TJ’s Cheese Cake Factory, Inc. sells original cheese cake for $16 each. The company provided the following units and total cost data concerning its cake sales for each month during 2011:
| Cost | Units | |
| January | 55000 | 2500 |
| February | 59000 | 2800 |
| March | 60000 | 3000 |
| April | 64000 | 4200 |
| May | 67000 | 4500 |
| June | 71000 | 5500 |
| July | 74000 | 6500 |
| August | 77000 | 7500 |
| September | 75000 | 7000 |
| October | 68000 | 4500 |
| November | 62000 | 3100 |
| December | 73000 | 6500 |
a. Use the linear regression method to estimate fixed and variable costs. Excel has a function that you can use (I have posted these data in excel on Blackboard for your convenience). Print out the regression output and attach to this test.
b. Interpret and evaluate your regression model and results. Write out the cost formula.
c. Estimate total costs in a month when 6,000 cakes are produced and sold.
d. Estimate total profit in a month when 6,000 cakes are produced and sold.
e. You are working on the budget for October 2012 and expect 10,000 cakes will be produced and sold. Estimate total costs in a month when 10,000 cakes are produced and sold. Will you use the estimated cost in your budget? Why?
f. How does linear regression differ from the high-low method in estimating fixed and variable costs? Discuss the pros and cons of each.
In: Accounting
Direct Materials Usage Variances: Direct Materials Mix and Yield Variances
Energy Products Company produces a gasoline additive, Gas Gain. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process.
Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. If the controls are not effective, there can be a loss of output and efficiency.
The standard cost of producing a 500-liter batch of Gas Gain is $135.00. The standard direct materials mix and related standard cost of each chemical used in a 500-liter batch are as follows:
| Chemical | Mix | SP | Standard Cost | |||
| Echol | 200 | liters | $0.200 | $40.00 | ||
| Protex | 100 | 0.425 | 42.50 | |||
| Benz | 250 | 0.150 | 37.50 | |||
| CT-40 | 50 | 0.300 | 15.00 | |||
| Total | 600 | liters | $135.00 | |||
The quantities of chemicals purchased and used during the current production period are shown in the following schedule. A total of 160 batches of Gas Gain were manufactured during the current production period. Energy Products determines its cost and chemical usage variations at the end of each production period.
| Chemical | Quantity Used | |
| Echol | 30,400 | liters |
| Protex | 14,720 | |
| Benz | 43,200 | |
| CT-40 | 8,160 | |
| Total | 96,480 | liters |
Required:
Compute the total direct materials usage variance, and then break down this variance into its mix and yield components. Do not round intermediate computations and round final answers to the nearest cent. (CMA adapted)
In: Accounting
Stillicum Corporation makes ultra light-weight backpacking
tents. Data concerning the company’s two product lines appear
below:
| Deluxe | Standard | |||||
| Direct materials per unit | $ | 59.00 | $ | 47.00 | ||
| Direct labor per unit | $ | 17.00 | $ | 14.00 | ||
| Direct labor-hours per unit | 0.70 | DLHs | 1.40 | DLHs | ||
| Estimated annual production | 10,000 | units | 50,000 | units | ||
The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:
| Estimated total manufacturing overhead | $ | 627,000 | |
| Estimated total direct labor-hours | 77,000 | DLHs | |
*****Determine the unit product costs of the Deluxe and Standard products under the company’s traditional costing system.*****
The company is considering replacing its traditional costing
system with an activity-based absorption costing system that would
have the following three activity cost pools:
| Expected Activity | |||||
| Activity Cost Pools and Activity Measures |
Estimated Overhead Cost |
Deluxe | Standard | Total | |
| Supporting direct labor (direct labor-hours) | $ | 462,000 | 7,000 | 70,000 | 77,000 |
| Batch setups (setups) | 105,000 | 200 | 100 | 300 | |
| Safety testing (tests) | 60,000 | 30 | 70 | 100 | |
| Total manufacturing overhead cost | $ | 627,000 | |||
****Determine the unit product costs of the Deluxe and Standard products under the activity-based absorption costing system.*****
In: Accounting
Allegro Music sells musical equipment. A detailed list of
Allegro Music’s inventory follows:
| Inventory item | Number of units — year end | Cost per unit | Total cost | NRV* per unit | Total NRV | LCNRV** | |
| Chime Set | 3 | $750 | 2,250 | 790 | 2,370 | ||
| Cymbals | 4 | 70 | 280 | 85 | 340 | ||
| Drum Sets | 3 | 450 | 1,350 | 525 | 1,575 | ||
| Flutes | 5 | 650 | 3,250 | 775 | 3,875 | ||
| Violins | 3 | 1,500 | 4,500 | 1,650 | 4,950 | ||
| Guitars | 7 | 62 | 434 | 45 | 315 | ||
| Guitars-acoustic | 9 | 125 | 1,125 | 132 | 1,188 | ||
| Guitars-electric | 12 | 190 | 2,280 | 225 | 2,700 | ||
| Keyboards | 4 | 2,200 | 8,800 | 2,100 | 8,400 | ||
| Pianos-entry | 3 | 2,300 | 6,900 | 2,500 | 7,500 | ||
| Pianos-introductory | 5 | 4,500 | 22,500 | 4,900 | 24,500 | ||
| Pianos-intermediate | 2 | 12,000 | 24,000 | 14,200 | 28,400 | ||
| Pianos-professional | 1 | 22,500 | 22,500 | 25,000 | 25,000 | ||
| Pianos-upright | 2 | 5,000 | 10,000 | 7,500 | 15,000 | ||
| Recorders | 25 | 7 | 175 | 10 | 250 | ||
| Saxophones | 3 | 575 | 1,725 | 675 | 2,025 | ||
| Triangles | 5 | 55 | 275 | 65 | 325 | ||
| Xylophones | 4 | 245 | 980 | 300 | 1,200 | ||
| TOTAL= 113,324 | Total= 129,913 |
*NRV = net realizable value
**LCNRV = lower of cost and net realizable value
Required:
Complete the schedule above and prepare the year-end adjusting
entry to record the inventory at the lower of cost and net
realizable value.
In: Accounting
Physical Flow, Equivalent Units, Unit Costs, No Beginning WIP Inventory, Activity-Based Costing
Lacy, Inc., produces a subassembly used in the production of hydraulic cylinders. The subassemblies are produced in three departments: Plate Cutting, Rod Cutting, and Welding. Materials are added at the beginning of the process. Overhead is applied using the following drivers and activity rates:
| Driver | Rate | Actual Usage (by Plate Cutting) |
||
|---|---|---|---|---|
| Direct labor cost | 120% of direct labor | $732,000 | ||
| Inspection hours | $40 per hour | 7,450 hours | ||
| Purchase orders | $1,000 per order | 800 orders |
Other data for the Plate Cutting Department are as follows:
| Beginning work in process | — |
| Units started | 750,000 |
| Direct materials cost | $5,250,000 |
| Units, ending work in process (100% materials; 64% conversion) |
50,000 |
Required:
1. Prepare a physical flow schedule. If an answer is zero, enter "0".
| Lacy, Inc. | |
| Physical flow schedule | |
| Units to account for: | |
| Total units to account for | |
| Units accounted for: | |
| Total units accounted for | |
2. Calculate equivalent units of production for:
| Equivalent Units | |
| a. Direct Materials | |
| b. Conversion Costs |
3. Calculate unit costs for the following. Round your answers to the nearest cent.
| a. Direct materials | $ | per unit |
| b. Conversion costs | per unit | |
| c. Total manufacturing | $ | per unit |
4.
Provide the following information:
a. The total cost of units transferred out
$
b. The journal entry for transferring costs from Plate Cutting to Welding
c. The cost assigned to units in ending inventory.
In: Accounting
You will be completing a tax memo on the following fact pattern. Basically, you'll be writing a memo to a client advising him based on current tax law (prior to recent 2017 legislation).
Acquire, Inc. (client), an S Corp, is seeking to acquire Target, LLC (taxed as a C Corporation). Target has 3 shareholders with two of them holding 20% each and one holding 60% of its total shares (1,000 shares total between all 3 shareholders). Only one of Target's shareholders is a non US citizen.
The market value of each Target share is worth $1,000/per share. Each share has a cost basis of $25 per share. The fair market value of Target's assets are $800,000 with a cost basis of $200,000. One of the assets include commercial real estate with a fair market value of $200,000 with a liability (mortgage) of $220,000 that can be assumed by Acquire, Inc.
Acquire, Inc's shares are valued at $500/per share with a cost basis of $50 per share. The total shares outstanding is 1,000 all solely own by sole shareholder (Mr. Client-Shareholder). Acquire's total corporate assets are valued at $400,000 with a cost basis of $200,000.
Client (Acquire, Inc.) wants to know whether it's possible to acquire Target, Inc. without any taxable consequences to the company or to Mr. Sole Shareholder-Client? Discuss. The options to acquire the company may be done through either purchasing the assets or the shares. Please be sure to cite any statute or support for your reasoning.
In: Accounting
Income Statements under Absorption Costing and Variable Costing
Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (62,700 units) during the first month, creating an ending inventory of 5,700 units. During February, the company produced 57,000 units during the month but sold 62,700 units at $80 per unit. The February manufacturing costs and selling and administrative expenses were as follows:
| Number of Units | Unit Cost | Total Cost |
||||
| Manufacturing costs in February 1 beginning inventory: | ||||||
| Variable | 5,700 | $32.00 | $182,400 | |||
| Fixed | 5,700 | 12.00 | 68,400 | |||
| Total | $44.00 | $250,800 | ||||
| Manufacturing costs in February: | ||||||
| Variable | 57,000 | $32.00 | $1,824,000 | |||
| Fixed | 57,000 | 13.20 | 752,400 | |||
| Total | $45.20 | $2,576,400 | ||||
| Selling and administrative expenses in February: | ||||||
| Variable | 62,700 | $15.60 | $978,120 | |||
| Fixed | 62,700 | 7.00 | 438,900 | |||
| Total | $22.60 | $1,417,020 | ||||
a. Prepare an income statement according to the absorption costing concept for the month ending February 28.
| Fresno Industries Inc. | ||
| Absorption Costing Income Statement | ||
| For the Month Ended February 28 | ||
| $ | ||
| Cost of goods sold: | ||
| $ | ||
| $ | ||
| $ | ||
Feedback
a. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead.
b. Prepare an income statement according to the variable costing concept for the month ending February 28.
| Fresno Industries Inc. | ||
| Variable Costing Income Statement | ||
| For the Month Ended February 28 | ||
| $ | ||
| $ | ||
| $ | ||
| Fixed costs: | ||
| $ | ||
| $ | ||
In: Accounting
Problema
From the account balances listed below, prepare a schedule of cost of goods manufactured for La Lave Manufacturing Company for the month ended December 31, 2018.
|
Account Description |
A/C Balance |
Account Description |
A/C Balance |
|
Finished Goods Inventory, December 31 |
$42,000 |
Raw Materials Purchases |
$ 95,000 |
|
Factory Supervisory Salaries |
12,000 |
Work In Process Inventory, December 1 |
30,000 |
|
Income Tax Expense |
18,000 |
Factory Utilities Expense |
4,000 |
|
Raw Materials Inventory, December 1 |
12,000 |
Direct Labor |
70,000 |
|
Work In Process Inventory, December 31 |
25,000 |
Raw Materials Inventory, December 31 |
19,000 |
|
Sales Salaries Expense |
14,000 |
Sales Returns and Allowances |
5,000 |
|
Factory Depreciation Expense |
8,000 |
Indirect Labor |
21,000 |
|
Finished Goods Inventory, December 1 |
35,000 |
Sales Discounts |
3,000 |
Solución Problema II
|
Cost of Goods Manufactured Schedule |
|||
|
Work in process, December 1 |
|||
|
Direct materials |
|||
|
Raw materials inventory, December 1 |
$ |
||
|
Raw materials purchases |
|||
|
Total raw materials available for use |
$ |
||
|
Less: Raw materials inventory, December 31 |
|||
|
Direct materials used |
$ |
||
|
Direct labor |
|||
|
Manufacturing Overhead |
|||
|
Indirect Labor |
$ |
||
|
Factory supervisory salaries |
|||
|
Factory depreciation expense |
|||
|
Factory utilities expense |
|||
|
Total manufacturing overhead |
|||
|
Total manufacturing costs Added |
|||
|
Total cost of work in process |
$ |
||
|
Less: Work in process, December 31 |
|||
|
Cost of goods manufactured |
|||
In: Accounting
Arlo Tech Inc. has an Automotive and a Consumer Products Division. The two divisions share a distribution warehouse in another city. The space in the warehouse is allocated 60% to Automotive and 40% to Consumer Products. The warehouse manager spends about 70% of his time working on Consumer Products matters and 30% on Automotive matters. The total cost of running the warehouse is $1,000,000 a year, all of this cost is considered a fixed cost. How much of the annual warehouse cost should appear on the Automotive Division Income Statement?
In: Accounting
"La Yuca" company produces raw material for the alcapurrias industry. It has fixed weekly costs of $ 4,000.00 plus variable costs per unit of $ 3.00. The raw material is sold in the market for $ 20.00 per package. a) determine the total cost to produce # 2,000 packages b) determine the cost per unit, average cost, for the # 2,000 packages c) How much can the fixed cost go down if you want to make a profit of $ 3,000.00 per week?
In: Economics