performed = 950
Standard number of nursing hours allowed for each OR surgery = 5
Actual number of OR nursing hours used = 5,000
Actual OR nursing costs = $190,000

Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount. If there is no variance, enter "0" and select "No variance" from the dropdown.

7. For the OR service line, use the information above and the cost per OR nursing hour under the current cost system to calculate the

a. flexible budget variance. (Hint: Use your answer to Requirement 3 as the standard cost per OR nursing hour for the current cost system.)
$

b. price variance.
$

c. efficiency variance.
$

8. For the OR service line, use the information above and the cost per OR nursing hour under the vital-signs costing system to calculate the

a. flexible budget variance. (Hint: Use your answer to Requirement 6 as the standard cost per OR nursing hour for the vital signs cost system.)
$

b. price variance.
$

c. efficiency variance.
$

Discussion of Reported Costs and Variances from the Two Systems

9. Consider SHH’s need to control its skyrocketing costs, Jack’s discussion with experienced nurses regarding their use of hospital resources, and the reported costs that you calculated from each cost system. Based on these considerations, which cost system (current or vitalsigns) should Jack choose? Briefly explain the reasoning behind your choice.

a. costing system should more accurately allocate costs to service lines because its cost allocation base.

b. uses only one cost driver and cost effective.

c. The more accurate system should generate a more accurate estimate of the cost per nursing hour, which affects the budgeting process, because the portion of costs allocated to each service line, ER.

10. What does each of the calculated variances suggest to Jack regarding actions that he should or should not take with respect to investigating and improving each variance? Also, briefly explain why the variances differ between the two cost systems.

a. The overall current system’s OR flexible budget variance ($47,500) is very , suggesting that the subvariances (price variance and efficiency variance) should be calculated.

b. The current system’s OR price variance ($40,000) is very large and unfavorable, suggesting that the nursing hiring manager negotiated a price and that nursing hour pay cuts might be necessary.

c. The current system’s OR efficiency variance ($7,500) is , suggesting that the operating room manager used too many OR nursing hours for the actual number of surgeries performed.

d. The overall vital signs’ OR flexible budget variance is , and suggests that nothing needs to be investigated further.

e. The vital signs’ OR price variance ($10,000) is large and favorable, suggesting that the nursing hiring manager negotiated a good price.

f. The vital signs’ OR efficiency variance ($10,000) is , suggesting that the operating room manager used too many OR nursing hours for the actual number of surgeries performed. In addition, it would be unwise had Jack decided to end the variance analysis after seeing that the flexible budget variance was zero. Only after continuing on with the analysis to calculate the price and efficiency variances would Jack realize that the zero flexible budget variance was the result of two large offsetting variances, both of which likely require further investigation and attention.

g. Overall, the two cost systems produce reported costs of the two service lines, ER and OR. The current system assigns nursing costs equally because the ER and OR have the same number of patients. Alternately, the vital-signs system assigns as much of the nursing costs to the OR because the OR requires as many vital signs checks of its patients as the ER does of its patients. In addition, the two systems produce estimates of the cost incurred by the hospital per OR nursing hour. When used as the standard costs in the budgeting process, these reported costs, lead to very different flexible budget variances and price and efficiency variances for the OR service line. Therefore, the managerial accountant should be very careful when constructing a cost system and be sure that the chosen allocation bases are as accurate as possible to match the underlying resource consumption patterns of the business environment. Choosing different cost allocation bases usually will result in differences in reported service line costliness and various variances, which can have ramifications for numerous managers (e.g., purchasing managers responsible for price variances, production managers responsible for efficiency variances, other managers responsible for making service line mix decisions, etc.)

1. Weighted average cost of capital Suppose Enviro-tech is attempting to estimate its cost of capital (WACC). The company has 1,500,000 shares of stock outstanding that currently sells for $50 per share. In addition, the company has 25,000 bonds outstanding with 10 years left until maturity that pay a $1,000 par value and an annual coupon of 5.0%. Management believes these bonds would sell for 1,010.50 in today’s market. The company’s beta is 1.1, the risk-free rate is 2% and the market risk premium is 8%. The tax rate is 25%.

a. What is the total market value of the company's stock (MVE)

b. What is the total market value of the company's bonds (MVD)?

c. What is the total market value of the firm's financial contacts (total invested capital)?

d. Estimate the percentage of the company financed with debt (w_d

e. Estimate the percentage of the company financed with equity (w_s)

f. Estimate the firm's cost of debt (r_d)

g. Estimate the firm's cost of equity (r_s) using the CAPM.

h. Compute an estimate of the firm's weighted average cost of capital (WACC)

james inc. charges $2,800 for its hand-crafted guitars. The cost function that describes the total cost, C, as a function of the guitars crafted and sold, x, is:

C(x) = 2000x + 4x 2 + 30000

a) Formulate the profit function, P(x).

b) How many game boards must be crafted and sold in order to maximize the total profit?

c) What is the maximum profit?

d) How many game boards must be crafted and sold in order to break even?