Sunspot Beverages, Ltd., of Fiji uses the weighted-average method in its process costing system. It makes blended tropical fruit drinks in two stages. Fruit juices are extracted from fresh fruits and then blended in the Blending Department. The blended juices are then bottled and packed for shipping in the Bottling Department. The following information pertains to the operations of the Blending Department for June.

Calculate the Blending Department's cost of ending work in process inventory for materials, conversion, and in total for June.

Calculate the Blending Department's cost of units transferred out to the Bottling Department for materials, conversion, and in total for June.

Prepare a cost reconciliation report for the Blending Department for June.

Consider the production function Q = K2L , where L is labor and K is capital. a.[4] What is the Marginal Product of Capital for this production function? Is it increasing, decreasing, or constant? Briefly explain or show how you arrived at your answer. b.[4] Does this production function exhibit increasing, constant or decreasing returns to scale? Briefly explain or show how you arrived at your answer. c.[5] If the firm has capital fixed at 15 units in the short run and the firm must produce 8,000 units of the good, find the cost-minimizing quantity of Labor. If labor is paid $200 and capital is rented at $400, what is the Total Cost at this short run equilibrium? d.[10] Find the long-run cost minimizing quantities of Labor and Capital when labor is paid $200, Capital is rented at $400, and the firm must produce 8,000 units of the good. What is Total Cost at the long run equilibrium?

An industrial engineer is considering two robots for purchase by a fiber optic manufacturing company. Robot X will have a first cost of $125,000, an annual maintenance and operation (M&O) cost of $40,000, and a $60,000 salvage value. Robot Y will have a first cost of $145,000, an annual M&O cost of $33,000, and a $65,000 salvage value. Which should be selected on the basis of an annual worth comparison of 9% per year? Use a 3-year study period.

Applied vs. Actual Manufacturing Overhead

Sloan Manufacturing Corporation applies manufacturing overhead on the basis of 120% of direct labor cost. An analysis of the related accounts and job order cost sheet indicates that during the year total manufacturing overhead incurred was $420,000 and that at year-end Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold included $60,000, $40,000, and $300,000, respectively, of direct labor incurred during the current year.

a. Determine the over-applied manufacturing overhead at year-end (assume it is significant).

Over-applied manufacturing overhead $Answer_____

b. Prepare a journal entry to record the disposition of the over-applied manufacturing overhead.

Let's assume that your baumol-tobin model is $ 54,000 a year. The annual interest rate of the savings deposit account is 2.5% and we assume that you keep your income in your account.

1- Assume you go to the bank 4 times a month, how many times do you go to the bank in total?

2- How much money do you keep on average for a year?

3- Now, every time you go to the bank, let F cost $ 0.42. how much is the total cost of keeping your income?

4- Optimal number of trips to the bank for one year based on your income, considering savings deposits, interest rates and the cost of each trip to the bank. What is N * (ie the number of visits to the bank that will minimize the cost of wanting to keep cash in your hand)?

5-according to N* that you calculated it in (4) Calculate the amount of money you will keep on average.

Mastery Problem: Introduction to Managerial Accounting

Able Baker Charlie Company

Charles Maxwell is starting a cheesecake bakery, Able Baker Charlie Company, to produce and sell different flavored cheesecakes to restaurants and the general public. He has just begun his study of accounting, and is a bit confused about the many types of reports he has read about and how they will help him run his business. He asks you to help him clarify what the differences between managerial accounting and financial accounting are. He’s also wondering how to set up his inventory, how to classify the costs of his business, and how to fill in some missing information.

Managerial vs. Financial

Select whether the following characteristics are most often associated with managerial accounting or financial accounting.

Primarily used for internal decision makingManagerial Accounting

Generally Accepted Accounting Principles (GAAP) must be usedFinancial Accounting

Prepared statements usually pertain to the company as a whole rather than individual departments or productsFinancial Accounting

Information provided will often be subjective, such as estimated future resultsManagerial Accounting

Often prepared on an as-needed basis rather than at fixed intervalsManagerial Accounting

Feedback

Review the differences between managerial and financial accounting, and how each type of accounting is used in the organization and for management processes.

Cost Classification

Charles has provided some of the costs he expects to incur as follows. Decide on the classifications that could be applied to each of these costs using the table provided. The cost object in each case is the cheesecake.

(Select "Yes" or "No" from the below dropdowns.)

CostProduct
CostPeriod
CostDirect
MaterialsDirect
LaborFactory
OverheadSelling
ExpenseAdministrative
ExpenseDirect
CostIndirect
CostPrime
CostConversion
Cost

Eggs used to make cheesecakesYes No Yes No No No No Yes No Yes No

Baker’s wagesYes No No Yes No No No Yes No Yes Yes

Delivery driver wagesNo Yes No No No Yes No No No No No

Depreciation of office computersNo Yes No No No No Yes No No No No

Power to run the cheesecake ovensYes No No No Yes No No No Yes No Yes

President’s salaryNo Yes No No No No Yes No No No No

Sales commissionsNo Yes No No No Yes No No No No No

Factory supervisor salaryYes No No No Yes No No No Yes No Yes

Feedback

Review the definitions of each type of cost. Note that each cost may be in more than one category.

Financial Statements

Charles found some sample income statements and balance sheets on the Internet, and asked which of them might be most appropriate for a manufacturing business like his. Review income statements A and B, and balance sheets C and D. Determine which income statement and balance sheet would be most appropriate for a manufacturing business like Able Baker Charlie Company.

Income Statement A

Sample Company A
Income Statement
For the Year Ended December 31, 20Y8

Sales$42,000

  Finished goods inventory, January 1, 20Y8$5,250

  Cost of goods manufactured6,400

  Cost of finished goods available for sale$11,650

  Finished goods inventory, December 31, 20Y8(400)

  Cost of goods sold(11,250)

Gross profit$30,750

Operating expenses:

  Selling expenses$6,400

  Administrative expenses5,250

    Total operating expenses(11,650)

Net income$19,100

Income Statement B

Sample Company B
Income Statement
For the Year Ended December 31, 20Y8

Sales$42,000

  Beginning inventory$5,250

  Net purchases6,400

  Inventory available for sale$11,650

  Ending inventory(400)

  Cost of goods sold(11,250)

Gross profit$30,750

Operating expenses:

  Selling expenses$6,400

  Administrative expenses5,250

    Total operating expenses(11,650)

Net income$19,100

Balance Sheet C

Sample Company C
Balance Sheet
December 31, 20Y8

Assets

Cash$20,800

Accounts receivable (net)10,000

Inventory6,000

Supplies2,100

Land17,000

Total assets$55,900

Liabilities

Accounts payable$17,800

Stockholders’ Equity

Common stock$19,000

Retained earnings19,100

Total stockholders’ equity38,100

Total liabilities and stockholders’ equity$55,900

Balance Sheet D

Sample Company D
Balance Sheet
December 31, 20Y8

Assets

Cash$20,800

Accounts receivable (net)10,000

Inventory:

  Direct materials$2,500

  Work in process1,500

  Finished goods2,000

  Total inventory6,000

Supplies2,100

Land17,000

Total assets$55,900

Liabilities

Accounts payable$17,800

Stockholders’ Equity

Common stock$19,000

Retained earnings19,100

Total stockholders’ equity38,100

Total liabilities and stockholders’ equity$55,900

Which income statement is most appropriate for a manufacturing business?

Income statement A

Which balance sheet is most appropriate for a manufacturing business?

Balance sheet D

Feedback

Think about which accounts would be needed in a manufacturing environment.

Costs and Balances

At the end of February, after the second month of operations of Able Baker Charlie Company, Charles shows you the data he’s collected, but he was unable to figure out some of the amounts. Review the following data and fill in the missing amounts on the chart for Able Baker Charlie Company. Note: It may be helpful to use T accounts to map the flow of the amounts through the manufacturing accounts and solve for the missing dollar values. It may also be helpful to review the steps for determining the cost of materials used, total manufacturing cost incurred, and cost of goods manufactured.

Data for February

Decrease in materials inventory$3,300

Materials inventory on Feb. 2850% of materials inventory on Jan. 31

Direct materials purchased$11,700

Direct materials used3 times the direct labor incurred

Total manufacturing costs incurred in period$28,700

Total manufacturing costs incurred in period70% of Cost of Goods Manufactured

Total manufacturing costs incurred in period$7,000 less than Cost of Goods Sold

Account Balances

AccountJan. 31Feb. 28Costs Incurred

Materials Inventory$$Direct Materials Used$

Work in Process Inventory21,000Direct Labor Incurred

Finished Goods Inventory16,500Factory Overhead Incurred

Cost of Goods Sold

Mastery Problem: Introduction to Managerial Accounting

Able Baker Charlie Company

Charles Maxwell is starting a cheesecake bakery, Able Baker Charlie Company, to produce and sell different flavored cheesecakes to restaurants and the general public. He has just begun his study of accounting, and is a bit confused about the many types of reports he has read about and how they will help him run his business. He asks you to help him clarify what the differences between managerial accounting and financial accounting are. He’s also wondering how to set up his inventory, how to classify the costs of his business, and how to fill in some missing information.

Managerial vs. Financial

Select whether the following characteristics are most often associated with managerial accounting or financial accounting.

Primarily used for internal decision makingManagerial Accounting

Generally Accepted Accounting Principles (GAAP) must be usedFinancial Accounting

Prepared statements usually pertain to the company as a whole rather than individual departments or productsFinancial Accounting

Information provided will often be subjective, such as estimated future resultsManagerial Accounting

Often prepared on an as-needed basis rather than at fixed intervalsManagerial Accounting

Feedback

Review the differences between managerial and financial accounting, and how each type of accounting is used in the organization and for management processes.

Cost Classification

Charles has provided some of the costs he expects to incur as follows. Decide on the classifications that could be applied to each of these costs using the table provided. The cost object in each case is the cheesecake.

(Select "Yes" or "No" from the below dropdowns.)

CostProduct
CostPeriod
CostDirect
MaterialsDirect
LaborFactory
OverheadSelling
ExpenseAdministrative
ExpenseDirect
CostIndirect
CostPrime
CostConversion
Cost

Eggs used to make cheesecakesYes No Yes No No No No Yes No Yes No

Baker’s wagesYes No No Yes No No No Yes No Yes Yes

Delivery driver wagesNo Yes No No No Yes No No No No No

Depreciation of office computersNo Yes No No No No Yes No No No No

Power to run the cheesecake ovensYes No No No Yes No No No Yes No Yes

President’s salaryNo Yes No No No No Yes No No No No

Sales commissionsNo Yes No No No Yes No No No No No

Factory supervisor salaryYes No No No Yes No No No Yes No Yes

Feedback

Review the definitions of each type of cost. Note that each cost may be in more than one category.

Financial Statements

Charles found some sample income statements and balance sheets on the Internet, and asked which of them might be most appropriate for a manufacturing business like his. Review income statements A and B, and balance sheets C and D. Determine which income statement and balance sheet would be most appropriate for a manufacturing business like Able Baker Charlie Company.

Income Statement A

Sample Company A
Income Statement
For the Year Ended December 31, 20Y8

Sales$42,000

  Finished goods inventory, January 1, 20Y8$5,250

  Cost of goods manufactured6,400

  Cost of finished goods available for sale$11,650

  Finished goods inventory, December 31, 20Y8(400)

  Cost of goods sold(11,250)

Gross profit$30,750

Operating expenses:

  Selling expenses$6,400

  Administrative expenses5,250

    Total operating expenses(11,650)

Net income$19,100

Income Statement B

Sample Company B
Income Statement
For the Year Ended December 31, 20Y8

Sales$42,000

  Beginning inventory$5,250

  Net purchases6,400

  Inventory available for sale$11,650

  Ending inventory(400)

  Cost of goods sold(11,250)

Gross profit$30,750

Operating expenses:

  Selling expenses$6,400

  Administrative expenses5,250

    Total operating expenses(11,650)

Net income$19,100

Balance Sheet C

Sample Company C
Balance Sheet
December 31, 20Y8

Assets

Cash$20,800

Accounts receivable (net)10,000

Inventory6,000

Supplies2,100

Land17,000

Total assets$55,900

Liabilities

Accounts payable$17,800

Stockholders’ Equity

Common stock$19,000

Retained earnings19,100

Total stockholders’ equity38,100

Total liabilities and stockholders’ equity$55,900

Balance Sheet D

Sample Company D
Balance Sheet
December 31, 20Y8

Assets

Cash$20,800

Accounts receivable (net)10,000

Inventory:

  Direct materials$2,500

  Work in process1,500

  Finished goods2,000

  Total inventory6,000

Supplies2,100

Land17,000

Total assets$55,900

Liabilities

Accounts payable$17,800

Stockholders’ Equity

Common stock$19,000

Retained earnings19,100

Total stockholders’ equity38,100

Total liabilities and stockholders’ equity$55,900

Which income statement is most appropriate for a manufacturing business?

Income statement A

Which balance sheet is most appropriate for a manufacturing business?

Balance sheet D

Feedback

Think about which accounts would be needed in a manufacturing environment.

Costs and Balances

At the end of February, after the second month of operations of Able Baker Charlie Company, Charles shows you the data he’s collected, but he was unable to figure out some of the amounts. Review the following data and fill in the missing amounts on the chart for Able Baker Charlie Company. Note: It may be helpful to use T accounts to map the flow of the amounts through the manufacturing accounts and solve for the missing dollar values. It may also be helpful to review the steps for determining the cost of materials used, total manufacturing cost incurred, and cost of goods manufactured.

Data for February

Decrease in materials inventory$3,300

Materials inventory on Feb. 2850% of materials inventory on Jan. 31

Direct materials purchased$11,700

Direct materials used3 times the direct labor incurred

Total manufacturing costs incurred in period$28,700

Total manufacturing costs incurred in period70% of Cost of Goods Manufactured

Total manufacturing costs incurred in period$7,000 less than Cost of Goods Sold

Account Balances

AccountJan. 31Feb. 28Costs Incurred

Materials Inventory$$Direct Materials Used$

Work in Process Inventory21,000Direct Labor Incurred

Finished Goods Inventory16,500Factory Overhead Incurred

Cost of Goods Sold

Mastery Problem: Introduction to Managerial Accounting

Able Baker Charlie Company

Charles Maxwell is starting a cheesecake bakery, Able Baker Charlie Company, to produce and sell different flavored cheesecakes to restaurants and the general public. He has just begun his study of accounting, and is a bit confused about the many types of reports he has read about and how they will help him run his business. He asks you to help him clarify what the differences between managerial accounting and financial accounting are. He’s also wondering how to set up his inventory, how to classify the costs of his business, and how to fill in some missing information.

Managerial vs. Financial

Select whether the following characteristics are most often associated with managerial accounting or financial accounting.

Primarily used for internal decision makingManagerial Accounting

Generally Accepted Accounting Principles (GAAP) must be usedFinancial Accounting

Prepared statements usually pertain to the company as a whole rather than individual departments or productsFinancial Accounting

Information provided will often be subjective, such as estimated future resultsManagerial Accounting

Often prepared on an as-needed basis rather than at fixed intervalsManagerial Accounting

Feedback

Review the differences between managerial and financial accounting, and how each type of accounting is used in the organization and for management processes.

Cost Classification

Charles has provided some of the costs he expects to incur as follows. Decide on the classifications that could be applied to each of these costs using the table provided. The cost object in each case is the cheesecake.

(Select "Yes" or "No" from the below dropdowns.)

CostProduct
CostPeriod
CostDirect
MaterialsDirect
LaborFactory
OverheadSelling
ExpenseAdministrative
ExpenseDirect
CostIndirect
CostPrime
CostConversion
Cost

Eggs used to make cheesecakesYes No Yes No No No No Yes No Yes No

Baker’s wagesYes No No Yes No No No Yes No Yes Yes

Delivery driver wagesNo Yes No No No Yes No No No No No

Depreciation of office computersNo Yes No No No No Yes No No No No

Power to run the cheesecake ovensYes No No No Yes No No No Yes No Yes

President’s salaryNo Yes No No No No Yes No No No No

Sales commissionsNo Yes No No No Yes No No No No No

Factory supervisor salaryYes No No No Yes No No No Yes No Yes

Feedback

Review the definitions of each type of cost. Note that each cost may be in more than one category.

Financial Statements

Charles found some sample income statements and balance sheets on the Internet, and asked which of them might be most appropriate for a manufacturing business like his. Review income statements A and B, and balance sheets C and D. Determine which income statement and balance sheet would be most appropriate for a manufacturing business like Able Baker Charlie Company.

Income Statement A

Sample Company A
Income Statement
For the Year Ended December 31, 20Y8

Sales$42,000

  Finished goods inventory, January 1, 20Y8$5,250

  Cost of goods manufactured6,400

  Cost of finished goods available for sale$11,650

  Finished goods inventory, December 31, 20Y8(400)

  Cost of goods sold(11,250)

Gross profit$30,750

Operating expenses:

  Selling expenses$6,400

  Administrative expenses5,250

    Total operating expenses(11,650)

Net income$19,100

Income Statement B

Sample Company B
Income Statement
For the Year Ended December 31, 20Y8

Sales$42,000

  Beginning inventory$5,250

  Net purchases6,400

  Inventory available for sale$11,650

  Ending inventory(400)

  Cost of goods sold(11,250)

Gross profit$30,750

Operating expenses:

  Selling expenses$6,400

  Administrative expenses5,250

    Total operating expenses(11,650)

Net income$19,100

Balance Sheet C

Sample Company C
Balance Sheet
December 31, 20Y8

Assets

Cash$20,800

Accounts receivable (net)10,000

Inventory6,000

Supplies2,100

Land17,000

Total assets$55,900

Liabilities

Accounts payable$17,800

Stockholders’ Equity

Common stock$19,000

Retained earnings19,100

Total stockholders’ equity38,100

Total liabilities and stockholders’ equity$55,900

Balance Sheet D

Sample Company D
Balance Sheet
December 31, 20Y8

Assets

Cash$20,800

Accounts receivable (net)10,000

Inventory:

  Direct materials$2,500

  Work in process1,500

  Finished goods2,000

  Total inventory6,000

Supplies2,100

Land17,000

Total assets$55,900

Liabilities

Accounts payable$17,800

Stockholders’ Equity

Common stock$19,000

Retained earnings19,100

Total stockholders’ equity38,100

Total liabilities and stockholders’ equity$55,900

Which income statement is most appropriate for a manufacturing business?

Income statement A

Which balance sheet is most appropriate for a manufacturing business?

Balance sheet D

Feedback

Think about which accounts would be needed in a manufacturing environment.

Costs and Balances

At the end of February, after the second month of operations of Able Baker Charlie Company, Charles shows you the data he’s collected, but he was unable to figure out some of the amounts. Review the following data and fill in the missing amounts on the chart for Able Baker Charlie Company. Note: It may be helpful to use T accounts to map the flow of the amounts through the manufacturing accounts and solve for the missing dollar values. It may also be helpful to review the steps for determining the cost of materials used, total manufacturing cost incurred, and cost of goods manufactured.

Data for February

Decrease in materials inventory$3,300

Materials inventory on Feb. 2850% of materials inventory on Jan. 31

Direct materials purchased$11,700

Direct materials used3 times the direct labor incurred

Total manufacturing costs incurred in period$28,700

Total manufacturing costs incurred in period70% of Cost of Goods Manufactured

Total manufacturing costs incurred in period$7,000 less than Cost of Goods Sold

Account Balances

AccountJan. 31Feb. 28Costs Incurred

Materials Inventory$$Direct Materials Used$

Work in Process Inventory21,000Direct Labor Incurred

Finished Goods Inventory16,500Factory Overhead Incurred

Cost of Goods Sold

Absorption Statement

Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in the cost of goods sold.

Variable Statement

Under variable costing, the cost of goods manufactured includes only variable manufacturing costs. This type of income statement includes a computation of manufacturing margin.

Method Comparison

Review the income statements on the Absorption Statement and Variable Statement, then complete the following table. The company’s sales price per unit is $80, and the number of units in ending inventory is 5,000. There was no beginning inventory.

Manufacturing Decisions

Whenever the units manufactured differ from the units sold, finished goods inventory is affected. In analyzing operating income, such increases and decreases could be misinterpreted as operating efficiencies or inefficiencies. Each decision-making situation should be carefully analyzed in deciding whether absorption or variable costing reporting would be more useful.

All costs are controllable in the long run by someone within a business. For a given level of management, costs may be controllable costs or noncontrollable costs.

The production manager for Saxon, Inc. is worried because the company is not showing a high enough profit. Looking at the income statements on the Absorption Statement and the Variable Statement, he notices that the operating income is higher on the absorption cost income statement. He is considering manufacturing another 10,000 units, up to the company’s capacity for manufacturing, in the coming year. He reasons that this will boost operating income and satisfy the company’s owner that the company is sufficiently profitable. Although the total units manufactured changes, assume that total fixed costs, unit variable costs, unit sales price, and the sales levels are the same. Complete questions (1)-(4) that follow. If the answer is zero, enter "0".

1. Use the income statements on the Absorption Statement and Variable Statement to complete the following table for the original production level. Then prepare similar income statements at a production level 10,000 units higher and add that information to the table. Assume that total fixed costs, unit variable costs, unit sales price, and the sales levels are the same at both production levels.

2. What is the change in operating income from producing 10,000 additional units under absorption costing?

$

3. What is the change in operating income from producing 10,000 additional units under variable costing?

$

Absorption Statement

Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in the cost of goods sold.

Variable Statement

Under variable costing, the cost of goods manufactured includes only variable manufacturing costs. This type of income statement includes a computation of manufacturing margin.

Method Comparison

Review the income statements on the Absorption Statement and Variable Statement, then complete the following table. The company’s sales price per unit is $80, and the number of units in ending inventory is 5,000. There was no beginning inventory.

Manufacturing Decisions

Whenever the units manufactured differ from the units sold, finished goods inventory is affected. In analyzing operating income, such increases and decreases could be misinterpreted as operating efficiencies or inefficiencies. Each decision-making situation should be carefully analyzed in deciding whether absorption or variable costing reporting would be more useful.

All costs are controllable in the long run by someone within a business. For a given level of management, costs may be controllable costs or noncontrollable costs.

The production manager for Saxon, Inc. is worried because the company is not showing a high enough profit. Looking at the income statements on the Absorption Statement and the Variable Statement, he notices that the operating income is higher on the absorption cost income statement. He is considering manufacturing another 10,000 units, up to the company’s capacity for manufacturing, in the coming year. He reasons that this will boost operating income and satisfy the company’s owner that the company is sufficiently profitable. Although the total units manufactured changes, assume that total fixed costs, unit variable costs, unit sales price, and the sales levels are the same. Complete questions (1)-(4) that follow. If the answer is zero, enter "0".

1. Use the income statements on the Absorption Statement and Variable Statement to complete the following table for the original production level. Then prepare similar income statements at a production level 10,000 units higher and add that information to the table. Assume that total fixed costs, unit variable costs, unit sales price, and the sales levels are the same at both production levels.