Production, Direct Labor, Direct Materials, Sales Budgets, Budgeted Contribution Margin

Greiner Company makes and sells high-quality glare filters for microcomputer monitors. John Craven, controller, is responsible for preparing Greiner’s master budget and has assembled the following data for the coming year. The direct labor rate includes wages, all employee-related benefits, and the employer’s share of FICA. Labor saving machinery will be fully operational by March. Also, as of March 1, the company’s union contract calls for an increase in direct labor wages that is included in the direct labor rate. Greiner expects to have 5,900 glare filters in inventory on December 31 of the current year, and has a policy of carrying 35 percent of the following month’s projected sales in inventory. Information on the first four months of the coming year is as follows:

Required:
Unless otherwise indicated, round all calculated amounts to the nearest dollar or unit.

1. Prepare the following monthly budgets for Greiner Company for the first quarter of the coming year.

a. Production budget in units:

b. Direct labor budget in hours: Round your answers to two decimal places, if required.

c. Direct materials cost budget:

d. Sales budget: Round unit selling price amounts to the nearest cent and use the same for subsequent requirements.

2. Calculate the total budgeted contribution margin for Greiner Company by month and in total for the first quarter of the coming year. (CMA adapted)

Which of the following statements is correct?

A) In the short run, if a firm chooses to produce no output (i.e., shut down) its total costs of production will equal its total fixed costs.

B) A firm minimizes its total costs of production when average variable cost is minimized.

C) If a firm decides to shut down, its short-run total costs will equal 0.

D) As a firm increases output in the short run, the change in total costs is equal to the change in total variable costs.

1.

Any firm that has economies of scale will

Group of answer choices

Prefer to produce a small amount of total industry output.

Try to spread production over many plants.

Face an upward-sloping long-run average total cost curve.

Be able to produce at a lower unit cost as it increases production.

2.

Antitrust laws can restrain the abuse of monopoly power.

Group of answer choices

True

False

3.

If a monopolist is producing a level of output where MR is less than MC, then it should

Group of answer choices

Increase its output.

Lower its output.

Lower its price.

Shift its marginal cost curve upward.

4.

Market power is

Group of answer choices

Enjoyed by all firms at high levels of output.

The ability to alter the market price of a product.

Most common for competitive firms.

A characteristic of all market structures.

5.

Monopolists set prices

Group of answer choices

At the minimum of the long-run average total cost curve.

Without constraints since there is no competition.

At the output where marginal revenue equals marginal cost.

On the marginal revenue curve.

1. Tangible Benefits Worksheet - Nova

2. One Time Cost Worksheet – Nova

3. Recurring Cost Worksheet – Nova

4. Discount Rate = 12%

Need to let Management Team know what:

1. What the Overall NPV is.
2. What the Return on Investment is.
3. What the Break Even Point is.

Energy Sol Corp. produces a certain energy-saving device. The demand for the device, D, is 1,800 units per year (or 6 units each day (i.e., d = 6), assuming 300 working days in a year). The company can produce at an annual rate, P, of 7,200 units (or 24 per day, i.e., p = 24). Setup cost, S, is $300. There is an inventory holding cost, H, of $36 per unit, per year. Mr. Sharp, Operations Manager of the company wants to determine the economic production run size (optimal production quantity) that will minimize the annual total cost. But without knowing any quantitative techniques, Mr. Sharp just produces 72 units per setup (i.e., Q = 72). Is Q = 72 optimal?

a. What is the maximum possible inventory (I ) when they complete the production of 72 units?

b. What is the annual total cost (TC) of the current policy (Q = 72)?

c. Determine the optimal production quantity using the EPRS approach? What is the minimum total cost? How much can Mr. Sharp save by using the EPRS approach instead of the current policy?

A firm in a purely competitive industry is currently producing 1,400 units per day at a total cost of $600. If the firm produced 1,200 units per day, its total cost would be $400, and if it produced 900 units per day, its total cost would be $375.

Instructions: In parts a and c, round your answers to 2 decimal places. In part d, round your answer to 1 decimal place.

a. What are the firm's ATC at these three levels of production?      

     At 1,400 units per day, ATC = $ .      

     At 1,200 units per day, ATC = $ .      

     At 900 units per day, ATC = $ .

b. If every firm in this industry has the same cost structure, is the industry in long-run competitive equilibrium?   (Click to select)  No  Yes  .

c. From what you know about these firms’ cost structures, what is the highest possible price per unit that could exist as the market price in long-run equilibrium? $ .

d. If that price ends up being the market price and if the normal rate of profit is 10 percent, then how big will each firm’s accounting profit per unit be?  cents per unit.

Weighted Average Cost Method >with Perpetual Inventory

The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are as follows:

Required:

1. Record the inventory, purchases, and cost of goods sold data in a perpetual inventory record similar to the one illustrated in Exhibit 5, using the weighted average cost method.

2. Determine the total sales, the total cost of goods sold, and the gross profit from sales for the period.

3. Determine the ending inventory cost on June 30.

A retailer purchases a certain type of chemical from a supplier on the following quantity discount schedule: • If the order amount is less than 100 kg.s, the supplier charges $30 per kg. • If the order amount is at least 100 kg.s and less than 500 kg.s, the supplier applies an incremental discount where the first 100 kg. costs $30 per kg. and the remaining amount costs $28 per kg. • If the order amount is at least 500 kg.s, the supplier applies an all-units discount and charges $28 per kg. for all units. The ordering cost is $100 per order and the retail owner assumes an annual holding cost based on the annual inflation rate which is 25%. The annual demand of this chemical to retailer is 800 kg.s and the demand rate stays constant in the planning horizon. Back-ordering is disallowed and both the retailer and the supplier works for 365 days in a year. Find the economic order quantity and the order cycle time (in days) that minimizes the total inventory cost. Calculate the minimum total annual inventory cost. Carry out the whole analysis and show all of your calculations. **how is the total cost calculated?**

Hyundai Corporation uses activity-based costing to compute its product margins. Overhead costs have already been allocated to the company's three activity cost pools--Machining, Order Filling, and Other. The data related to those costs in the activity cost pools appears below:

Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:

Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.

What is the overhead cost assigned to Product S1 under activity-based costing? (Round the Intermediate calculation to two decimal places and your final answer to nearest whole dollar.)