A cake baker bakes cake. His short run cost function is C(y) = 100 + 10y - 2y² + y³, where y is the number of cakes

(a) derive and graph his average total cost, average variable cost and marginal cost curves

(b) what is his short run supply curve

Optimus Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for the year ended December 31, 2020, and relevant budget data are as follows.

Actual

Comparison with Budget

Sales$1,400,000$100,000 favorable

Variable cost of goods sold665,00045,000 unfavorable

Variable selling and administrative expenses125,00025,000 unfavorable

Controllable fixed cost of goods sold170,000On target

Controllable fixed selling and administrative expenses80,000On target

Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount.

Prepare a responsibility report for the Home Division. (List variable costs before fixed costs. Round ROI to 2 decimal places, e.g. 1.57%.)

OPTIMUS COMPANY
Home Division
Responsibility Report
For the Year Ended December 31, 2020

Difference

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

Gross ProfitControllable Direct Fixed CostsTotal Variable CostsVariable CostsContribution MarginControllable MarginTotal Controllable Direct Fixed CostsSalesCost of Goods SoldSelling and Administrative

$ $ $

FavorableUnfavorableNeither Favorable nor Unfavorable

SalesContribution MarginControllable Direct Fixed CostsSelling and AdministrativeControllable MarginCost of Goods SoldGross ProfitTotal Controllable Direct Fixed CostsTotal Variable CostsVariable Costs

    Variable Costs    Controllable Margin    Contribution Margin    Selling and Administrative    Controllable Direct Fixed Costs    Cost of Goods Sold    Gross Profit    Sales    Total Controllable Direct Fixed Costs    Total Variable Costs    

FavorableUnfavorableNeither Favorable nor Unfavorable

    Contribution Margin    Total Controllable Direct Fixed Costs    Controllable Direct Fixed Costs    Selling and Administrative    Total Variable Costs    Variable Costs    Controllable Margin    Cost of Goods Sold    Gross Profit    Sales    

FavorableUnfavorableNeither Favorable nor Unfavorable

    Variable Costs    Selling and Administrative    Cost of Goods Sold    Total Controllable Direct Fixed Costs    Controllable Direct Fixed Costs    Total Variable Costs    Sales    Contribution Margin    Gross Profit    Controllable Margin    

FavorableUnfavorableNeither Favorable nor Unfavorable

SalesSelling and AdministrativeContribution MarginGross ProfitTotal Controllable Direct Fixed CostsVariable CostsTotal Variable CostsControllable Direct Fixed CostsControllable MarginCost of Goods Sold

FavorableUnfavorableNeither Favorable nor Unfavorable

Total Variable CostsControllable MarginVariable CostsContribution MarginCost of Goods SoldGross ProfitControllable Direct Fixed CostsTotal Controllable Direct Fixed CostsSalesSelling and Administrative

    Contribution Margin    Sales    Selling and Administrative    Variable Costs    Cost of Goods Sold    Total Controllable Direct Fixed Costs    Controllable Direct Fixed Costs    Controllable Margin    Total Variable Costs    Gross Profit    

FavorableUnfavorableNeither Favorable nor Unfavorable

    Controllable Margin    Total Variable Costs    Sales    Total Controllable Direct Fixed Costs    Cost of Goods Sold    Variable Costs    Contribution Margin    Controllable Direct Fixed Costs    Selling and Administrative    Gross Profit    

FavorableUnfavorableNeither Favorable nor Unfavorable

    Total Controllable Direct Fixed Costs    Controllable Margin    Cost of Goods Sold    Variable Costs    Selling and Administrative    Gross Profit    Total Variable Costs    Contribution Margin    Controllable Direct Fixed Costs    Sales    

FavorableUnfavorableNeither Favorable nor Unfavorable

Controllable Direct Fixed CostsControllable MarginCost of Goods SoldGross ProfitSalesSelling and AdministrativeTotal Controllable Direct Fixed CostsTotal Variable CostsVariable CostsContribution Margin

$ $ $

FavorableUnfavorableNeither Favorable nor Unfavorable

ROI % % %

FavorableUnfavorableNeither Favorable nor Unfavorable

Compute the expected ROI in 2020 for the Home Division, assuming the following independent changes to actual data. (Round ROI to 2 decimal places, e.g. 1.57%.)

The expected ROI

(1)Variable cost of goods sold is decreased by 5%. %

(2)Average operating assets are decreased by 10%. %

(3)Sales are increased by $200,000, and this increase is expected to increase contribution margin by $80,000. %

___ 1. Lester Company has a single product. The

selling price is $50 and the variable cost is $30 per

unit. The company’s fixed expenses are $200,000 per

month. What is the company’s unit contribution mar-

gin? a) $50; b) $30; c) $20; d) $80.

___ 2. Refer to the data for Lester Company in

question 1 above. What is the company’s contribution

margin ratio? a) 0.60; b) 0.40; c) 1.67; d) 20.00.

___ 3. Refer to the data for Lester Company in

question 1 above. What is the company’s break-even

in sales dollars? a) $500,000; b) $33,333; c) $200,000;

d) $400,000.

___ 4. Refer to the data for Lester Company in

question 1 above. How many units would the company

have to sell to attain target profits of $50,000? a)

10,000; b) 12,500; c) 15,000; d) 13,333.

___ 5. The following figures are taken from Park-

er Company’s income statement: Net income, $30,000;

Fixed costs, $90,000; Sales, $200,000; and CM ratio,

60%. The company’s margin of safety in dollars is: a)

$150,000; b) $30,000; c) $50,000; d) $80,000.

___ 6. Refer to the data in question for Parker

Company in 5 above. The margin of safety in percen-

tage form is: a) 60%; b) 75%; c) 40%; d) 25%.

___ 7. Refer to the data for Parker Company in

question 5 above. What is the company’s total contri-

bution margin? a) $110,000; b) $120,000; c) $170,000;

d) $200,000.

___ 8. Refer to the data for Parker Company in

question 5 above. What is the company’s degree of

operating leverage? a) 0.25; b) 0.60; c) 1.25; d) 4.00.

___ 9. If sales increase from $400,000 to

$450,000, and if the degree of operating leverage is 6,

net income should increase by: a) 12.5%; b) 75%; c)

67%; d) 50%.

___ 10. In multiple product firms, a shift in the

sales mix from less profitable products to more profit-

able products will cause the company’s break-even

point to: a) increase; b) decrease; c) there will be no

change in the break-even point; d) none of these.

Generic Motors Corporation has two product lines, A and B. Its revenue and costs for last year is as follows:

Generic Motors uses ABC to allocate the overhead costs. It examined the main activities in the firm, and decided to break up the total overhead costs of $11,700 into 3 cost pools:
* "labor-related" - the total cost in this pool is $3,000, allocated based on direct labor dollars
* "sales-related" - the total cost in this pool is $2,700, allocated based on number of units
* "production setups" - the total cost in this pool is $6,000, allocated based on the number of production setups. Product A requires 10 setups. Product B requires is 40 setups.

Required:

a) for each cost pool, compute the activity rate and the amounts allocated to product A and product B.
(hint: The amounts allocated to A and B from each pool should add up to the total cost in that pool. To allocate the costs in the "production setups" pool, you will have to compute the number of batches. If the total number of batches for A and B does not add up to 50, you are doing something wrong).
* "labor-related" pool:
   activity rate = $  per DL$
   Labor-related OH costs allocated to A = $
   Labor_related OH costs allocated to B = $
* "sales-related" pool:
   activity rate = $  per unit
   Sales-related OH costs allocated to A = $
   Sales_related OH costs allocated to B = $
* "production setups" pool:
   activity rate = $  per setup
   Production setups OH costs allocated to A = $
   Production setups OH costs allocated to B = $

b) using the allocated OH costs from (a), compute the profit margin for product A and product B.
If you get a negative number, enter it with a minus sign, i.e., enter negative $100 as -100, not ($100)
profit margin for A = $
profit margin for B = $

Erin Company's inventory at December 1, and the costs charged to Work in Process—Department B during December are as follows:

During December, all direct materials are transferred from Department A, the units in process at December 1 were completed, and of the 26,000 units entering the department, all were completed except 1,000 units which were 70% completed as to conversion costs. Inventories are costed by the first-in, first-out method.

Prepare a cost of production report for December.

Round your cost per equivalent unit amounts to two decimal places. Round all other amounts to the nearest dollar. If an amount value is zero enter "0" as answer.

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3.

At the beginning of June, Kimber Toy Company budgeted 19,000 toy action figures to be manufactured in June at standard direct materials and direct labor costs as follows:

The standard materials price is $0.50 per pound. The standard direct labor rate is $10.00 per hour. At the end of June, the actual direct materials and direct labor costs were as follows:

There were no direct materials price or direct labor rate variances for June. In addition, assume no changes in the direct materials inventory balances in June. Kimber Toy Company actually produced 16,500 units during June.

Determine the direct materials quantity and direct labor time variances. Round your per unit computations to two decimal places, if required. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

6.

Direct Materials, Direct Labor, and Factory Overhead Cost Variance Analysis

Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 6,800 units of product were as follows:

Each unit requires 0.25 hour of direct labor.

Required:

a. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

c. Determine variable factory overhead controllable variance, the fixed factory overhead volume variance, and total factory overhead cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Problem 15-1A Production costs computed and recorded; reports prepared LO C2, P1, P2, P3, P4

[The following information applies to the questions displayed below.]

Marcelino Co.'s March 31 inventory of raw materials is $86,000. Raw materials purchases in April are $570,000, and factory payroll cost in April is $380,000. Overhead costs incurred in April are: indirect materials, $54,000; indirect labor, $27,000; factory rent, $38,000; factory utilities, $20,000; and factory equipment depreciation, $60,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $635,000 cash in April. Costs of the three jobs worked on in April follow.

Problem 15-1A Part 1

Required:
1. Determine the total of each production cost incurred for April (direct labor, direct materials, and applied overhead), and the total cost assigned to each job (including the balances from March 31).

Problem 15-1A Part 2

1. Materials purchases (on credit).
2. Direct materials used in production.
3. Direct labor paid and assigned to Work in Process Inventory.
4. Indirect labor paid and assigned to Factory Overhead.
5. Overhead costs applied to Work in Process Inventory.
6. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
7. Transfer of Jobs 306 and 307 to Finished Goods Inventory.
8. Cost of goods sold for Job 306.
9. Revenue from the sale of Job 306.
10. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

2. Prepare journal entries for the month of April to record the above transactions.

3. Prepare a schedule of cost of goods manufactured.

4.1 Compute gross profit for April.

4.2 Show how to present the inventories on the April 30 balance sheet.

Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals.

The balance in the account Work in Process—Filling was as follows on January 1:

Work in Process—Filling Department (3,700 units, 60% completed):

Direct materials (3,700 x $11.40) $42,180

Conversion (3,700 x 60% x $7.40) 16,428 $58,608

The following costs were charged to Work in Process—Filling during January:

Direct materials transferred from Reaction Department: 47,700 units at $11.20 a unit $534,240

Direct labor 182,680

Factory overhead 175,508

During January, 47,300 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 4,100 units, 50% completed.

Required: 1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.

Dover Chemical Company Cost of Production Report-Filling Department For the Month Ended January 31

Unit Information Units charged to production:

Inventory in process, January 1

Received from Reaction Department

Total units accounted for by the Filling Department

Units to be assigned costs:

Equivalent Units

Whole Units Direct Materials Conversion

Inventory in process, January 1

Started and completed in January

Transferred to finished goods in January

Inventory in process, January 31

Total units to be assigned costs

Cost Information

Costs per equivalent unit:

Direct Materials Conversion

Total costs for January in Filling Department $ $

Total equivalent units

Cost per equivalent unit $ $

Costs charged to production:

Direct Materials Conversion Total

Total Inventory in process, January 1 $

Costs incurred in January

Total costs accounted for by the Filling Department $

Cost allocated to completed and partially completed units:

Inventory in process, January 1 balance $

To complete inventory in process, January 1 $ $

Cost of completed January 1 work in process $

Started and completed in January

Transferred to finished goods in January $

Inventory in process, January 31

Total costs assigned by the Filling Department $

2. Journalize the entries for

(1) costs transferred from Reaction to Filling and (2) the costs transferred from Filling to Finished Goods.

(1)

(2)

3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places.

Increase or Decrease Amount

Change in direct materials cost per equivalent unit $

Change in conversion cost per equivalent unit

4. The cost of production report may be used as the basis for allocating product costs between and . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.