1) Required information
Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows:
| Activity Cost Pools | Total Cost of Pool | Cost Driver | Estimated Cost Driver | ||
| Machining | $ | 236,300 | Number of machine hours | 69,500 | |
| Designing costs | 58,725 | Number of design hours | 6,750 | ||
| Setup costs | 71,350 | Number of batches | 500 | ||
Required:
1. Compute the activity rate for each activity.
2. Classify each activity as facility, product, batch, or unit level.
2) Required information
Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows:
| Activity Cost Pools | Total Cost of Pool | Cost Driver | Estimated Cost Driver | ||
| Machining | $ | 236,300 | Number of machine hours | 69,500 | |
| Designing costs | 58,725 | Number of design hours | 6,750 | ||
| Setup costs | 71,350 | Number of batches | 500 | ||
Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows:
| Product A | Product B | Product C | |
| Number of machine hours | 25,000 | 35,000 | 9,500 |
| Number of design hours | 2,700 | 1,550 | 2,500 |
| Number of batches | 50 | 180 | 270 |
Required:
Using activity rates, determine the amount of overhead assigned to
each product.
3) Schell Company manufactures automobile floor mats. It
currently has two product lines, the Standard and the Deluxe.
Schell has a total of $25,640 in overhead. It currently uses a
traditional cost system with overhead applied to the product on the
basis of either labor hours or machine hours. Schell has compiled
the following information about possible cost drivers and its two
product lines:
| Schell Company Total | Quantity/Amount Consumed by Standard Floor Mat Line |
Quantity/Amount Consumed by Deluxe Floor Mat Line |
||
| 1,010 labor hours | 650 labor hours | 360 labor hours | ||
| 7,170 machine hours | 3,030 machine hours | 4,140 machine hours | ||
Required:
1. Suppose Schell uses a traditional costing
system with direct labor hours as the cost driver. Determine the
amount of overhead assigned to each product line.
2. Suppose Schell uses a traditional costing
system with machine hours as the cost driver. Determine the amount
of overhead assigned to each product line.
4) Schell Company manufactures automobile floor mats. It
currently has two product lines, the Standard and the Deluxe.
Suppose that Schell has conducted further research into its
overhead and potential cost drivers. As a result, the company has
compiled the following detailed information, breaking total
overhead into three cost pools:
| Activity Cost Pools | Cost Driver | Cost Assigned to Pool |
Quantity/Amount Consumed by Standard Floor Mat Line |
Quantity/Amount Consumed by Deluxe Floor Mat Line |
|||||
| Material handling | Number of moves | $ | 2,673.00 | 31 moves | 68 moves | ||||
| Quality control | Number of inspections | $ | 9,177.00 | 680 inspections | 650 inspections | ||||
| Machine maintenance | Number of machine hours | $ | 13,032.00 | 2,920 machine hours | 4,320 machine hours | ||||
Required:
1. Calculate the activity rates for each cost pool assuming Schell uses an ABC system.
2. Calculate the amount of overhead that Schell will assign to the Standard floor mat line.
3. Determine the amount of overhead Schell will assign to the Deluxe product line.
5) Turtle Inc. has developed a new and improved widget. The company plans to sell the product through an existing website. Turtle’s marketing department believes the product will sell for $110. Turtle’s goal is a 30 percent profit margin on the widget.
Required:
1. If current prototypes cost $61.00 to produce, will Turtle meet its profit goal?
Yes
No
2. Calculate the target cost necessary for Turtle
to earn 30 percent profit.
In: Accounting
Make sure to scroll left and right to see full question and please show work. Waterway makes two products, Simple and Complex. As their names suggest, Simple is the more basic product, and Complex comes with all the bells and whistles. The company has always allocated overhead costs to products based on machine hours. Last year, the company implemented an activity-based costing system, and managers determined the following activity pools and rates based on total overhead of $1,592,000:
| Rate | |||
|---|---|---|---|
| Assembly | $1.25 per direct labor hour | ||
| Fabrication | $9.75 per machine hour | ||
| Setups | $18 per batch | ||
| Bonding | $262,400 direct to Complex |
Only the Complex product requires bonding, so all the costs of
bonding should be allocated to Complex. The following data relate
to both products.
| Simple | Complex | |||
|---|---|---|---|---|
| Units produced | 127,000 | 48,000 | ||
| Direct labor hours | 226,000 | 110,000 | ||
| Machine hours | 50,000 | 30,000 | ||
| Batches | 2,200 | 5,000 |
Using the traditional method of allocating overhead costs,
| • | allocate overhead cost to the products. |
| • | show that the overhead assigned to each product sums to the total company overhead. |
| • | determine the overhead cost per unit for each product. |
(Round overhead rate and overhead per unit answers to 2
decimal places, e.g. 15.25.)
| Simple | Complex | Total | ||||
|---|---|---|---|---|---|---|
| Machine hours | Enter a number of hours | Enter a number of hours | ||||
| Overhead rate | $Enter a dollar amount rounded to 2 decimal places | $Enter a dollar amount rounded to 2 decimal places | ||||
| Total overhead to product | $Enter a total amount | $Enter a total amount | $Enter a total amount |
| Simple | Complex | |||
|---|---|---|---|---|
| Total overhead to product | $Enter a dollar amount | $Enter a dollar amount | ||
| Number of units produced | Enter a number of units | Enter a number of units | ||
| Overhead per unit | $Enter a dollar amount per unit rounded to 2 decimal places | $Enter a dollar amount per unit rounded to 2 decimal places |
Using the activity-based costing rates,
| • | allocate overhead cost to the products. |
| • | show that the overhead assigned to each product sums to the total company overhead. |
| • | determine the overhead cost per unit for each product. |
(Round per unit answers to 2 decimal places, e.g.
15.25)
| Simple | Complex | Total | ||||
|---|---|---|---|---|---|---|
| Assembly | $Enter a dollar amount | $Enter a dollar amount | ||||
| Fabrication | Enter a dollar amount | Enter a dollar amount | ||||
| Setups | Enter a dollar amount | Enter a dollar amount | ||||
| Bonding | Enter a dollar amount | Enter a dollar amount | ||||
| Total overhead | $Enter a total amount | $Enter a total amount | $Enter a total amount |
| Simple | Complex | |||
|---|---|---|---|---|
| Total overhead to product | $Enter a dollar amount | $Enter a dollar amount | ||
| Number of units produced | Enter a number of units | Enter a number of units | ||
| Overhead per unit | $Enter a dollar amount per unit rounded to 2 decimal places | $Enter a dollar amount per unit rounded to 2 decimal places |
In: Accounting
1. You are given the following demand equations:
Q 450 16P
Q 360 80P
Q 1,500 500P
a. Determine each equation’s total revenue and marginal revenue equations.
b. Plot the demand equation and the marginal and total revenue equations on a graph.
c. Use calculus to determine the prices and quantities that maximize the revenue foreach equation. Show the points of revenue maximization on the graphs that you have constructed.
2. You are given the following cost equations:
TC 1,500 300Q 25Q2 1.5Q3
TC 1,500 300Q 25Q2
TC 1,500 300Q
a. Determine each equation’s average variable cost, average cost, and marginal cost.
b. Plot each equation on a graph. On separate graphs, plot each equation’s average variable cost, average cost, and marginal cost.
c. Use calculus to determine the minimum point on the marginal cost curve.
3. Given the demand equation shown, perform the following tasks:
Q 10 .004P
a. Combine this equation with each cost equation listed in question 3. Use calculus to find the price that will maximize the short-run profit for each of the cost equations.
b. Plot the profit curve for each of the cost equations.
c. Use calculus to determine the minimum point on the marginal cost curve.
4. Given the demand equation shown, perform the following tasks:
Q 10 .004P
a. Combine this equation with each cost equation listed in question 3. Use calculus to find the price that will maximize the short-run profit for each of the cost equations.
b. Plot the profit curve for each of the cost equations.
In: Accounting
Surgery Center is an outpatient surgical clinic that wants to better understand its costs. It decides to prepare an activity-based cost analysis, including an estimate of the average cost of both general surgery and orthopedic surgery. The clinic's three cost centers and their cost drivers follow as does information on the two main surgery centers.
| Cost Center | Cost | Cost Driver | Driver Quantity |
| Professional Salaries | 900,000 | Professional hours | 17,000 |
| Patient Services & supplies | 40,000 | Number of patients | 700 |
| Building Cost | 250,000 | Square feet | 5,000 |
| Service | Hours | Square Feet | Patients |
| General surgery | 6,000 | 1,750 | 500 |
| Orthopedic surgery | 11,000 | 3,250 | 200 |
1. Assume costs are allocated based on the number of patients only. Compute the average cost per patient.
2. Compute the cost applied to the general surgery center using the predetermined overhead rate computed in Question 1.
3. Compute the cost applied to the orthopedic surgery center using the predetermined overhead rate computed in Question 1.
4. Using activity-based costing to allocate overhead, compute the cost per driver for each of the three cost centers presented above. Then use that information to calculate the amount of overhead applied to the general surgery center. Only provide the total amount overhead allocated to the general surgery center in the blank.
5. Using activity-based costing to allocate overhead, compute the cost per driver for each of the three cost centers presented above. Then use that information to calculate the amount of overhead applied to the orthopedic surgery center. Only provide the total amount overhead allocated to the orthopedic surgery center in the blank.
In: Accounting
The Bowman Corporation has a bond obligation of $23 million outstanding, which it is considering refunding. Though the bonds were initially issued at 12 percent, the interest rates on similar issues have declined to 10.7 percent. The bonds were originally issued for 20 years and have 10 years remaining. The new issue would be for 10 years. There is a call premium of 8 percent on the old issue. The underwriting cost on the new $23,000,000 issue is $530,000, and the underwriting cost on the old issue was $420,000. The company is in a 35 percent tax bracket, and it will use an 12 percent discount rate (rounded aftertax cost of debt) to analyze the refunding decision. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
a. Calculate the present value of total outflows. (Do not round intermediate calculations and round your answer to 2 decimal places.) PV of total outflows $
b. Calculate the present value of total inflows. (Do not round intermediate calculations and round your answer to 2 decimal places.) PV of total inflows $
c. Calculate the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value $
In: Finance
Exercise 9-25 Budgeting Production and Raw-Material Purchases (LO 9-3, 9-6)
Greener Grass Fertilizer Company plans to sell 200,000 units of
finished product in July and anticipates a growth rate in sales of
5 percent per month. The desired monthly ending inventory in units
of finished product is 80 percent of the next month’s estimated
sales. There are 160,000 finished units in inventory on June 30.
Each unit of finished product requires four pounds of raw material
at a cost of $1.15 per pound. There are 700,000 pounds of raw
material in inventory on June 30.
Required:
1. Compute the company’s total required production
in units of finished product for the entire three-month period
ending September 30.
2. Independent of your answer to requirement 1,
assume the company plans to produce 600,000 units of finished
product in the three-month period ending September 30, and to have
raw-material inventory on hand at the end of the three-month period
equal to 25 percent of the use in that period. Compute the total
estimated cost of raw-material purchases for the entire three-month
period ending September 30.
1 Total required production in Units =
2 Total estimated cost =
In: Accounting
Calculate Cash Flows
Nature’s Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 5,600 units at $42 each. The new manufacturing equipment will cost $97,000 and is expected to have a 10-year life and $7,400 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:
| Direct labor | $7.10 | |
| Direct materials | 23.40 | |
| Fixed factory overhead-depreciation | 1.60 | |
| Variable factory overhead | 3.60 | |
| Total | $35.70 | |
Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar.
| Out of Eden, Inc. | |||
| Net Cash Flows | |||
| Year 1 | Years 2-9 | Last Year | |
| Initial investment | $ | ||
| Operating cash flows: | |||
| Annual revenues | $ | $ | $ |
| Selling expenses | |||
| Cost to manufacture | |||
| Net operating cash flows | $ | $ | $ |
| Total for Year 1 | $ | ||
| Total for Years 2-9 | $ | ||
| Residual value | |||
| Total for last year | $ | ||
In: Accounting
Calculate Cash Flows
Nature’s Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The garden tool is expected to generate additional annual sales of 8,800 units at $48 each. The new manufacturing equipment will cost $171,500 and is expected to have a 10-year life and $13,100 residual value. Selling expenses related to the new product are expected to be 4% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:
| Direct labor | $8.2 | |
| Direct materials | 26.7 | |
| Fixed factory overhead-depreciation | 1.8 | |
| Variable factory overhead | 4.1 | |
| Total | $40.8 | |
Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar.
| Nature’s Way Inc. | |||
| Net Cash Flows | |||
| Year 1 | Years 2-9 | Last Year | |
| Initial investment | |||
| Operating cash flows: | |||
| Annual revenues | |||
| Selling expenses | |||
| Cost to manufacture | |||
| Net operating cash flows | |||
| Total for Year 1 | |||
| Total for Years 2-9 | |||
| Residual value | |||
| Total for last year | |||
In: Accounting
Calculate Cash Flows
Nature’s Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The garden tool is expected to generate additional annual sales of 5,100 units at $50 each. The new manufacturing equipment will cost $104,900 and is expected to have a 10-year life and $8,000 residual value. Selling expenses related to the new product are expected to be 4% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:
| Direct labor | $8.5 | |
| Direct materials | 27.8 | |
| Fixed factory overhead-depreciation | 1.9 | |
| Variable factory overhead | 4.3 | |
| Total | $42.5 | |
Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar.
| Nature’s Way Inc. | |||
| Net Cash Flows | |||
| Year 1 | Years 2-9 | Last Year | |
| Initial investment | |||
| Operating cash flows: | |||
| Annual revenues | $ | $ | $ |
| Selling expenses | |||
| Cost to manufacture | |||
| Net operating cash flows | $ | $ | $ |
| Total for Year 1 | $ | ||
| Total for Years 2-9 | $ | ||
| Residual value | |||
| Total for last year | $ | ||
In: Accounting
|
Fleet Street Inc., a manufacturer of high-fashion clothing for women, is located in South London in the UK. Its product line consists of trousers (25%), skirts (33%), dresses (14%), and other (28%). Fleet Street Inc. has been using a volume-based rate to assign overhead to each product; the rate it uses is £2.61 per unit produced. The results for the trousers line, using the volume-based approach, are as follows:
|
Recently, it has conducted a further analysis of the trousers line of product, using ABC. In the study, eight activities were identified, and direct labor was assigned to the activities. The total conversion cost (labor and overhead) for the eight activities, after allocation to the trousers line, is as follows:
| Pattern cutting | £ | 39,470 | |
| Grading | 33,700 | ||
| Lay planning | 32,800 | ||
| Sewing | 37,800 | ||
| Finishing | 25,000 | ||
| Inspection | 11,300 | ||
| Boxing up | 6,100 | ||
|
Storage |
12,200 |
Determine the profit margin for trousers using ABC. Please show all calculations step by step
In: Accounting