Kubin Company’s relevant range of production is 30,000 to 35,000 units. When it produces and sells 32,500 units, its average costs per unit are as follows:

Required:

1. Assume the cost object is units of production:

a. What is the total direct manufacturing cost incurred to make 32,500 units?

b. What is the total indirect manufacturing cost incurred to make 32,500 units?

2. Assume the cost object is the Manufacturing Department and that its total output is 32,500 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department?

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $146,250 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives’ compensation.

a. When the company sells 32,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives?

b. When the company sells 32,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

Kubin Company’s relevant range of production is 30,000 to 35,000 units. When it produces and sells 32,500 units, its average costs per unit are as follows:

Required:

1. Assume the cost object is units of production:

a. What is the total direct manufacturing cost incurred to make 32,500 units?

b. What is the total indirect manufacturing cost incurred to make 32,500 units?

2. Assume the cost object is the Manufacturing Department and that its total output is 32,500 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department?

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $146,250 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives’ compensation.

a. When the company sells 32,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives?

b. When the company sells 32,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

Kubin Company’s relevant range of production is 13,000 to 18,000 units. When it produces and sells 15,500 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 7.40 Direct labor $ 4.40 Variable manufacturing overhead $ 1.90 Fixed manufacturing overhead $ 5.40 Fixed selling expense $ 3.90 Fixed administrative expense $ 2.90 Sales commissions $ 1.40 Variable administrative expense $ 0.90 Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 15,500 units? b. What is the total indirect manufacturing cost incurred to make 15,500 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 15,500 units. a. How much total manufacturing cost is directly traceable to the Manufacturing Department? b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department? 3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $44,950 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives’ compensation. a. When the company sells 15,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives? b. When the company sells 15,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

Kubin Company’s relevant range of production is 20,000 to 23,000 units. When it produces and sells 21,500 units, its average costs per unit are as follows:

Required:

1. Assume the cost object is units of production:

a. What is the total direct manufacturing cost incurred to make 21,500 units?

b. What is the total indirect manufacturing cost incurred to make 21,500 units?

2. Assume the cost object is the Manufacturing Department and that its total output is 21,500 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department?

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $75,250 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives’ compensation.

a. When the company sells 21,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives?

b. When the company sells 21,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

Define each of the following resources.

7.1. Central park:

7.2. I-95 interstate thruway from Maine to Florida:

7.3. Fish in a stream in NY State:

7.4. US Navy medical hospital supply ship now docked in NYC:

7.5. Zoom:

Strikes tend to be pretty uncommon in the US these days. Have you ever been impacted by a strike? What trend do you see strikes having in the future? Does the change in generations (from baby boomers to millenials) affect the likelihood of strikes in your opinion?

CASE 4–20 Ethics and the Manager, Understanding the Impact of Percentage Completion on Profit—Weighted-Average Method [Course Objective B] Gary Stevens and Mary James are production managers in the Consumer Electronics Division of General Electronics Company, which has several dozen plants scattered in locations throughout the world. Mary manages the plant located in Des Moines, Iowa, while Gary manages the plant in El Segundo, California. Production managers are paid a salary and get an additional bonus equal to 5% of their base salary if the entire division meets or exceeds its target profits for the year. The bonus is determined in March after the company’s annual report has been prepared and issued to stockholders.

Shortly after the beginning of the New Year, Mary received a phone call from Gary that went like this:

Gary: How’s it going, Mary?

Mary: Fine, Gary. How’s it going with you?

Gary: Great! I just got the preliminary profit figures for the division for last year and we are within $200,000 of making the year’s target profits. All we have to do is pull a few strings, and we’ll be over the top!

Mary: What do you mean? Gary: Well, one thing that would be easy to change is your estimate of the percentage completion of your ending work in process inventories. Mary: I don’t know if I can do that, Gary. Those percentage completion figures are supplied by Tom

Winthrop, my lead supervisor, who I have always trusted to provide us with good estimates.

Besides, I have already sent the percentage completion figures to corporate headquarters. Gary:     You can always tell them there was a mistake. Think about it, Mary. All of us managers are doing as much as we can to pull this bonus out of the hat. You may not want the bonus check, but the rest of us sure could use it.

The final processing department in Mary’s production facility began the year with no work in process inventories. During the year, 210,000 units were transferred in from the prior processing department and 200,000 units were completed and sold. Costs transferred in from the prior department totaled $39,375,000. No materials are added in the final processing department. A total of $20,807,500 of conversion cost was incurred in the final processing department during the year.

Required:

1.            Tom Winthrop estimated that the units in ending inventory in the final processing department were 30% complete with respect to the conversion costs of the final processing department. If this estimate of the percentage completion is used, what would be the Cost of Goods Sold for the year? (Note: Since all units completed were sold, the cost of goods transferred out = Cost of Goods Sold.)

2.            Gary is recommending that the completion percentage by adjusted by 15 percentage points in order to assist the team in making their bonus.

a. Calculate the cost of goods sold if the ending inventory is 15% complete in regard to conversion costs. Would net income increase or decrease if this option was chosen over the 30% completion percentage? How much is the increase?

b. Calculate the cost of goods sold if the ending inventory is 45% complete in regard to conversion costs. Would net income increase or decrease if this option was chosen over the 30% completion percentage? How much is the increase?

c. Based on your calculations, which percentage is Gary suggesting that Mary use for her ending inventory calculations.  

Question 3 (October 2018)

Dyson Company Malaysia manufactures the cyclonic vacuum cleaner which us to be sold in Asia for RM2,000 per vacuum. The following information is in relation to the budgeted production and sales of cyclonic vacuum cleaners for the last quarter of 2017.

1. Budgeted sales in units:

July 10,000

August 12,000

September 14,000

October 13,500

November 13,800

December 14,500

60% of the sales will be collected one month after sales.

30% of the sales will be collected two months after sales.

10% of the sales will be collected three months after sales.

2. Variable production cost per vacuum:

RM

Direct materials 30.00

Direct labour 21.00

Overhead 16.00

3. Budgeted production in units:

August 12,000

September 14,000

October 13,500

November 13,800

December 14,500

4. It is the company policy to pay creditors for material two months after purchases are made.

5. Wages and variable overhead are paid within the month they are incurred.

6. Sales commission are 8% on sales and are to be paid one month after sales are made.

7. Fixed overhead is RM210,000 per month, which includes depreciation of RM65,000.

8.Fixed selling and administration is RM72,000 per month which is payable in the month

it is incurred.

9. One of the old machines will be sold for RM12,000 in the month of November and a new machine will be replace it in the same month at a cost of RM78,000.

10. The company will pay dividends which was declared at RM100,000 at the end of December.

11. It is expected that the cash balance on 30th September will be RM80,000.

Required:

(a) Prepare a schedule of expected cash collections from customer for the last quarter of 2017.

(b) Prepare schedule for payment of materials for the last quarter of 2017.

(c) Prepare a cash budget for the last quarter of 2017.

Suppose a US company issued 10-year bonds 5 years ago with a face value of $1,000 and an annual coupon rate of 6%. The coupons are paid semi-annually and the bonds are currently trading in the market at a price of $1,089.83. The company is considering whether to call the bonds and issue new 5- year bonds at a par value of $1,000. Based on this information, answer the following four questions.

(i) What is the yield to maturity on the currently outstanding bonds with a remaining time to maturity of 5 years? If we assume that the company’s credit rating has not changed, what is the annual coupon rate the company would pay on the newly issued bond? Would you advise the company to call the bond and refinance?

(ii) Suppose the yield that the US government would pay on a 5-year bond with a coupon rate of 6% equals 1.5%. What would be the current market price of the government bond?

(iii) Looking at current interest rates in the market, 10-year government bonds have a higher yield to maturity than 5-year government bonds. The yield curve on corporate bonds shows that 5-year corporate bonds trade at a higher yield than 5-year government bonds. Can you explain both of these observations?

(iv) Suppose that after a contentious meeting at the Fed, the chairperson decides that it is time for a drastic interest rate increase. As a result the yield on 5-year government bonds goes up to 3.5%. What is the effect of this interest rate increase on the price of this bond? Would zero-coupon bonds respond more or less aggressively to the change in the interest rate? Explain your answer