Walkenhorst Company’s machining department prepared its 2019 budget based on the following data:

The department uses machine hours to apply factory overhead to production. In 2019, the department used 85,000 machine hours and incurred $625,000 in total manufacturing overhead cost to manufacture 42,000 units. Actual fixed overhead cost for the year was $375,000.

Required:

Determine for the year:

1. The fixed, variable, and total factory overhead application rates (per machine hour). (Round your answers to 2 decimal places.)

2. The total flexible budget, for factory overhead cost based on output achieved in 2019.

3. The production volume variance. State whether this variance was favorable (F) or unfavorable (U).

4. The total overhead spending variance. State whether this variance was favorable (F) or unfavorable (U).

5. The overhead efficiency variance. State whether this variance was favorable (F) or unfavorable (U).

6. The variable overhead spending variance and the fixed overhead spending variance. State whether each variance is favorable (F) or unfavorable (U).

Walkenhorst Company’s machining department prepared its 2019 budget based on the following data: Practical capacity 40,000 units Standard machine hours per unit 2 Standard variable factory overhead $3.00 per machine hour Budgeted fixed factory overhead $ 360,000 The department uses machine hours to apply factory overhead to production. In 2019, the department used 85,000 machine hours and incurred $625,000 in total manufacturing overhead cost to manufacture 42,000 units. Actual fixed overhead cost for the year was $375,000. Required: Determine for the year: 1. The fixed, variable, and total factory overhead application rates (per machine hour). (Round your answers to 2 decimal places.) 2. The total flexible budget, for factory overhead cost based on output achieved in 2019. 3. The production volume variance. State whether this variance was favorable (F) or unfavorable (U). 4. The total overhead spending variance. State whether this variance was favorable (F) or unfavorable (U). 5. The overhead efficiency variance. State whether this variance was favorable (F) or unfavorable (U). 6. The variable overhead spending variance and the fixed overhead spending variance. State whether each variance is favorable (F) or unfavorable (U).

Activity-Based Product Costing

Sweet Sugar Company manufactures three products (white sugar, brown sugar, and powdered sugar) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:

ActivityBudgeted Activity Cost

Production $448,900

Setup 130,200

Inspection 94,600

Shipping 136,400

Customer service 79,800

Total $889,900

The activity bases identified for each activity are as follows:

ActivityActivity Base

ProductionMachine hours

SetupNumber of setups

InspectionNumber of inspections

ShippingNumber of customer orders

Customer serviceNumber of customer service requests

The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

   Machine Hours Number of
Setups Number of
Inspections Number of
Customer Orders Customer
Service
Requests Units

White sugar 2,950 80 220 880 70 7,375

Brown sugar 1,880 110 330 2,420 440 4,700

Powdered sugar 1,870 110 550 1,100 190 4,675

Total 6,700 300 1,100 4,400 700 16,750

Each product requires 0.9 machine hour per unit.

Required:

If required, round all per unit amounts to the nearest cent.

1. Determine the activity rate for each activity.

Production$ per machine hour

Setup$ per setup

Inspection$ per move

Shipping$ per cust. ord.

Customer service$ per customer service request

2. Determine the total and per-unit activity cost for all three products.

Total Activity CostActivity Cost Per Unit

White sugar$$

Brown sugar

Powdered sugar

3. Why aren’t the activity unit costs equal across all three products since they require the same machine time per unit?

The unit costs are different because the products consume many activities in ratios different from the volume .

Feedback

1. Calculate Activity Rate for each activity:

Total Cost ÷ Total Activity-Base = Activity Rate

2. Calculate Activity Cost for each product:

Activity-Base Usage x Activity rate from Req. (1) = Activity cost; Sum all activity costs per product to determine a total and divide the total overhead by budgeted units to derive the activity costs per unit for each product.

he budget director of Birding Homes & Feeders Inc., 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 January:

1. Estimated sales for January:

   Bird house	15,000 units at $25 per unit
   Bird feeder	40,000 units at $15 per unit

2. Estimated inventories at January 1:

   Direct materials:
   Wood	600 ft.
   Plastic	1,000 lbs.
   Finished products:
   Bird house	1,000 units at $15 per unit
   Bird feeder	2,500 units at $8 per unit

3. Desired inventories at January 31:

   Direct materials:
   Wood	500 ft.
   Plastic	1,250 lbs.
   Finished products:
   Bird house	1,500 units at $15 per unit
   Bird feeder	3,000 units at $8 per unit

4. Direct materials used in production:

   In manufacture of Bird House:
   Wood	0.80 ft. per unit of product
   Plastic	0.10 lb. per unit of product
   In manufacture of Bird Feeder:
   Wood	0.20 ft. per unit of product
   Plastic	1.00 lb. per unit of product

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

   Wood	$2.50 per ft.
   Plastic	$0.80 per lb.

6. Direct labor requirements:

   Bird House:
   Fabrication Department	0.40 hr. at $18 per hr.
   Assembly Department	0.20 hr. at $12 per hr.
   Bird Feeder:
   Fabrication Department	0.25 hr. at $18 per hr.
   Assembly Department	0.10 hr. at $12 per hr.

7. Estimated factory overhead costs for January:

   Indirect factory wages	$40,000
   Depreciation of plant and equipment	20,000
   Power and light	10,000
   Insurance and property tax	5,000

8. Estimated operating expenses for January:

   Sales salaries expense	$125,000
   Advertising expense	80,000
   Office salaries expense	40,000
   Depreciation expense—office equipment	4,000
   Travel expense—selling	25,000
   Office supplies expense	2,500
   Miscellaneous administrative expense	3,500

9. Estimated other revenue and expense for January:

   Interest revenue	$4,540
   Interest expense	3,000

10. Estimated tax rate: 25%

Required:

1. Prepare a sales budget for January.

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

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

4. Prepare a direct labor cost budget for January.

5. Prepare a factory overhead cost budget for January.

6. Prepare a cost of goods sold budget for January. Work in process at the beginning of January is estimated to be $9,000, and work in process at the end of January is estimated to be $10,500. 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 January.

8. Prepare a budgeted income statement for January. In the Other revenue and expense section, indicate expenses as negative amounts.

******PLEASE COMPLETE ALL PARTS*****

1. The EPA is considering an application from the state of Colorado for a large dam project on the Colorado River. The basic costs and benefits of the project (in inflation-adjusted dollar values) are as follows:

1. Do a formal Cost-Benefit Analysis (CBA) using the quantifiable factors listed above. Assume that the operating lifespan of the dam is 30 years. Assume construction begins in year 1. All other impacts start when the dam is completed (at the beginning of Year 4) and continue for 30 years, which implies the full lifespan for the project is 33 years.
2. Using the same parameters and results from part (a.), adjust the interest rate to determine the level of discounting necessary to just break even. (Hint: I would start by changing the interest rate in 1% increments and then refine the changes as you get close to the break-even point.) What does this increase or decrease in interest rate imply about the relationship between costs and benefits over time?
3. (Return to the setup from part (a.) with a 7% discount rate.) In addition to the components of the project listed above, what other costs and/or benefits do you think are missing that should be included? How do you think they will impact the overall conclusion regarding the profitability of the project? (Hint: I would suggest thinking about this in terms of existence values – i.e., based on our discussion in class surrounding the development of ANWR what values may need to be built into this analysis and how would you go about getting them. There isn’t one right answer – you just need to defend your reasoning for what you come up with. I would suggest starting by thinking about how many households there are in the US and how much each would pay per year to protect the ecosystems associated with the dam.)
4. Finally, holding constant the analysis you did in part (c.) what happens when you increase the acre-foot price of irrigation water from $700 to $1500 and/or the price per kilowatt hour of electricity from $0.125 to $0.15?

When you take the effort to dispute a parking ticket, you must take into account the cost of your time, which is called:

explicit cost

accounting cost

economic cost

opportunity cost

When making decisions, welfare is maximized when:

marginal cost equals opportunity cost

marginal cost equals marginal benefit

marginal cost equals total benefit

marginal cost equals total cost

If you paid $18 for an “unlimited play” pass at Boomers Fun Center, what is the marginal cost of the 3^rd round of mini-golf?

$18

$6

$3

$0

Instead of taking this exam, you could be home watching your favorite TV show. The value of watching this TV show is called the:

intrinsic value

explicit benefit

opportunity cost

alternative value

Instead of taking economics this term, you could have volunteered at a camp for kids, backpacked through Europe, or attended a marathon training camp. If you prefer volunteering more than backpacking, and prefer backpacking more than marathon training, what is your opportunity cost of taking this class?

The value gained from volunteering at the camp

The value gained from backpacking through Europe

The value gained from attending the marathon training camp

The sum of the value gained from all three activities

Appen Ltd. incurred fixed manufacturing costs of $25,000 during 2020. Other information for 2020 includes:

            The budgeted denominator level is 2,500 units.

            Units produced total 2,600 units.

            Units sold total 1,600 units.

            Variable cost per unit is $5

            Beginning inventory is zero.

The fixed manufacturing cost rate is based on the budgeted denominator level. There is no spending variance for fixed manufacturing cost.

Under absorption costing, calculate the production-volume variance. Clearly label whether the variance is ‘favourable’ or ‘unfavourable’ (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.) Show all workings.

A firm has been ordering on the basis of EOQ for a product that has an annual requirement of 22,000 units/year and the unit cost is $40/unit. Ordering and receiving costs are $75/order, and the annual carrying costs are 30% of the part value in storage. The supplier is offering a 5% price discount on orders greater than 800 units/order.

Determine the EOQ without considering the quanitity discount

What is the total annual cost including the value of the product without a discount?

What is the total annual cost including the value of the product if the order quantity goes to 800 and the discount is taken?

Should the customer order the discount quantity?

Show all work.

Summit Engineering manufactures two products, Product ACC01 and Product ACC02. The company has adopted an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

The total overhead applied to Product ACC02 under activity-based costing is closest to: