|
The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers that it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 63 students enrolled in those two courses. Data concerning the company’s cost formulas appear below: |
| Fixed Cost per Month | Cost per Course |
Cost per Student |
||||
| Instructor wages | $ | 2,940 | ||||
| Classroom supplies | $ | 310 | ||||
| Utilities | $ | 1,230 | $ | 75 | ||
| Campus rent | $ | 4,700 | ||||
| Insurance | $ | 2,300 | ||||
| Administrative expenses | $ | 3,700 | $ | 44 | $ | 6 |
|
For example, administrative expenses should be $3,700 per month plus $44 per course plus $6 per student. The company’s sales should average $870 per student. |
| The actual operating results for September appear below: |
| Actual | ||
| Revenue | $ | 51,910 |
| Instructor wages | $ | 11,040 |
| Classroom supplies | $ | 19,380 |
| Utilities | $ | 1,940 |
| Campus rent | $ | 4,700 |
| Insurance | $ | 2,440 |
| Administrative expenses | $ | 3,680 |
| Required: | |
| A. |
The Gourmand Cooking School expects to run four courses with a total of 63 students in September. Complete the company’s planning budget for this level of activity. |
|
Expenses: Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Total expense: Net operating income: |
|
| B. |
The school actually ran four courses with a total of 53 students in September. Complete the company’s flexible budget for this level of activity. |
|
Expenses: Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Total expense: Net operating income: |
| 3. |
Calculate the revenue and spending variances for September. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Expenses: Instructor wages Classroom supplies Utilities Campus rent Insurance Administrative expenses Total expense: Net operating income: |
In: Accounting
The El Dorado Star is the only newspaper in El Dorado, New Mexico. Certainly, the Star competes with The Wall Street Journal, USA Today, and the New York Times for national news reporting, but the Star offers readers stories of local interest, such as local news, weather, high-school sporting events, and so on. The El Dorado Star faces the revenue and cost schedules shown in the spreadsheet that follows: A template for the spreadsheet is provided in the Course Materials. You may download my template or create your own. Since we are using dollars and cents, be sure to go out two decimal places on your calculations. Add columns to show, respectively, marginal cost (MC), marginal revenue (MR), and total profit
|
Number of newspapers per day (Q) |
Total revenue (including advertising revenues) per day (TR) |
Total cost per day (TC) |
|
0 |
0 |
2500 |
|
1000 |
4000 |
2600 |
|
2000 |
5000 |
2700 |
|
3000 |
5500 |
2860 |
|
4000 |
5750 |
3020 |
|
5000 |
5950 |
3200 |
|
6000 |
6125 |
3390 |
|
7000 |
6225 |
3590 |
|
8000 |
6125 |
3810 |
|
9000 |
5975 |
4050 |
What price should the manager of the EI Dorado Star charge? How many papers should be sold daily to maximize profit?
At the price and output level you answered in the previous question, is the EI Dorado Star making the greatest possible amount of total revenue? Is this what you expected? Explain why or why not.
Use the appropriate formulas to create two new columns (7 and 8) for total profit and profit margin, respectively. What is the maximum profit the EI Dorado Star can earn? What is the maximum possible profit margin? Are profit and profit margin maximized at the same point on demand?
What is the total fixed cost for the El Dorado Star? Explain how you arrived at this conclusion.
Create a new spreadsheet in which total fixed cost increases to $5,000. What price should the manager charge? How many papers should be sold in the short run?
In: Economics
Traditional Product Costing versus Activity-Based
Costing
Ridgeland Inc. makes backpacks for large sporting goods chains that
are sold under the customers' store brand names. The Accounting
Department has identified the following overhead costs and cost
drivers for next year:
| Overhead Item | Expected Costs | Cost Driver | Maximum Quantity |
|---|---|---|---|
| Setup costs | $979,200 | Number of setups | 7,200 |
| Ordering costs | 260,000 | Number of orders | 65,000 |
| Maintenance | 1,840,000 | Number of machine hours | 80,000 |
| Power | 176,000 | Number of kilowatt hours | 440,000 |
Total predicted direct labor hours for next year is 52,000. The following data are for two recently completed jobs:
| Job 201 | Job 202 | ||
|---|---|---|---|
| Cost of direct materials | $13,000 | $14,500 | |
| Cost of direct labor | $21,100 | $64,800 | |
| Number of units completed | 1,000 | 850 | |
| Number of direct labor hours | 220 | 270 | |
| Number of setups | 15 | 19 | |
| Number of orders | 21 | 42 | |
| Number of machine hours | 450 | 360 | |
| Number of kilowatt hours | 200 | 300 |
a. Determine the unit cost for each job using a traditional
plantwide overhead rate based on direct labor hours.
Round cost per unit answers to two decimal places
when applicable.
| Job 201 | Job 202 | |
|---|---|---|
| Direct materials | ||
| Direct labor | ||
| Overhead | ||
| Total cost | ||
| Units produced | ||
| Cost per unit |
b. Determine the unit cost for each job using ABC. Round cost per
unit answers to two decimal places when
applicable.
| Job 201 | Job 202 | |
|---|---|---|
| Direct materials | ||
| Direct labor | ||
| Setup cost | ||
| Ordering costs | ||
| Maintenance costs | ||
| Power | ||
| Total job costs | ||
| Units produced | ||
| Cost per unit |
In: Accounting
Manufacturing Income Statement, Statement of Cost of Goods Manufactured
Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December:
| On Company |
Off Company |
|||
| Materials inventory, December 1 | $86,200 | $110,300 | ||
| Materials inventory, December 31 | (a) | 124,710 | ||
| Materials purchased | 218,900 | (a) | ||
| Cost of direct materials used in production | 254,100 | (b) | ||
| Direct labor | 325,000 | 248,270 | ||
| Factory overhead | 100,860 | 123,590 | ||
| Total manufacturing costs incurred in December | (b) | 713,865 | ||
| Total manufacturing costs | 845,480 | 979,805 | ||
| Work in process inventory, December 1 | 165,520 | 265,940 | ||
| Work in process inventory, December 31 | 139,650 | (c) | ||
| Cost of goods manufactured | (c) | 707,260 | ||
| Finished goods inventory, December 1 | 145,660 | 124,765 | ||
| Finished goods inventory, December 31 | 152,590 | (d) | ||
| Sales | 1,270,720 | 1,103,580 | ||
| Cost of goods sold | (d) | 715,025 | ||
| Gross profit | (e) | (e) | ||
| Operating expenses | 165,540 | (f) | ||
| Net income | (f) | 244,015 | ||
Required:
1. Determine the amounts of the missing items, identifying them by letter. Enter all amounts as positive numbers.
| Letter | On Company | Off Company |
| a. | $ | $ |
| b. | $ | $ |
| c. | $ | $ |
| d. | $ | $ |
| e. | $ | $ |
| f. | $ | $ |
2. Prepare On Company's statement of cost of goods manufactured for December.
Note: If an amount should be subtracted, begin entry with a minus (-) sign.
| On Company | |||
| Statement of Cost of Goods Manufactured | |||
| For the Month Ended December 31 | |||
| Work in process inventory, December 1 | $ | ||
| Direct materials: | |||
| Materials inventory, December 1 | $ | ||
| Purchases | |||
| Cost of materials available for use | $ | ||
| Materials inventory, December 31 | |||
| Cost of direct materials used in production | $ | ||
| Direct labor | |||
| Factory overhead | |||
| Total manufacturing costs incurred during December | |||
| Total manufacturing costs | $ | ||
| Work in process inventory, December 31 | |||
| Cost of goods manufactured | $ | ||
3. Prepare On Company's income statement for December.
Note: If an amount should be subtracted, begin entry with a minus (-) sign.
| On Company | ||
| Income Statement | ||
| For the Month Ended December 31 | ||
| Sales | $ | |
| Cost of goods sold: | ||
| Finished goods inventory, December 1 | $ | |
| Cost of goods manufactured | ||
| Cost of finished goods available for sale | $ | |
| Finished goods inventory, December 31 | ||
| Cost of goods sold | ||
| Gross profit | $ | |
| Operating expenses | ||
| Net income | $ | |
In: Accounting
Question 4-53
Use the information in the table on the previous page to allocate costs to the mission centers using the direct distribution method.
Information in the Table
|
Allocation Statistics |
|||
|
Direct |
Purchasing: |
Administration |
|
|
Cost Centers |
Costs ($) |
Purchase Orders (%) |
Total Salaries (%) |
|
Support |
|||
|
Purchasing |
80,000 |
5 |
|
|
Administration |
40,000 |
15 |
- |
|
Mission |
- |
||
|
Soup Kitchens |
900,000 |
40 |
90 |
|
Counseling |
300,000 |
45 |
5 |
|
Total Cost |
1,320,000 |
100 |
100 |
Direct Distribution Method
|
Soup Kitchen |
Counseling |
Purchasing |
Administration |
|
|
Operating costs |
$900,000 |
$300,000 |
$80,000 |
$40,000 |
|
Purchasing (in ratio of 40-45) |
$37,647 |
$ 42,353 |
$(80,000) |
|
|
Administration (in ratio of 90.5) |
$ 37,895 |
$ 2,105 |
$ (40,000) |
|
|
Total |
$ 975,542 |
$ 344,458 |
$ - |
$ - |
Question 4-54
Using the information from Problem 4-53, allocate the costs using the step-down method. Compare the results with Problem 4-53. Do they differ?
Step-down Method
?????
Question 4-55
Using the information from Problem 4-54, allocate the costs using the step-down method, but change the order of step-down from that used when you solved Problem 4-54. Do your results differ from those you found in Problem 4-54?
|
Allocation Statistics |
|||
|
Direct |
Purchasing: |
Administration |
|
|
Cost Centers |
Costs ($) |
Purchase Orders (%) |
Total Salaries (%) |
|
Support |
|||
|
Purchasing |
80,000 |
5 |
|
|
Administration |
40,000 |
15 |
- |
|
Mission |
- |
||
|
Soup Kitchens |
900,000 |
40 |
90 |
|
Counseling |
300,000 |
45 |
5 |
|
Total Cost |
1,320,000 |
100 |
100 |
In: Accounting
1a. In order to at least break-even, a price must cover total costs (COGS + fixed costs). Calculate total cost and per unit total cost for XYZ eyeglass manufacturer with the following information (show your calculations):
Total units produced and sold: 100,000
Total annual management compensation: $600,000
Annual utilities cost: $120,000
Annual office rent: $240,000
Annual advertising cost: $400,000
Annual shared admin department costs: $600,000
40,000 plastic frames purchased in January for $10 each
20,000 plastic frames purchased in March for $9 each
40,000 plastic frames purchased in August for $11 each
40,000 lenses purchased in January for $5 each
20,000 lenses purchased in March for $6 each
40,000 lenses purchased in August for $7 each
100,000 units of glue purchased in January for $1 per unit
100,000 units of screws purchased in January for $1 per unit
1b. XYZ eyeglasses company has decided to sell the glasses at a set price of $39.99 per pair. Calculate the quantity XYZ must sell to break-even. Then, calculate profit margin per unit assuming XYZ sells all 100,000 eyeglasses. (Show your calculations)
1c. What would be the impact to break-even and profitability for XYZ if it lowered the price by $5 to $34.99?
- What would be the new profit margin per unit? ·
- What would be the new required units sold to break-even? ·
- How much would the profit margin change?
In: Accounting
A retail company receives most of its revenue from credit or debit card transactions or payments by check. Funds received from credit and debit card transactions automatically deposit in interest bearing accounts. However, the company does receive some cash payments from customers each day. These cash receipts total $7,250,000 annually. The company makes no cash payments to its suppliers or creditors. Money held in the cash account earns no interest. The company estimates that the transaction cost of moving funds from the cash account into investments that earn interest are $30.00 regardless of the amount transferred. The company earns on average 1.65% interest on funds held in interest bearing accounts and investments. 1. How much cash should the company allow to accumulate before making a deposit if it wants to minimize the total cost associated with carrying and converting cash? 2. If the company follows the optimal strategy identified in question 1, how frequently (on average) will the company move cash from the cash account into interest bearing investments? 3. If the company transfers funds as frequently as indicated in question 2: a. what will the total annual costs to transfer funds be? b. what will the average balance in the company’s cash account be? c. how much interest will the company forego annually by keeping funds in the cash account? d. what is the total cost to maintain a cash account? 4a. Determine the total cost associated with the cash account if the company transfers funds to interest bearing investments weekly rather than as often as indicated in question 2.
In: Finance
|
For many years Futura Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction in output, the company has idle capacity that could be used to produce the starters. The chief engineer has recommended against this move, however, pointing out that the per unit cost to produce the 55,000 starters needed would be greater than the current $11.60 per unit purchase price:
|
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In: Accounting
|
For many years Futura Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction in output, the company has idle capacity that could be used to produce the starters. The chief engineer has recommended against this move, however, pointing out that the per unit cost to produce the 55,000 starters needed would be greater than the current $13.70 per unit purchase price: |
| Per Unit | Total | |||
| Direct materials | $ | 7.00 | ||
| Direct labor | 3.50 | |||
| Supervision | 1.80 | $ | 99,000 | |
| Depreciation | 1.30 | $ | 71,500 | |
| Variable manufacturing overhead | 0.60 | |||
| Rent | 0.40 | $ | 22,000 | |
| Total product cost | $ | 14.60 | ||
|
A supervisor would have to be hired to oversee production of the starters. However, the company has sufficient idle tools and machinery so that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $88,000 per period. Depreciation is due to obsolescence rather than wear and tear. |
| Required: |
| 1. |
Determine the total relevant cost per unit if starters are made inside the company. (Round your answer to 2 decimal places.) |
| 2. |
Determine the total relevant cost per unit if starters are purchased from an outside supplier. (Round your answer to 2 decimal places.) |
| 3. |
What is the increase or decrease in profits as a result of purchasing the starters from an outside supplier rather than making them inside the company? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) |
In: Accounting
Palcic Manufacturing Company uses a process cost system. The Molding Department adds materials at the beginning of the process and conversion costs are incurred uniformly throughout the process. Work in process on May 1 was 75% complete and work in process on May 31 was 40% complete.
Instructions
Part A: Complete the Production Cost Report for the Molding Department for the month of May using the above information and the information below.
PALCIC MANUFACTURING COMPANY
Molding Department
Production Cost Report
For the Month Ended May 31, 2018
Equivalent Units
QUANTITIES Physical Units Materials Conversion Costs
Units to be accounted for
Work in process, May 1 16,000
Started into production 50,000
Total units 66,000
Units accounted for
Transferred out ______ _______ _______
Work in process, May 31 20,000 _______ _______
Total units ______ _______ _______
COSTS
Unit costs Materials Conversion Costs Total
Costs in May $198,000 $135,000 $333,000
Equivalent units ______ _______ _______
Unit costs $______ $______ $ ______
Costs to be accounted for
Work in process, May 1 $ 83,000
Started into production** 250,000
Total costs $333,000
Cost Reconciliation Schedule
Costs accounted for
Transferred out to assembly department $
Work in process, May 31
Materials $
Conversion costs ______ ______
Total costs $______ .
Part B: journalize all the transactions from above (current period manufacturing costs and transfer to next department – Packaging Department in this case).
**NOTE: Started into production costs (current period costs) breakdown as follows
Material costs: $85,000 Direct Labor: $100,000 Manufacturing Overhead: $65,000
In: Accounting