Exercise 3-4 Contrast ABC and Conventional Product Costs [LO3-4]
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Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is expected to sell 39,000 units next year and Product L is expected to sell 7,800 units. A unit of either product requires 0.3 direct labor-hours. |
| The company's total manufacturing overhead for the year is expected to be $1,193,400. |
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| 1-a. |
The company currently applies manufacturing overhead to products using direct labor-hours as the allocation base. If this method is followed, how much overhead cost per unit would be applied to each product? (Round your answers to 2 decimal places.) HOME ACCESSIBILITY PREVIEW
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In: Accounting
Williams Electronics design and manufacturer specialized in switches for the telecomunication industry. The accounting records of the business reflect the following data at December 31, 2016
inventory 1/1/2016 31/12/2016
Raw material $260,000. $230,000.
Work in progress $332,300. $218,800
Finished goods $1,075,200. $615,000.
Other Information
Sales revenue $5,765,000
Factory supplies 45,000
Director factory labour 750,000
Raw materials purchased 540,000
Plant janitorial service 52,000
Depreciation: Plant & Equipment 165,000
Total ultiities 550,000
Plant supervisory's salary 480,000
R & D for graphic designs 70.500
Insurance on Plant & Equipment 120,000
Delivery truck driver's wages 175,000
Depreciation: Delivery truck 52,000
Property taxes 300,000
Administration wages & salaries 840.150
Advertising expenses 1% of sales revenue
!. of the total utilities, 70% relates to manufacturing and 30% relates to general and administrative costs
2. the property taxes should be shared: 60% manufacturing & 40% general & administrative costs
Required
a) Calculate the raw material used by Williams Electronics.
b) What is the total manufacturing overhead cost incurred by Williams Electronic during the period?
c) Determine the prime cost & conversion cost of the product manufactured
d) Prepare a schedue of cost of goods manufactured for the year ended December 31, 2016, clearing showing total manufacturing costs & total manufacturing costs to account for
e) Prepare an income statement for the year ended December 31, 2016 clearly showing the calculation of Costs of Goods sold. List the non-production overheads in order of size starting with the largest
f) Given that the company manufactured 1,500 switches in 2016, compute the company's unit product cost for the year
g) briefly explain the differences between a product cost and period cost
In: Accounting
What is the direct material volume variance, direct material efficiency variance, and the direct material price variance? Are each of these favorable or unfavorable?
Use the following scenario to help answer these questions:
DeFleur manufactures bicycles. The bicycles are manufactured in two divisions. In the framing division, the carbon bicycle frames are manufactured. In the assembly division, the components are assembled to the frame and the bike is ready for sale. There is no market for the unassembled frames and all manufactured frames are transferred to the assembly division. For the purposes of performance evaluation, the framing division transfers the completed frames to the assembly division at the budgeted standard cost of a frame. The budgeted units of production for the framing division is 1,000, all of which will be transferred to the assembly division at the standard full absorption cost.
The budgeted costs for the framing division are as follows:
| Direct Materials per unit: 10 layers of carbon-fiber at $20/layer | $200.00 |
| Direct Labor per unit: 8 hours at $12/hour | $96.00 |
1. Standard variable overhead is applied to products on the basis of direct labor hours at a rate of $4/unit produced.
Budgeted Fixed Overhead is $30,000 and the standard fixed cost per unit is based on the budgeted units of production.
Actual data for the period relating to the costs are as follows:
| The actual number of units produced was | 800 |
| Actual Fixed Overhead costs were | $32,000 |
| Actual Variable Overhead costs | $4,000 |
2. The framing division worked 7,500 direct labor hours during the year at a total cost of $93,750.
3. A total of 9,000 carbon-fiber layers were purchased and used in production during the year at a total cost of $171,000
4. Total Budgeted cost for the framing department was $330,000. The total actual cost was $300,750
(Note that all the questions on variance are with respect to the framing department.)
In: Accounting
What is the sum of all the price, efficiency and volume variances across all accounts (material, labor, variable overhead, and fixed overhead)?
Consider the following information for help with the question:
DeFleur manufactures bicycles. The bicycles are manufactured in two divisions. In the framing division, the carbon bicycle frames are manufactured. In the assembly division, the components are assembled to the frame and the bike is ready for sale. There is no market for the unassembled frames and all manufactured frames are transferred to the assembly division. For the purposes of performance evaluation, the framing division transfers the completed frames to the assembly division at the budgeted standard cost of a frame. The budgeted units of production for the framing division is 1,000, all of which will be transferred to the assembly division at the standard full absorption cost.
The budgeted costs for the framing division are as follows:
| Direct Materials per unit: 10 layers of carbon-fiber at $20/layer | $200.00 |
| Direct Labor per unit: 8 hours at $12/hour | $96.00 |
1. Standard variable overhead is applied to products on the basis of direct labor hours at a rate of $4/unit produced.
Budgeted Fixed Overhead is $30,000 and the standard fixed cost per unit is based on the budgeted units of production.
Actual data for the period relating to the costs are as follows:
| The actual number of units produced was | 800 |
| Actual Fixed Overhead costs were | $32,000 |
| Actual Variable Overhead costs | $4,000 |
2. The framing division worked 7,500 direct labor hours during the year at a total cost of $93,750.
3. A total of 9,000 carbon-fiber layers were purchased and used in production during the year at a total cost of $171,000
4. Total Budgeted cost for the framing department was $330,000. The total actual cost was $300,750
(Note that all the questions on variance are with respect to the framing department.)
In: Accounting
Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial information pertaining to cost of quality (COQ) in 2019 and 2020 (in thousands of dollars):
| 2019 | 2020 | ||||||
| Sales | $ | 15,600 | $ | 19,600 | |||
| Materials inspection | 260 | 56 | |||||
| In-process (production) inspection | 156 | 121 | |||||
| Finished product inspection | 210 | 66 | |||||
| Preventive equipment maintenance | 16 | 56 | |||||
| Scrap (net) | 460 | 260 | |||||
| Warranty repairs | 660 | 410 | |||||
| Product design engineering | 146 | 230 | |||||
| Vendor certification | 24 | 56 | |||||
| Direct costs of returned goods | 235 | 76 | |||||
| Training of factory workers | 36 | 136 | |||||
| Product testing—equipment maintenance | 56 | 56 | |||||
| Product testing labor | 170 | 86 | |||||
| Field repairs | 66 | 36 | |||||
| Rework before shipment | 200 | 196 | |||||
| Product-liability settlement | 320 | 56 | |||||
| Emergency repair and maintenance | 160 | 71 | |||||
Required:
1. Classify the cost items in the table into cost-of-quality (COQ) categories.
2. Calculate the ratio of each COQ category to revenues in each of the 2 years.
Classify the cost items in the table into cost-of-quality (COQ) categories. Calculate the ratio of each COQ category to revenues in each of the 2 years. (Enter amounts in thousands, not in whole dollar. Round your "Percentage" answers to 2 decimal places.)
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In: Accounting
Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:
| Molding | Fabrication | Total | |||||
| Machine-hours | 24,000 | 34,000 | 58,000 | ||||
| Fixed manufacturing overhead costs | $ | 780,000 | $ | 240,000 | $ | 1,020,000 | |
| Variable manufacturing overhead cost per machine-hour | $ | 6.00 | $ | 6.00 | |||
During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:
| Job D-70: | Molding | Fabrication | Total | |||
| Direct materials cost | $ | 374,000 | $ | 321,000 | $ | 695,000 |
| Direct labor cost | $ | 230,000 | $ | 170,000 | $ | 400,000 |
| Machine-hours | 16,000 | 8,000 | 24,000 | |||
| Job C-200: | Molding | Fabrication | Total | |||
| Direct materials cost | $ | 300,000 | $ | 210,000 | $ | 510,000 |
| Direct labor cost | $ | 150,000 | $ | 220,000 | $ | 370,000 |
| Machine-hours | 8,000 | 26,000 | 34,000 | |||
Delph had no underapplied or overapplied manufacturing overhead during the year.
Questions:
1.Compute the departmental predetermined overhead rates for the molding department, and then the fabrication department. (Round the final answers to 2 decimal places.)
2.Compute the total manufacturing cost assigned to Job D-70 and Job C-200. (Round your intermediate calculations to 2 decimal places.
3.If Delph establishes bid prices that are 130% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200? (Round your intermediate calculations to 2
decimal places.)
4.What is Delph’s cost of goods sold for the year? (Round your intermediate calculations to 2 decimal places.)
In: Accounting
Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage
Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
| Estimated Fixed Cost |
Estimated Variable Cost (per unit sold) |
||||||
| Production costs: | |||||||
| Direct materials | $28 | ||||||
| Direct labor | 19 | ||||||
| Factory overhead | $698,900 | 14 | |||||
| Selling expenses: | |||||||
| Sales salaries and commissions | 145,200 | 6 | |||||
| Advertising | 49,100 | ||||||
| Travel | 10,900 | ||||||
| Miscellaneous selling expense | 12,000 | 6 | |||||
| Administrative expenses: | |||||||
| Office and officers' salaries | 142,000 | ||||||
| Supplies | 17,500 | 2 | |||||
| Miscellaneous administrative expense | 16,400 | 3 | |||||
| Total | $1,092,000 | $78 | |||||
It is expected that 7,000 units will be sold at a price of $390 a unit. Maximum sales within the relevant range are 9,000 units.
Required:
1. Prepare an estimated income statement for 20Y7.
| Belmain Co. | |||
| Estimated Income Statement | |||
| For the Year Ended December 31, 20Y7 | |||
| $ | |||
| Cost of goods sold: | |||
| $ | |||
| Cost of goods sold | |||
| Gross profit | $ | ||
| Expenses: | |||
| Selling expenses: | |||
| $ | |||
| Total selling expenses | $ | ||
| Administrative expenses: | |||
| $ | |||
| Total administrative expenses | |||
| Total expenses | |||
| Income from operations | $ | ||
2. What is the expected contribution margin
ratio? Round to the nearest whole percent.
%
3. Determine the break-even sales in units and dollars.
| Units | units |
| Dollars | units |
4. Construct a cost-volume-profit chart on your
own paper. What is the break-even sales?
$
5. What is the expected margin of safety in dollars and as a percentage of sales?
| Dollars: | $ | |
| Percentage: (Round to the nearest whole percent.) | % |
6. Determine the operating leverage. Round to one decimal place.
In: Finance
Exercise 2-15 Plantwide and Departmental Predetermined Overhead Rates; Job Costs [LO2-1, LO2-2, LO2-3, LO2-4]
[The following
information applies to the questions displayed
below.]
Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:
| Molding | Fabrication | Total | |||||
| Machine-hours | 31,000 | 41,000 | 72,000 | ||||
| Fixed manufacturing overhead costs | $ | 740,000 | $ | 210,000 | $ | 950,000 | |
| Variable manufacturing overhead cost per machine-hour | $ | 5.50 | $ | 5.50 | |||
During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:
| Job D-70: | Molding | Fabrication | Total | |||
| Direct materials cost | $ | 378,000 | $ | 322,000 | $ | 700,000 |
| Direct labor cost | $ | 230,000 | $ | 160,000 | $ | 390,000 |
| Machine-hours | 24,000 | 7,000 | 31,000 | |||
| Job C-200: | Molding | Fabrication | Total | |||
| Direct materials cost | $ | 290,000 | $ | 230,000 | $ | 520,000 |
| Direct labor cost | $ | 160,000 | $ | 270,000 | $ | 430,000 |
| Machine-hours | 7,000 | 34,000 | 41,000 | |||
Delph had no underapplied or overapplied manufacturing overhead during the year.
Exercise 2-15 Part 2
2. Assume Delph uses departmental predetermined overhead rates based on machine-hours.
a. Compute the departmental predetermined overhead rates.
b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.
c. If Delph establishes bid prices that are 140% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200?
d. What is Delph’s cost of goods sold for the year?
In: Accounting
Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage
Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
| Estimated Fixed Cost |
Estimated Variable Cost (per unit sold) |
||||||
| Production costs: | |||||||
| Direct materials | $17 | ||||||
| Direct labor | 12 | ||||||
| Factory overhead | $150,500 | 9 | |||||
| Selling expenses: | |||||||
| Sales salaries and commissions | 31,300 | 4 | |||||
| Advertising | 10,600 | ||||||
| Travel | 2,400 | ||||||
| Miscellaneous selling expense | 2,600 | 3 | |||||
| Administrative expenses: | |||||||
| Office and officers' salaries | 30,600 | ||||||
| Supplies | 3,800 | 1 | |||||
| Miscellaneous administrative expense | 3,400 | 2 | |||||
| Total | $235,200 | $48 | |||||
It is expected that 5,600 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 7,000 units.
Required:
1. Prepare an estimated income statement for 20Y7.
| Belmain Co. | |||
| Estimated Income Statement | |||
| For the Year Ended December 31, 20Y7 | |||
| $ | |||
| Cost of goods sold: | |||
| $ | |||
| Cost of goods sold | |||
| Gross profit | $ | ||
| Expenses: | |||
| Selling expenses: | |||
| $ | |||
| Total selling expenses | $ | ||
| Administrative expenses: | |||
| $ | |||
| Total administrative expenses | |||
| Total expenses | |||
| Income from operations | $ | ||
2. What is the expected contribution margin
ratio? Round to the nearest whole percent.
%
3. Determine the break-even sales in units and dollars.
| Units | units |
| Dollars | units |
4. Construct a cost-volume-profit chart on your
own paper. What is the break-even sales?
$
5. What is the expected margin of safety in dollars and as a percentage of sales?
| Dollars: | $ | |
| Percentage: (Round to the nearest whole percent.) | % |
6. Determine the operating leverage. Round to one decimal place.
In: Accounting
Ariana’s health insurance policy includes a deductible of $1,500 and a coinsurance provision requiring her to pay 20 percent of all bills. Her total bill is $8,800. What is Ariana’s total cost?
In: Finance