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:

Other data for the Plate Cutting Department are as follows:

Required:

1. Prepare a physical flow schedule. If an answer is zero, enter "0".

2. Calculate equivalent units of production for:

3. Calculate unit costs for the following. Round your answers to the nearest cent.

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.

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.

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:

a. Prepare an income statement according to the absorption costing concept for the month ending February 28.

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.

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.

Solución Problema II

Concrete Creations manufactures concrete bird baths that are sold through retail outlets nationwide. The bird baths are made in a two-stage process. In the Forming Department, the concrete is poured into silicone molds where it is allowed to cure and set. Once set, the birdbaths are removed from the mold and sent to the Finishing Department where any imperfections are removed and the birdbaths are sprayed with a special sealant. Information for the Forming Department for the month of May is provided below.

Percent Complete

Units Materials Conversion

Work-in-Process, Beginning 10,000 100% 60%

Started into Production 90,000   

Completed and Transferred Out 80,000

Work-in-Process, Ending 20,000 100% 40%

Materials Conversion

Work-in-Process, Beginning $ 12,600 $12,400

Cost Added During Period $ 167,400 $ 119,350

Questions 1. Assume that Concrete Creations uses the weighted-average method for cost allocation. Determine the equivalent units of production for the Forming Department for the month of May. 2. Assume that Concrete Creations uses the weighted-average method for cost allocation. Compute the cost per equivalent units of production for the Forming Department 3. Assume that Concrete Creations uses the weighted-average method for cost allocation. Calculate the total cost of ending work in process inventory as well as total cost of units transferred out for May. 4. Assume that Concrete Creations uses the weighted-average method for cost allocation. Prepare a cost reconciliation report for the Forming Department for May. 5. Assume that Concrete Creations used the FIFO method rather than the weighted average method in its process costing system. Determine the equivalent units of production for the Forming Department for the month of May. 6. Assume that Concrete Creations used the FIFO method rather than the weighted average method in its process costing system. Compute the cost per equivalent units of production for the Forming Department. 7. Assume that Concrete Creations used the FIFO method rather than the weighted average method in its process costing system. Calculate the total cost of ending work in process inventory as well as total cost of units transferred out for May. 8. Assume that Concrete Creations used the FIFO method rather than the weighted average method in its process costing system. Prepare a cost reconciliation report for the Forming Department for May. 9. Compare the two cost reconciliation reports (weighted average and FIFO). Identify and comment on any significant differences between the two reports. If you were a manager at Concrete Creations, which approach would you recommend and why? Be sure to identify the advantages and disadvantages to both approaches when making your analysis.

The entire answer is needed, but special emphasis on question#9, comparing the two cost reconciilation reports

PA4-3 Selecting Cost Drivers, Assigning Costs Using Activity Rates [LO 4-1, 4-3, 4-4, 4-6 ]

Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows:
   

Harbour has monthly overhead of $213,390, which is divided into the following cost pools:

The company has also compiled the following information about the chosen cost drivers:      

Required:            
1. Suppose Harbour uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)

    
2. Calculate the production cost per unit for each of Harbour’s products under a traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.)

3. Calculate Harbour’s gross margin per unit for each product under the traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.)

4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Harbour wanted to implement an ABC system.

    
5. Assuming an ABC system, assign overhead costs to each product based on activity demands.

6. Calculate the production cost per unit for each of Harbour’s products in an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)

7. Calculate Harbour’s gross margin per unit for each product under an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)

8. Compare the gross margin of each product under the traditional system and ABC. (Round your answers to 2 decimal places.)

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?

La Yuca Company produces raw materials for the alcapurrias industry. It has weekly fixed 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 you lower the fixed cost if you want to make a profit of $ 3,000.00 per week?

Maxima distributor uses 500 units of an office supply per year. The cost of the office supply is $60/unit, for orders of less than 50 units; $55/unit for orders greater or equal to 50. The inventory holding cost is 20% of its unit price per year. The procurement order setup cost is $15/order. What is the optimum purchase order quantity that Maxima should place and what is the total cost? (TCO=KD/Q+hQ/2+cD)