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.

Kookaburra Ltd used the cost model to measure its machine. Machine Z had cost of $80 000 and had a carrying amount of $70 000 at 30 June 2020 and is depreciated on a straight-line basis over a 10-year period.

On 31 December 2020, the directors of Kookaburra Ltd decided to change the basis of measuring the equipment from the cost model to the revaluation model. Machine Z was revalued to $70 000 with an expected useful life of 8 years.

REQUIRED

Provide the numbers for the journal entries in the blanks below for Machine Z on 31 December 2020 and on 30 June 2021. Complete the four blanks.(You don't need to provide the numbers for "??")

-----

31 December 2020

a)

            Depreciation expense – Machine Z                          Dr   

                     Accumulated depreciation – Machine Z          Cr                                       

b)

            Accumulated depreciation – Machine Z                   Dr   

                     Machine Z                                                        Cr                                       

c)

            Machine Z                                                                 Dr    

                     Gain on revaluation – Machine Z (OCI)         Cr                                       

            Gain on revaluation – Machine Z (OCI)                  Dr ??

                     Asset revaluation surplus – Machine Z           Cr ??   

30 June 2021

d)

            Depreciation expense – Machine Z                          Dr   

                     Accumulated depreciation – Machine Z          Cr                                       

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.

Discussion Board # 8 - Cost Volume Profit Analysis

1) Describe the cost behavior most firms face;

2) Describe the various tools management accountants use to measure cost behavior;

3) Discuss the importance of break-even points in accounting.

In the book Advanced Managerial Accounting, Robert P. Magee discusses monitoring cost variances. A cost variance is the difference between a budgeted cost and an actual cost. Magee describes the following situation:

Michael Bitner has responsibility for control of two manufacturing processes. Every week he receives a cost variance report for each of the two processes, broken down by labor costs, materials costs, and so on. One of the two processes, which we'll call process A , involves a stable, easily controlled production process with a little fluctuation in variances. Process B involves more random events: the equipment is more sensitive and prone to breakdown, the raw material prices fluctuate more, and so on.

     "It seems like I'm spending more of my time with process B than with process A," says Michael Bitner. "Yet I know that the probability of an inefficiency developing and the expected costs of inefficiencies are the same for the two processes. It's just the magnitude of random fluctuations that differs between the two, as you can see in the information below."

     "At present, I investigate variances if they exceed $2,789, regardless of whether it was process A or B. I suspect that such a policy is not the most efficient. I should probably set a higher limit for process B."

The means and standard deviations of the cost variances of processes A and B, when these processes are in control, are as follows: (Round your z value to 2 decimal places and final answers to 4 decimal places.):

Furthermore, the means and standard deviations of the cost variances of processes A and B, when these processes are out of control, are as follows:

(a) Recall that the current policy is to investigate a cost variance if it exceeds $2,789 for either process. Assume that cost variances are normally distributed and that both Process A and Process B cost variances are in control. Find the probability that a cost variance for Process A will be investigated. Find the probability that a cost variance for Process B will be investigated. Which in-control process will be investigated more often.

Process A = ___

Process B = ___

_(A or B)__ Process is investigated more often

(b) Assume that cost variances are normally distributed and that both Process A and Process B cost variances are out of control. Find the probability that a cost variance for Process A will be investigated. Find the probability that a cost variance for Process B will be investigated. Which out-of-control process will be investigated more often.

Process A = ___

Process B = ___

_(A or B)__ Process is investigated more often

(c) If both Processes A and B are almost always in control, which process will be investigated more often.

_(A or B)__ Process is investigated more often

(d) Suppose that we wish to reduce the probability that Process B will be investigated (when it is in control) to .2912. What cost variance investigation policy should be used? That is, how large a cost variance should trigger an investigation? Using this new policy, what is the probability that an out-of-control cost variance for Process B will be investigated?

Process A = ___

Process B = ___

Classify the costs below as: Product-Direct, Product-Indirect, or Period AND Variable cost, Fixed cost, or Mixed cost.   Below are budgeted income statements at different team levels, use the information to answer the questions below:

Using the above data and the high/low method, answer the following questions:

Determine the variable cost per unit

Determine the fixed cost

What is the cost equation?

Estimate the total cost for 20 teams

In addition to the above data, assume the company has the following sales. Answer the following questions

What is the revenue generated per team?

What is the per unit contribution margin?

What is the contribution margin ratio?

Compute break-even point in dollars and in units (round to the next whole number) for each of the three scenarios. Then, choose a scenario for your team.

If CAVALRY wants to have net income of $100.00 from this event, how many teams are needed?

If CAVALRY estimates 20 teams, determine the Margin of Safety in sales dollars.

Perform a sensitivity analysis to determine how an increase in team revenue of $500 would impact Net Income?

If the team revenue changed to $120 per team, and all other expenses remained the same as calculated in your cost equation, what is the new break-even in units?

If the variable costs changed to $50 per team (the fix costs remained the same as in your cost equation and team revenue remained at $100 per team), what is the new break-even in units?

If the fixed costs changed to $980, (variable expenses remained the same as in your cost equation, and sales price remained at $100 per team), what is the new break-even in units?

Classify the costs below as: Product-Direct, Product-Indirect, or Period AND Variable cost, Fixed cost, or Mixed cost.   Below are budgeted income statements at different team levels, use the information to answer the questions below:

Manufacturing cost data for Orlando Company, which uses a job order cost system, are presented below.

Indicate the missing amount for each letter. Assume that in all cases manufacturing overhead is applied on the basis of direct labor cost and the rate is the same. (Round overhead rate to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 5,275.)

Voice Com, Inc., uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 5,010 units of cell phones are as follows:

Voice Com desires a profit equal to a 16% rate of return on invested assets of $599,000.

a. Determine the amount of desired profit from the production and sale of 5,010 units of cell phones.
$fill in the blank 1

b. Determine the product cost per unit for the production of 5,010 of cell phones. If required, round your answer to nearest dollar.
$fill in the blank 2 per unit

c. Determine the product cost markup percentage (rounded to two decimal places) for cell phones.
fill in the blank 3 %

d. Determine the selling price of cell phones. Round to the nearest dollar.