Factory Overhead Cost Variance Report

Tannin Products Inc. prepared the following factory overhead cost budget for the Trim Department for July of the current year, during which it expected to use 8,000 hours for production:

Tannin has available 12,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 7,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows:

Construct a factory overhead cost variance report for the Trim Department for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If an amount box does not require an entry, leave it blank. Round your interim computations to the nearest cent, if required.

Mastery Problem: Cost-Volume-Profit Analysis

Cost Behavior

Cover-to-Cover Company is a manufacturer of shelving for books. The company has compiled the following cost data, and wants your help in determining the cost behavior. After reviewing the data, complete requirements (1) and (2) that follow.

1. Determine whether the costs in the table are variable, fixed, mixed, or none of these.

2. For each cost, determine the fixed portion of the cost, and the per-unit variable cost. If there is no amount or an amount is zero, enter "0". Recall that, for N = Number of Units Produced, Total Costs = (Variable Cost Per Unit x N) + Fixed Cost. Complete the following table with your answers. Round variable portion of cost (per unit) answers to two decimal places.

High-Low

Biblio Files Company is the chief competitor of Cover-to-Cover Company in the bookshelf business. Biblio Files is analyzing its manufacturing costs, and has compiled the following data for the first six months of the year. After reviewing the data, answer questions (1) through (3) that follow.

1. From the data previously provided, help Biblio Files Company estimate the fixed and variable portions of its total costs using the high-low method. Recall that Total Costs = (Variable Cost Per Unit x Number of Units Produced) + Fixed Cost. Complete the following table.

2. With your Total Fixed Cost and Variable Cost per Unit from the high-low method, compute the total cost for the following values of N (Number of Units Produced).

3. Why does the total cost computed for 4,360 units not match the data for January?

a. The high-low method is accurate only for months in which production is at full capacity.

b. The high-low method only gives accurate data when fixed costs are zero.

c. The high-low method gives a formula for the estimated total cost and may not match levels of production other than the highest and lowest.

d. The high-low method gives accurate data only for levels of production outside the relevant range.

Contribution Margin

Review the contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements. Complete the following table from the data provided on the income statements. Each company sold 77,800 units during the year.

Income Statement - Cover-to-Cover

Income Statement - Biblio Files

Sales Mix

Biblio Files Company is making plans for its next fiscal year, and decides to sell two new types of bookshelves, Basic and Deluxe. The company has compiled the following estimates for the new product offerings.

The company is interested in determining how many of each type of bookshelf would have to be sold in order to break even. If we think of the Basic and Deluxe products as components of one overall enterprise product called “Combined,” the unit contribution margin for the Combined product would be $2.31. Fixed costs for the upcoming year are estimated at $346,500. Recall that the totals of all the sales mix percents must be 100%. Determine the amounts to complete the following table.

Target Profit

Refer again to the income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statement. Note that both companies have the same sales and net income. Answer questions (1) - (3) that follow, assuming that all data for the coming year is the same as the current year, except for the amount of sales.

1. If Cover-to-Cover Company wants to increase its profit by $30,000 in the coming year, what must their amount of sales be?
$fill in the blank e41fe3015f9006a_1

2. If Biblio Files Company wants to increase its profit by $30,000 in the coming year, what must their amount of sales be?
$fill in the blank e41fe3015f9006a_2

3. What would explain the difference between your answers for (1) and (2)?

a. Biblio Files Company has a higher contribution margin ratio, and so more of each sales dollar is available to cover fixed costs and provide operating income.

b. Cover-to-Cover Company’s contribution margin ratio is lower, meaning that it’s more efficient in its operations.

c. The companies have goals that are not in the relevant range.

d. The answers are not different; each company has the same required sales amount for the coming year to achieve the desired target profit.

Your two new display cases cost $5,500 each. Shipping from the manufacturer cost another $2,600. The installer charged $900 to set up the cases (carpet work, leveling and trim) and the electrician needed $1,500 to wire the display cases and lighting controls. What will be the cost we show on the Balance Sheet?

Using the information from the previous question, what will be the monthly depreciation on this asset? Assume we will depreciate over 6 years and the expected salvage value will be $1,600. Using the information from the previous two questions, what would be the accumulated depreciation on this asset at the end of year 4?

All answers are supposed to be whole numbers.

Delta Corporation has the following capital structure:

a. If the firm has $22 million in retained earnings, at what size capital structure will the firm run out of retained earnings? (Enter your answer in millions of dollars (e.g., $10 million should be entered as "10").)
  

b. The 9.5 percent cost of debt referred to earlier applies only to the first $36 million of debt. After that the cost of debt will go up. At what size capital structure will there be a change in the cost of debt? (Enter your answer in millions of dollars (e.g., $10 million should be entered as "10").)

Factory Overhead Cost Variance Report

Tannin Products Inc. prepared the following factory overhead cost budget for the Trim Department for July of the current year, during which it expected to use 8,000 hours for production:

Tannin has available 12,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 7,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows:

Construct a factory overhead cost variance report for the Trim Department for July. Enter all amounts as positive numbers. If an amount box does not require an entry, leave it blank. Round your interim computations to the nearest cent, if required.

Please explain steps

Learned Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 5.60 Direct labor $ 4.55 Variable manufacturing overhead $ 2.15 Fixed manufacturing overhead $ 21,000 Sales commissions $ 0.80 Variable administrative expense $ 0.70 Fixed selling and administrative expense $ 6,500 Required: a. For financial reporting purposes, what is the total amount of product costs incurred to make 5,000 units? b. For financial reporting purposes, what is the total amount of period costs incurred to sell 5,000 units? c. If the selling price is $24.40 per unit, what is the contribution margin per unit sold? (Round your answer to 2 decimal places.) d. If 6,000 units are produced, what is the total amount of direct manufacturing cost incurred? e. If 6,000 units are produced, what is the total amount of indirect manufacturing costs incurred?

Learned Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 5.10 Direct labor $ 4.30 Variable manufacturing overhead $ 1.90 Fixed manufacturing overhead $ 36,000 Sales commissions $ 0.80 Variable administrative expense $ 0.70 Fixed selling and administrative expense $ 12,600 Required: a. For financial reporting purposes, what is the total amount of product costs incurred to make 9,000 units? b. For financial reporting purposes, what is the total amount of period costs incurred to sell 9,000 units? c. If the selling price is $23.90 per unit, what is the contribution margin per unit sold? (Round your answer to 2 decimal places.) d. If 10,000 units are produced, what is the total amount of direct manufacturing cost incurred? e. If 10,000 units are produced, what is the total amount of indirect manufacturing costs incurred?

The hospital ran a regression analysis using nursing hours as the cost driver to predict total hospital overhead costs. The regression analysis produced the following data:

Intercept: 346245

Slope: 12.81796

RSQ: 0.909311

A.) Round the variable portion of the regression equation formula to two decimal places. Based on the regression equation formula, what will the predicted total hospital overhead costs be if 54,000 nursing hours are expended during a month?

The hospital then ran a regression analysis using number of patient days as cost driver. The regression analysis produced the following data:

Intercept: 559764

Slope: 47.970926

RSQ: 0.563496482

B.) Again, round the variable portion of the regression equation to two decimal places. If 9,500 patient days are predicted for a month, what is the total predicted hospital overhead costs using the regression equation?

C.) Which regression equation, the one using nursing hours as the cost driver or the one using patient days as the cost driver, produces the most accurate correlation (best explanation of) the predicted hospital overhead costs. How do you know that your answer is correct? In other words, justify your answer.

Kesterson Corporation has provided the following information:

If 7,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:

Multiple Choice

• $8,750

• $27,950

• $23,750

• $15,000

Pedregon Corporation has provided the following information:

If the selling price is $22.00 per unit, the contribution margin per unit sold is closest to:

Multiple Choice

• $3.45

• $5.05

• $7.35

• $10.50

Wimpy Inc. produces and sells a single product. The selling price of the product is $175.00 per unit and its variable cost is $63.00 per unit. The fixed expense is $368,064 per month.

The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

• $1,022,400

• $654,336

• $575,100

The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $7 per direct labor-hour; the budgeted fixed manufacturing overhead is $82,000 per month, of which $15,700 is factory depreciation.

If the budgeted direct labor time for November is 7,700 hours, then the total budgeted manufacturing overhead for November is:

Multiple Choice

• $82,000

• $120,200

• $135,900

• $151,600