The following table provides incomplete information on the costs of producing diagnostic imaging tests. It uses two inputs to produce its outputs: capital and labour. The fixed capital costs reflect the monthly leasing cost for the diagnostic imaging machine and the variable labour costs reflects the wages and hours worked by staff.

Assume that the firm is operating in a perfectly competitive market. Also assume that its fixed costs are sunk costs (i.e. it cannot recuperate these costs even if it decides to leave the market.

1. Complete all empty cells in the table above

2. Provide a brief explanation of why the marginal costs could exhibit the pattern you observe in part (a).

3. Add three columns to the table above headed: (i) marginal revenue; (ii) total revenue; and (iii) profit. If the market price was $40, complete all new columns in the table over the output range of 0 to 10

4. If the market price was $40, what would be the optimum level of production for the firm? Why?

Required 1. Olmo, Inc., manufactures and sells two products: Product K0 and Product H9. The annual production and sales of Product of K0 is 700 units and of Product H9 is 700 units. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

The overhead applied to each unit of Product K0 under activity-based costing is closest to?

Required 2. Olmo, Inc., manufactures and sells two products: Product T8 and Product P4. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

The total overhead applied to Product P4 under activity-based costing is closest to?

Han Products manufactures 25,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is:

   
An outside supplier has offered to sell 25,000 units of part S-6 each year to Han Products for $49.00 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $707,500. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.

Required:

1. Calculate the per unit and total relevant cost for buying and making the product. (Round your "per unit" answers to 2 decimal places.)

2. How much will profits increase or decrease if the outside supplier’s offer is accepted?

Statement of Cost of Goods Manufactured for a Manufacturing Company

Cost data for Sandusky Manufacturing Company for the month ended January 31 are as follows:

a. Prepare a cost of goods manufactured statement for January.

b. Determine the cost of goods sold for January.

On April 30, the end of the first month of operations, Joplin Company prepared the following income statement, based on the absorption costing concept:

If the fixed manufacturing costs were $12,408 and the fixed selling and administrative expenses were $5,580, prepare an income statement according to the variable costing concept. Round all final answers to whole dollars.

Exercise 4A-9 Equivalent Units; Equivalent Units of Production; Assigning Costs-FIFO Method [LO4-6, LO4-7, LO4-8]

Jarvene Corporation uses the FIFO method in its process costing system. The following data are for the most recent month of operations in one of the company’s processing departments:

The cost of beginning inventory according to the company’s costing system was $7,831 of which $4,849 was for materials and the remainder was for conversion cost. The costs added during the month amounted to $175,274. The costs per equivalent unit for the month were:

Required:

1. Compute the total cost per equivalent unit for the month.

2. Compute the equivalent units of material and conversion in the ending inventory.

3. Compute the equivalent units of material and conversion that were required to complete the beginning inventory.

4. Compute the number of units started and completed during the month.

5. Compute the cost of ending work in process inventory for materials, conversion, and in total for the month.

6. Compute the cost of the units transferred to the next department for materials, conversion, and in total for the month.

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows:

Barley Hopp had the following actual results last year:

Required:
1. Calculate the direct materials price, quantity, and total spending variances for Barley Hopp.
2. Calculate the direct labor rate, efficiency, and total spending variances for Barley Hopp.
3. Calculate the variable overhead rate, efficiency, and total spending variances for Barley Hopp.

1.

2.

3.

ANSWER ALL PARTS. DO NOT SKIP ANY PART. ATTEMPT ONLY IF YOU CAN EXPLAIN EACH PART STEP BY STEP

Jarvene Corporation uses the FIFO method in its process costing system. The following data are for the most recent month of operations in one of the company’s processing departments:




Units in beginning inventory 390
Units started into production 4,290
Units in ending inventory 340
Units transferred to the next department 4,340


Materials Conversion
Percentage completion of beginning inventory 80 % 20 %
Percentage completion of ending inventory 70 % 30 %


The cost of beginning inventory according to the company’s costing system was $7,833 of which $4,865 was for materials and the remainder was for conversion cost. The costs added during the month amounted to $177,160. The costs per equivalent unit for the month were:



Materials Conversion
Cost per equivalent unit $18.00 $23.00


Required:

1. Compute the total cost per equivalent unit for the month.

2. Compute the equivalent units of material and conversion in the ending inventory.

3. Compute the equivalent units of material and conversion that were required to complete the beginning inventory.

4. Compute the number of units started and completed during the month.

5. Compute the cost of ending work in process inventory for materials, conversion, and in total for the month.

6. Compute the cost of the units transferred to the next department for materials, conversion, and in total for the month.

Worley Company buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to hundreds of hospitals. Worley sets its prices for all hospitals by marking up its cost of goods sold to those hospitals by 8%. For example, if a hospital buys supplies from Worley that cost Worley $100 to buy from manufacturers, Worley would charge the hospital $108 to purchase these supplies.

For years, Worley believed that the 8% markup covered its selling and administrative expenses and provided a reasonable profit. However, in the face of declining profits, Worley decided to implement an activity-based costing system to help improve its understanding of customer profitability. The company broke its selling and administrative expenses into five activities as shown:

Worley gathered the data below for two of the many hospitals that it serves—University and Memorial (each hospital purchased medical supplies that had cost Worley $31,000 to buy from manufacturers):

Required:

1. Compute the total revenue that Worley would receive from University and Memorial.

2. Compute the activity rate for each activity cost pool.

3. Compute the total activity costs that would be assigned to University and Memorial.

4. Compute Worley’s customer margin for University and Memorial. (Hint: Do not overlook the $31,000 cost of goods sold that Worley incurred serving each hospital.)