The De Facto Corporation is planning an investment in the consumer electronics market. The corporation already has an established brand recognition in this market, and believes it can capture 5% of the whole market. Table 1 sets out data on the relevant consumer electronics market.

Table 1: Consumer electronics market (numbers in millions) Annual sales revenues £100,000 Annual costs (variable) £50,000 Annual growth in sales/costs 3% Beta of sales and cost cash flows 1.5

Table 2 sets out data on De Facto Co’s investment project. Table 2: De Facto Co’s investment project Investment cost in year 0 £5.9bn Annual fixed costs £1bn Annual sales revenues 4.5% of total market Annual variable cost 4% of total market Working capital 20% of next year’s sales Duration 10 years The risk-free interest rate is 3% and the average return on the market index is 7%.

a. What is the relevant cost of capital for De Facto Co’s investment appraisal analysis?

b. What is the present value of De Facto Co’s future sales revenues?

c. What is the present value of De Facto Co’s future variable and fixed costs?

d. What is the net present value of De Facto Co’s working capital investment?

e. What is the net present value of De Facto Co’s total investment in the consumer electronics market?

f. Why do you think that De Facto Co’s sales revenues are 4.5% of the total market but only 4% of the total variable cost?

Sharifi Hospital bases its budgets on patient-visits. The hospital's static budget for October appears below:

The total overhead cost at an activity level of 8,400 patient-visits per month should be:

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The management of Furrow Corporation is considering dropping product L07E. Data from the company’s budget for the upcoming year appear below:

In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:

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The following labor standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month:

What is the labor rate variance for the month?

Marcelino Co.'s March 31 inventory of raw materials is $80,000. Raw materials purchases in April are $510,000, and factory payroll cost in April is $377,000. Overhead costs incurred in April are: indirect materials, $53,000; indirect labor, $22,000; factory rent, $39,000; factory utilities, $20,000; and factory equipment depreciation, $58,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $645,000 cash in April. Costs of the three jobs worked on in April follow.

rev: 03_15_2018_QC_CS-121813

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).

Bendix Ltd is a car parts manufacturer. It supplies you the following information regarding costs at various levels of monthly production:

In the above table there are some pure variable costs, some pure fixed costs and some mixed costs.

Required:

1. Identify and make separate lists of the pure variable costs, pure fixed costs and mixed costs and calculate their totals.
2. Split the total mixed costs into Fixed and Variable elements using High/Low method, calculate total fixed cost and develop the equation for total monthly production costs?
3. Explain to the management how to use the cost equation you developed in (2) above to predict total costs for the monthly production volume of 9 000 units and also calculate the correct unit cost.
4. In 2019 the company has produced 9 000 units. According to the Accountant’s calculations the unit cost was $28.05 ($336 600 / 12 000). The company added 10% margin to the cost and had set a selling price of $30.85.

However, the financial results show that there was a gross loss in the year. The company management cannot understand this mystery.

Explain to the management why there was a loss.

• The cost to purchase “New Tech” will be $421,000 and will have a useful life of 6 years; “New Tech” will have a salvage value of $26,000 at the end of 6 years. The cost to purchase “Standard Classic” will be $235,000 and will also have a useful life of 6 years; “Standard Classic” will have a salvage value of $5,000 at the end of 6 years.

• Total Contribution Margin from the sale of Widgets will be different for each machine because the “Standard Classic” machine requires more variable manufacturing overhead costs. The expected contribution margin if the “New Tech” machine is chosen is the following:

The contribution margin if the “Standard Classic” is chosen is expected to be the following:

• Working Capital of $53,000 will be required at the beginning of the production of Widgets for the “New Tech” machine, and working capital of $95,000 will be required at the beginning of the production of Widgets for the “Standard Classic” machine. For both machines the working capital will be released at the end of the project (i.e., end of year 6).

• The yearly cost of machine maintenance will be $50,000 for the “New Tech” and will be $72,000 for the “Standard Classic” machine.

• Other fixed costs for salaries, property taxes, and insurance, which will be the same regardless of the machine chosen, will be the following:

• The “Standard Classic” machine will require a major overhaul that will cost $100,000 at the end of year 3 of the project. This will not apply to the “New Tech” machine.

• The Required Rate of Return for Starliper Industries is 9%.

• Use the “Total-Cost Approach”

The computer workstation furniture manufacturing that Santana Rey started in January is progressing well. As of the end of June, Business Solutions's job cost sheets show the following total costs accumulated on three furniture jobs.

Job 602: Direct Materials: $1400, direct labor $1,000, Overhead $500

Job 603: Direct Materials: $3,600, direct labor $1,400, Overhead $700

Join 604: Direct Materials: $3,200, direct labor $2,200, Overhead $1,100

Job 602 was started in production in May, and these costs were assigned to it in May: direct materials, $600; direct labor, $250; and overhead, $125. Jobs 603 and 604 were started in June. Overhead cost is applied with a predetermined rate based on direct labor costs. Jobs 602 and 603 are finished in June, and Job 604 is expected to be finished in July. No raw materials are used indirectly in June. (Assume this company’s predetermined overhead rate did not change over these months.)
Required:
1. What is the cost of the raw materials used in June for each of the three jobs and in total?
2. How much total direct labor cost is incurred in June?
3. What predetermined overhead rate is used in June?
4. How much cost is transferred to finished goods inventory in June?

ob 604 Direct materials $ 1,400 $ 3,600 $ 3,200 Direct labor 1,000 1,400 2,200 Overhead 500 700 1,100 Job 602 was started in production in May, and these costs were assigned to it in May: direct materials, $600; direct labor, $250; and overhead, $125. Jobs 603 and 604 were started in June. Overhead cost is applied with a predetermined rate based on direct labor costs. Jobs 602 and 603 are finished in June, and Job 604 is expected to be finished in July. No raw materials are used indirectly in June. (Assume this company’s predetermined overhead rate did not change over these months.) Required: 1. What is the cost of the raw materials used in June for each of the three jobs and in total? 2. How much total direct labor cost is incurred in June? 3. What predetermined overhead rate is used in June? 4. How much cost is transferred to finished goods inventory in June?

1. Test Company derived the following cost function for the production of its product.

Cost = $16,000 + $10X, where x is the number of units.

Next month, Test Company expects to produce 4,000 units.

Determine the total cost per unit to produce 4,000 units.

Note: Give your answer using dollar signs and state your answer to the nearest cent.

Example: $12.34 or $12.00

2.

Next month, Test Company expects to produce 4,000 units.

Suppose production is less than expected so that Test Company only produces 3,500 units. Total cost will

3.

Next month, Test Company expects to produce 4,000 units.

Suppose production is less than expected so that Test Company only produces 3,500 units. Total variable cost will

4.

Next month, Test Company expects to produce 4,000 units.

Suppose production is less than expected so that Test Company only produces 3,500 units. Total fixed cost will

5.

Next month, Test Company expects to produce 4,000 units.

Suppose production is less than expected so that Test Company only produces 3,500 units. Variable cost per unit will

6.

Suppose production is less than expected so that Test Company only produces 3,500 units. Fixed cost per unit will

7.

Next month, Test Company expects to produce 4,000 units.

Suppose production is less than expected so that Test Company only produces 3,500 units. Total cost per unit will

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1. Machining rate: Overhead costs ÷ Total machine hours. The other three activity rates are calculated the same way using each activity's Overhead costs and totals.

2. Use the calculations from Requirement 1 to calculate the unit costs and also calculate OH cost per unit. Example of Total cost: Activity rate (above) × Basic OH costs and also Activity rate × Advanced OH costs. Example of OH costs per units: Total manufacturing costs÷ Units of production = Unit Cost (for Basic and Advanced).

3. Calculate unit costs using consumption ratios. Compare to activity rate unit costs. To assign inspection cost use the inspection hrs. for basic/advanced ÷ total inspection hrs. for both and give a conclusion.

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Question: Direct Materials and Direct Labor Variance Analysis Abbeville Fixture Company manufactures units ...

Direct Materials and Direct Labor Variance Analysis

Abbeville Fixture Company manufactures units in a small manufacturing facility. The units are made from brass. Manufacturing has 40 employees. Each employee presently provides 36 hours of labor per week. Information about a production week is as follows:

Required:

a. Determine the standard cost per unit for direct materials and direct labor. Round the cost per unit to two decimal places.

b. Determine the direct materials price variance, direct materials quantity variance, and total direct materials cost variance. Round your answers to the nearest whole dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

c. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Round your answers to the nearest whole dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.