The following information applies to the O’Donnell Company for March ­production. There are only two jobs (X and Y) in production in March. Purchased direct materials and indirect materials with the following summary of receiving reports: Material A $ 16,500 Material B 12,250 Indirect materials 3,250 Total $ 32,000 Issued direct materials and indirect materials with this summary of requisitions: Job X Job Y Total Material A $ 8,100 $ 16,200 $ 24,300 Material B 3,100 8,100 11,200 Subtotal $ 11,200 $ 24,300 $ 35,500 Indirect materials 39,250 Total $ 74,750 Factory labor incurred is summarized by these time tickets: Job X $ 22,200 Job Y 15,100 Indirect labor 28,250 Total $ 65,550 Factory utilities, factory depreciation, and factory insurance incurred is summarized as follows: Utilities $ 3,100 Depreciation 18,200 Insurance 2,600 Total $ 23,900 Factory overhead costs were applied to jobs at the predetermined rate of $46.50 per machine hour. Job X incurred 1,100 machine hours; Job Y used 800 machine hours. Job X was completed; Job Y was still in process at the end of March. The company closed the overapplied or underapplied overhead to the Cost of Goods Sold account at the end of March. Required: 1. Calculate the total manufacturing cost for Job X and Job Y for March. 2. Calculate the amount of overapplied or underapplied overhead and state whether the Cost of Goods Sold account will be increased or decreased by the adjustment.

Production Report, Weighted Average

Manzer Inc. manufactures bicycle frames in two departments: cutting and welding. Manzer uses the weighted average method. Manufacturing costs are added uniformly throughout the process. The following are cost and production data for the cutting department for October:

Required:

Prepare a production report for the cutting department. If an amount box does not require an entry, leave it blank or enter "0".

Question 4

1. Explain the difference between financial accounting and management accounting.

Ensure your explanation clearly explains the purpose of management accounting.

2. Car Services Ltd produces custom tow bars and bull bars for utes and cars. Each customer’s order is treated as a separate job so costs can be tracked for each customer.

Tasks

Briefly explain the following:

1. The meaning of the term cost object. Identify the cost object that would be used by Car Services Ltd when recording costs.
2. The difference between a direct cost and an indirect cost. Identify examples of both direct costs and indirect costs for the cost object.

3. Salmon Ltd provides you with the following information on the costs of testing the water quality of their wastewater.

Task

Using the high low method, calculate the fixed cost per month and the variable cost per test.

d) King Ltd uses a job costing system. The company’s budget for the year included a budgeted total manufacturing overhead cost of $1,800,000 and budgeted total direct labour hours of 60,000 hours. Manufacturing overhead cost is applied to jobs based on direct labour-hours worked. During December, King Ltd started and completed one manufacturing job (Job 571). The events of December are:

Tasks

1. Calculate the total cost of Job 571.
2. Determine the amount by which the manufacturing overhead cost is overapplied or underapplied for December.

A perfectly competitive industry has a large number of potential entrants. Each firm has an identical cost structure such that long-run average cost is minimized at an output of 20 units ( q i = 20 ) . The minimum average cost is $10 per unit. Total market demand is given by Q = D ( P ) = 1 , 500 - 50 P . What is the industry’s long-run supply schedule? What is the long-run equilibrium price ( P ∗ ) ? The total industry output ( Q ∗ ) ? The output of each firm ( q ∗ ) ? The number of firms? The profits of each firm? The short-run total cost function associated with each firm’s long-run equilibrium output is given by C ( q ) = 0.5 q 2 - 10 q + 200 . Calculate the short-run average and marginal cost function. At what output level does short-run average cost reach a minimum? Calculate the short-run supply function for each firm and the industry short-run supply function. Suppose now that the market demand function shifts upward to Q = D ( P ) = 2 , 000 - 50 P . Using this new demand curve, answer part (b) for the very short run when firms cannot change their outputs. In the short run, use the industry short-run supply function to recalculate the answers to (b). What is the new long-run equilibrium for the industry?

Here are the answers to the first 4. I ONLY NEED PARTS E,F, & G.

(a) In perfect competition, long run equilibrium holds when long run average cost = long run marginal cost = price We have, Q = 1500 - 50p Or, 50p = 1500 - Q p = 30 - 0.02Q This is the long run supply shcedule.

(b) Minimum average cost = $10 This is the marginal cost (MC) in long run. Since a perfectly competitive firm equates P with MC: p = 30 - 0.02Q = 10 0.02Q = 20 (i) Q = 1,000 [Q*] (ii) p = 30 - (0.02 x 1000) = 10 [p*] Since output of each firm = 20 units [q*] (Given) (iii) Number of firms = Total output (Q) / 20 = 1,000 / 20 = 50 (iv) Total industry profit = Revenue - cost = p* x q* - (AVC x q*) = q*(p* - AVC) = 0 [Since p* = AVC = 10] In the long run, excess profit = 0 for all firms.

(c) C = 0.5q2 - 10q + 200 Marginal cost, MC = dC / dq = q - 10 Average cost, AC = C / q = 0.5q - 10 + (200/q) AC is minimum when dAC / dq = 0 0.5 - (200/q2) = 0 (200/q2) = 0.5 q2 = 200 / 0.5 = 400 q = 20 [Output when AVC is minimum]

(d) In the short run, supply function is the marginal cost function of the firm: p = q - 10 [MC of firm] or, q = p + 10 Total industry supply = individual firm supply x number of firms Q = q x 50 = 50(p + 10) Q = 50p + 500 Or, p = (Q - 500) / 50 [Industry short run supply function]

“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $21 per drum, we would be paying $4.85 less than it costs us to manufacture the drums in our own plant. Since we use 50,000 drums a year, that would be an annual cost savings of $242,500.” Antilles Refining’s current cost to manufacture one drum is given below (based on 50,000 drums per year):

      A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are:

Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $157,500 per year.
Alternative 2: Purchase the drums from an outside supplier at $21 per drum.

     The new equipment would be more efficient than the equipment that Antilles Refining has been using and, according to the manufacturer, would reduce direct labour and variable overhead costs by 20%. The old equipment has no resale value. Supervision cost ($52,500 per year) and direct materials cost per drum would not be affected by the new equipment. The new equipment’s capacity would be 105,000 drums per year.
    The company’s total general company overhead would be unaffected by this decision. (Round all intermediate calculations to 2 decimal places.)

Required:
1. To assist the managing director in making a decision, prepare an analysis showing the total cost and the cost per drum for each of the two alternatives given above. Assume that 50,000 drums are needed each year.

a. What will be the total relevant cost of 50,000 drums if they are manufactured internally as compared to being purchased?

b. What would be the per unit cost of each drum manufactured internally? (Round your answer to 2 decimal places.)

c. Which course of action would you recommend to the managing director?

• Purchase from the outside supplier

• Manufacture internally

• Indifferent between the two alternatives

2a-1. What will be the total relevant cost of 75,000 drums if they are manufactured internally?

2a-2. What would be the per unit cost of drums? (Round your answer to 2 decimal places.)

2a-3. What course of action would you recommend if 75,000 drums are needed each year?

• Indifferent between the two alternatives

• Manufacture internally

• Purchase from the outside supplier

2b-1. What will be the total relevant cost of 105,000 drums if they are manufactured internally?

2b-2. What would be the per unit cost of drums? (Round your answer to 2 decimal places.)

2b-3. What course of action would you recommend if 105,000 drums are needed each year?

• Manufacture internally

• Purchase from the outside supplier

• Indifferent between the two alternatives

1. Which of the following statements is true of a normal costing system?

In a normal costing system, only the costs incurred for direct materials are used to determine unit cost.

In a normal costing system, only actual costs of direct materials, direct labor, and overhead are used to determine unit cost.

In a normal costing system, unit costs are determined by adding estimated direct materials, estimated direct labor, and actual overhead.

In a normal costing system, unit costs are determined by adding actual direct materials, actual direct labor, and estimated overhead.

d

2. Which of the following is a difference between the actual cost system and the normal cost system?

The actual cost system determines unit cost by adding actual costs of direct materials and actual direct labor, whereas the normal cost system determines unit cost by adding actual direct materials, actual direct labor, and estimated overhead.

The actual cost system determines unit cost by adding actual direct materials, actual direct labor, and actual overhead, whereas the normal cost system determines unit cost by adding actual direct materials, actual direct labor, and estimated overhead.

The actual cost system determines unit cost by adding actual costs of direct materials and actual direct labor, whereas the normal cost system determines unit cost by adding actual direct labor and estimated overhead.

The actual cost system determines unit cost by approximating the year’s actual total cost at the beginning of the year, whereas the normal cost system determines unit cost by approximating the year’s actual total cost based on the total cost of the prior year.

3. Using the normal costing method, how can the overhead costs be estimated or calculated?

Overhead costs can be calculated by approximating the year’s actual overhead at the end of the year and then using the actual rate to obtain the needed unit cost information.

Overhead costs are estimated by approximating the year’s estimated overhead at the beginning of the year and then using the actual rates from the most recent year to obtain the needed unit cost information.

Overhead costs can be estimated by approximating the year’s actual overhead at the beginning of the year and then using a predetermined rate throughout the year to obtain the needed unit cost information.

Overhead costs can be calculated by approximating the year’s actual overhead at the end of the first six months of the year and then using the actual rate of this period to obtain the needed unit cost information.

1. Nile Machinery Inc. estimated an annual overhead cost of $200,000 for the year 20X1. It also estimated an annual activity level of 4,000 units for the year. The actual overhead cost was $240,000. Calculate the predetermined overhead rate per unit for Nile Machinery for the year 20X1.

$60 per unit

$10 per unit

$50 per unit

$100 per unit

2. For the year 20X1, Argon Systems Inc.’s predetermined overhead rate was 40% of direct labor costs. By the end of the year, the total costs for direct labor was $100,000. The actual overhead for the year 20X1 was $38,000. Calculate the overhead variance for the year 20X1.

Underapplied variance of $2,000

Overapplied variance of $2,000

Underapplied variance of $4,000

Overapplied variance of $4,000

3. Which of the following is the mathematical expression to calculate the predetermined overhead rate for a department?

Predetermined Departmental Overhead Rate = Actual Department Overhead ÷ Estimated Departmental Activity Level

Predetermined Departmental Overhead Rate = Estimated Department Overhead ÷ Actual Departmental Activity Level

Predetermined Departmental Overhead Rate = Estimated Department Overhead ÷ Estimated Departmental Activity Level

Predetermined Departmental Overhead Rate = Actual Department Overhead ÷ Actual Departmental Activity Level

4. Regal Manufacturing Corp., manufacturers of custom-made motor engines, has an estimated overhead of $109,500 and estimated direct labor hours of 21,900 at the beginning of the current year. It applies overhead based on direct labor hours. Actual direct labor hours for the current year are 22,500. Calculate the overhead applied to production for the year.

$106,580

$112,500

$3,000

$5,920

1. Which of the following documents lists the total cost for a single job?

Sales order

Job-order cost sheet

Bill of materials

Goods receipt note

2. Which of the following is true of a material requisition form?

It includes the data like type, quantity, and unit price of the direct materials issued to a job.

It lists the total material cost for a single job.

It is filled out by each employee every day to identify total material cost and abnormal wastage of material.

It is prepared using the information of material cost entered in the job-order cost sheet.

3. Vector Paperwork's Inc. produces high-quality paper and other stationery items. It uses the job-order costing system in its manufacturing process. In the factory, 100 employees work in the production process, 20 as supervisors, 30 in the sales department, and 5 in the accounting department. For which of the following employees must time ticket be filled out for at the end of each job?

Employees in the accounting department

Employees in the sales department

Supervisors

Employees in the production process

Budgeted Income Statement and Supporting Budgets

The budget director of Gold Medal Athletic Co., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for March:

1. Estimated sales for March:

   Batting helmet	1,200 units at $40 per unit
   Football helmet	6,500 units at $160 per unit

2. Estimated inventories at March 1:

   Direct materials:
   Plastic	90 lbs.
   Foam lining	80 lbs.
   Finished products:
   Batting helmet	40 units at $25 per unit
   Football helmet	240 units at $77 per unit

3. Desired inventories at March 31:

   Direct materials:
   Plastic	50 lbs.
   Foam lining	65 lbs.
   Finished products:
   Batting helmet	50 units at $25 per unit
   Football helmet	220 units at $78 per unit

4. Direct materials used in production:

   In manufacture of batting helmet:
   Plastic	1.2 lbs. per unit of product
   Foam lining	0.5 lb. per unit of product
   In manufacture of football helmet:
   Plastic	3.5 lbs. per unit of product
   Foam lining	1.5 lbs. per unit of product

5. Anticipated cost of purchases and beginning and ending inventory of direct materials:

   Plastic	$6 per lb.
   Foam lining	$4 per lb.

6. Direct labor requirements:

   Batting helmet:
   Molding Department	0.2 hr. at $20 per hr.
   Assembly Department	0.5 hr. at $14 per hr.
   Football helmet:
   Molding Department	0.5 hr. at $20 per hr.
   Assembly Department	1.8 hrs. at $14 per hr.

7. Estimated factory overhead costs for March:

   Indirect factory wages	$86,000
   Depreciation of plant and equipment	12,000
   Power and light	4,000
   Insurance and property tax	2,300

8. Estimated operating expenses for March:

   Sales salaries expense	$184,300
   Advertising expense	87,200
   Office salaries expense	32,400
   Depreciation expense—office equipment	3,800
   Telephone expense—selling	5,800
   Telephone expense—administrative	1,200
   Travel expense—selling	9,000
   Office supplies expense	1,100
   Miscellaneous administrative expense	1,000

9. Estimated other income and expense for March:

   Interest revenue	$940
   Interest expense	872

10. Estimated tax rate: 30%

Required:

1. Prepare a sales budget for March. Enter all amounts as positive numbers.

2. Prepare a production budget for March. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

3. Prepare a direct materials purchases budget for March. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

4. Prepare a direct labor cost budget for March. Enter all amounts as positive numbers.

5. Prepare a factory overhead cost budget for March.

6. Prepare a cost of goods sold budget for March. Work in process at the beginning of March is estimated to be $15,300, and work in process at the end of March is desired to be $14,800. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

7. Prepare a selling and administrative expenses budget for March.

8. Prepare a budgeted income statement for March.

Budgeted Income Statement and Supporting Budgets

The budget director of Gold Medal Athletic Co., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for March:

Estimated sales for March:

Estimated inventories at March 1:

Desired inventories at March 31:

Direct materials used in production:

Anticipated cost of purchases and beginning and ending inventory of direct materials:

Direct labor requirements:

Estimated factory overhead costs for March:

Estimated operating expenses for March:

Estimated other income and expense for March:

Estimated tax rate: 30%

Required:

1. Prepare a sales budget for March. Enter all amounts as positive numbers.

2. Prepare a production budget for March. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

3. Prepare a direct materials purchases budget for March. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

4. Prepare a direct labor cost budget for March. Enter all amounts as positive numbers.

5. Prepare a factory overhead cost budget for March.

6. Prepare a cost of goods sold budget for March. Work in process at the beginning of March is estimated to be $15,300, and work in process at the end of March is desired to be $14,800. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

7. Prepare a selling and administrative expenses budget for March.

8. Prepare a budgeted income statement for March.

Budgeted Income Statement and Supporting Budgets

The budget director of Gold Medal Athletic Co., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for March:

Estimated sales for March:

Estimated inventories at March 1:

Desired inventories at March 31:

Direct materials used in production:

Anticipated cost of purchases and beginning and ending inventory of direct materials:

Direct labor requirements:

Estimated factory overhead costs for March:

Estimated operating expenses for March:

Estimated other income and expense for March:

Estimated tax rate: 30%

Required:

1. Prepare a sales budget for March. Enter all amounts as positive numbers.

2. Prepare a production budget for March. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

3. Prepare a direct materials purchases budget for March. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

4. Prepare a direct labor cost budget for March. Enter all amounts as positive numbers.

5. Prepare a factory overhead cost budget for March.

6. Prepare a cost of goods sold budget for March. Work in process at the beginning of March is estimated to be $15,300, and work in process at the end of March is desired to be $14,800. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

7. Prepare a selling and administrative expenses budget for March.

8. Prepare a budgeted income statement for March.

Check My Work