Denton Company manufactures and sells a single product. Cost data for the product are given:

The product sells for $50 per unit. Production and sales data for July and August, the first two months of operations, follow:

The company’s Accounting Department has prepared the following absorption costing income statements for July and August:

Required:

1. Determine the unit product cost under: (a) Absorption costing, (b) Variable costing. Need help for absorption

2. Prepare variable costing income statements for July and August. These are correct

3. Reconcile the variable costing and absorption costing net operating incomes. (Enter any losses or deductions as a negative value.) Not quite sure here either, please explain

Manufacturing Income Statement, Statement of Cost of Goods Manufactured

Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December:

Required:

1. Determine the amounts of the missing items, identifying them by letter. Enter all amounts as positive numbers.

2. Prepare On Company's statement of cost of goods manufactured for December.

3. Prepare On Company's income statement for December.

Bell Company manufactures and sells a single product. Cost data for the product follow: (Please explain steps)

Variable costs per unit:

Direct materials $11.5

Direct labor 46

Variable factory overhead 11.5

Variable selling and administrative 11.5

Total variable costs per unit $80.5

Fixed costs per month:

Fixed manufacturing overhead $1,008,000

Fixed selling and administrative 648,000

Total fixed cost per month $ 1,656,000

The product sells for $184 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

Units Produced Units Sold

May 24,000 20,000

June 24,000 28,000

Income statements prepared by the accounting department, using absorption costing.

May June

Sales    $3,680,000 $5,152,000

Cost of goods sold 2,220,000    3,108,000

Gross margin 1,460,000 2,044,000

Selling and administrative expenses 878,000 970,000

Net operating income $582,000    $1,074,000

Required: 1. Determine the unit product cost under absorption costing and variable costing. Unit product cost: Absorption costing Variable costing

2. Prepare contribution format variable costing income statements for May and June.

Sales

Variable expenses:

BLANK

BLANK

options: Direct materials, fixed manufacturing overhead, fixed selling and administrative expenses, sales, variable cost of goods sold, variable selling and administrative expenses

Total variable expenses

BLANK: Contribution margin or Gross margin

Fixed expenses:

(1-2 SPOTS)BLANK: options: Direct materials, fixed manufacturing overhead, fixed selling and administrative expenses, sales, variable cost of goods sold, variable selling and administrative expenses

Total fixed expenses

Net Operating Income or Net Operating Loss

3. Reconcile the variable costing and absorption costing net operating incomes. (Loss and deduction amounts should be indicated with a minus sign.)

Bell Company Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes for May/June -

Variable costing net operating income (loss)

- Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing -

Absorption costing net operating income (loss)

After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 100,000 units of the Sport model and 40,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 25 percent.

Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility

Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility

Required:

a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900.

please show explanation

1. Activity-Based Determining the cost of a product.Product Costing

   Sweet Sugar Company manufactures three products (white sugar, brown sugar, and powdered sugar) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:

   Activity		Budgeted Activity Cost
   Production			$482,400
   Changing the characteristics of a machine to produce a different product.Setup			305,900
   Inspection			127,400
   Shipping			117,600
   Customer service			39,900
   	Total		$1,073,200

   The A measure of activity that is related to changes in cost. Used in analyzing and classifying cost behavior.activity bases identified for each activity are as follows:

   Activity	Activity Base
   Production	Machine hours
   Setup	Number of setups
   Inspection	Number of inspections
   Shipping	Number of customer orders
   Customer service	Number of customer service requests

   The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

   			Machine Hours		Number of Setups		Number of Inspections		Number of Customer Orders		Customer Service Requests		Units
   White sugar			2,950		180		280		840		30		7,375
   Brown sugar			1,880		270		420		2,310		190		4,700
   Powdered sugar			1,870		250		700		1,050		80		4,675
   	Total		6,700		700		1,400		4,200		300		16,750

   Each product requires 0.9 machine hour per unit.

   Required:

   If required, round all per unit amounts to the nearest cent.

   1. Determine the The cost of an activity per unit of activity base.activity rate for each activity.

   Production	$ per machine hour
   Setup	$ per setup
   Inspection	$ per move
   Shipping	$ per cust. ord.
   Customer service	$ per customer service request

   2. Determine the total and per-unit activity cost for all three products.

   	Total Activity Cost	Activity Cost Per Unit
   White sugar	$	$
   Brown sugar
   Powdered sugar

   3. Why aren’t the activity unit costs equal across all three products since they require the same machine time per unit?

   The unit costs are different because the products consume many activities in ratios different from the

   • volume
   • sales mix

After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 115,000 units of the Sport model and 47,500 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 20 percent.

Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility

Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility

Required:

a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900.

After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 120,000 units of the Sport model and 50,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 15 percent.

Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility

Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility

Required:

a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900.

Sport: ?

Pro: ?

Brown Products manufactures specialized goods to customers’ specifications and operates a job-order costing system. Manufacturing overhead cost is applied to jobs based on direct labour cost. The following estimates were made at the beginning of the year:

Jobs require varying amounts of work in the three departments. The Home Stores job, for example, would have required manufacturing costs in the three departments as follows:

The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs.

Required:

1. Assuming the use of a plantwide overhead rate:

a. Compute the rate for the current year.

b. Determine the amount of manufacturing overhead cost that would have been applied to the Home Stores job.

2. Suppose that instead of using a plantwide overhead rate, the company had used a separate predetermined overhead rate in each department. Under these conditions:

a. Compute the rate for each department for the current year.

b. Determine the amount of manufacturing overhead cost that would have been applied to the Home Stores job.

3. Assume that it is customary in the industry to bid jobs at 140% of total manufacturing cost (direct materials, direct labour, and applied overhead).

a. What was the company’s bid price on the Home Stores job?

b. What would the bid price have been if departmental overhead rates had been used to apply overhead cost?

4. At the end of the year, the company assembled the following actual cost data relating to all jobs worked on during the year:

a. Compute the underapplied or overapplied overhead for the year, assuming that a plantwide overhead rate is used.

b. Compute the underapplied or overapplied overhead for the year, assuming that departmental overhead rates are used.

Exercise 3-10 Contrasting ABC and Conventional Product Costs [LO3-2, LO3-3, LO3-4]