AFA 200 Lecture Notes - Lecture 1: Indirect Costs, Fixed Cost

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greeneel128

13 Jun 2016

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Materials: sugar, water, aluminum, machinery, factory building, delivery vehicles. Labour: production line workers, factory supervisor, sales manager, finance director. Other expenses: electricity, insurance, royalty, utilities: by traceability: how easily to link each cost to the production of product. Direct costs: can be easily link to each unit of product (know accurately how much material to produce a unit of product) Indirect costs: cannot be easily link to each unit of product (electricity, insurance) Direct: sugar, water, aluminum, production line workers, royalty. Indirect: machinery, factory building, delivery vehicle, factory supervisor, sales manager, finance director, electricity, insurance, utilities: production / non-production costs. Production: must be incurred in order to produce unit or provide service. Non-production: costs which are not necessary for production of product (distribution costs, selling costs, finance costs, admin costs: by behaviour. *cost does change based on level of activity number of units produced or sold.

Related Questions

Yoder Furniture Works----the question is a the very end,I just provided supporting documents.

Yoder Furniture Works manufactures a high-quality, woodenrocker-recliner. A key differentiating feature of thisrocker-recliner is the ease with which a hand-operated lever raisesand lowers the footrest. Yoder left the prototype phase and begancommercial production on January 1, 2015. A retired accountant ofthe founder, Steve Yoder, maintained the accounting records on atemporary basis through January 31, 2015. Now, Yoder is searchingfor a replacement. Potential candidates are being askedto evaluate the information from the first month of commercialoperation as follows:

Cost information
Administrative expenses	$22,000
Advertising expenses	11,700
Cash account balance, January 1, 2015	0
Depreciation on production equipment and factory building	2,000
Depreciation on administrative offices	750
Insurance on production equipment and factory building	1,700
Administrative supplies expense	550
Property taxes on production equipment and factory building	425
Sales commissions	18,700
Utilities for production equipment and factory building	1,650
Wages paid to production workers	67,800
Direct materials inventory, January 1, 2015	0
Direct materials inventory, January 31, 2015	0
Direct materials purchases during January 2015	83,400
Work in process inventory, January 1, 2015	0
Work in process inventory, January 31, 2015	0
Finished goods inventory, January 1, 2015	0

Production and sales information
Units produced during January 2015	600
Units sold during January 2015	490
Sales price per unit	$500

Based on the above information, answer the followingquestions:

Classify costs as either product costs or period costs using theformat shown below. Enter the dollar amount for each cost in theappropriate column and total each classification.

Item	Product Costs			Period Costs
Item	Direct Materials	Direct Labor	Manufacturing Overhead	Period Costs
Admin Expenses				22,000
Advertising Exp				11,700
Depreciation Equipment and Building			2,000
Depreciation on Admin Offices				750.00
Insurance on production Equip and Fac.Building			1,700
Administrative Supplies Exp				550.00
Property taxes on production Equipment and FactoryBuild.			425.00
Sales commissions				18,700
Utilities for production equipment and factorybuilding			1,650.00
Wages paid to production workers		67,800
Direct materials purchases during January2015	83,400.00
Total	83,400	67,800	5,775	53,700

Classify costs as either variable costs or fixed costs. Assumethere are no mixed costs. Enter the dollar amount for each cost inthe appropriate column and total each classification. Use theformat shown below. Assume that Utilities for production equipmentand factory building are a fixed cost

Item	Variable Costs	Fixed Costs	Total Costs
Admin Expenses		22,000
Advertising Exp		11,700
Depreciation Equipment and Building		2,000
Depreciation on Admin Offices		750.00
Insurance on production Equip and Fac.Building		1,700
Administrative Supplies Exp		550
Property taxes on production Equipment and FactoryBuild.		425
Sales commissions	18,700
Utilities for production equipment and factorybuilding		1,650.00
Wages paid to production workers	67,800
Direct materials purchases during January2015	83,400.00
Total	169,900	40,775.00

The ones below, I am having trouble with.

Determine the per-unit variable cost of a chair.

Determine the per-unit contribution margin and the contributionmargin percentage.

azurebear488

Show your work

Preparing a Comprehensive Budget

Ginnie Springs Company has been bottling and selling water since1940. The companyâs current owner would like to know how a newproduct would affect the companyâs rent income in the comingyear.

Required

Calculate Ginnie Springs net income for the new product in thecoming year by completing the operating budgets and budgeted incomestatement that follow. Assume that the selling price will remainconstant.

Sales budget

Ginnie Springs Company

Sales Budget

Forthe year Ended December 31

Quarter

	1	2	3	4	Year
Sales in Units	40,000	30,000	50,000	55,000	175,000
Selling price per unit	X $1	X ?	X ?	X ?	X ?
Totals Sales	40,000	$ ?	X ?	X ?	X ?

2. Production Budget:

Ginnie SpringsCompany

ProductionBudget

For the year Ended December31_____________

Quarter

	1	2	3	4	Year
Sales in Units	40,000	?	?	?	?
Plus desired units of ending finished goods inventory*	30,000	?	?	6000	6000
Desired total Units	43000	?	?	?	?
Less desired units of ending finished goods inventory*	4000	?	?	?	4000
Total Production units	39,000	?	?	?	?

*Desired units of ending finished goods inventory = 10% of nextquarterâs budgeted production needs in ounces. Desired ounces ofbeginning direct materials inventory = 20% of current quartersbudgeted production needs in ounces.

3.DirectMaterials Purchases budget

Ginnie SpringsCompany

Direct Materials PurchaseBudget

For the year Ended December31_____________

Quarter

	1	2	3	4	Year
Total production units	39,000	32,000	50,500	55,500	?
Ounces per unit	X 20	X 20	X 20	X 20	X 20
Total production needs in ounces	780,000	?	?	?	?
Plus desired ounces of ending direct materials inventory*	128,000 908,000	? ?	? ?	240,000 ?	240,000 ?
Less desired ounces of ending direct materials inventory*	156,000	?	?	?	156,000
Total ounces of direct material to be purchased	752,000	?	?	?	?
Cost per ounce	X $0.01	X ?	X ?	X ?	X ?
Total cost of direct materials purchases	$7520	?	?	?	?

Desired ounces of ending direct material inventory =20% of nextquarters budgeted production needs in ounces.

Desired ounces of beginning direct materials inventory = 20% ofcurrent quarters budgeted production needs in ounces.

4.Directlabor budget:

Ginnie SpringsCompany

Direct LaborBudget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Total production units	39,000	?	?	?	?
Direct labor hours per units	X 0.001	X ?	X ?	X ?	X ?
Total direct labor hours	39.0	?	?	?	?
Direct labor cost per hour	X $8	X ?	X ?	X ?	X ?
Total direct labor cost	$312	$ ?	$ ?	$ ?	$ ?

5.Overheadbudget

Ginnie SpringsCompany

Overhead Budget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Variable overhead costs:
Factory supplies ($0.01)	$ 390	$ ?	$ ?	$ ?	$ ?
Employee benefits ($0.05)	1,950	?	?	?	?
Inspection ($0.01)	390	?	?	?	?
Maintenance and repairs($0.02)	780	?	?	?	?
Utilities ($0.01)	390	?	?	?	?
Total Variable overheadcosts	$3900	$ ?	$ ?	$ ?	$ ?
Total fixed overhead costs	1416	?	?	?	?
Total overhead costs	$5,316	$ ?	$ ?	$ ?	$ ?

Note: The figures in parentheses are variable costs perunit.

6.Sellingand administrative expenses budget:

Ginnie SpringsCompany

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Variable Selling and Administrative expenses
Delivery expenses ($0.01)	$ 400	$ ?	$ ?	$ ?	$ ?
Sales Commission ($0.02)	800	?	?	?	?
Accounting ($0.01)	400	?	?	?	?
Other administrative expenses($0.01)	400	?	?	?	?
Total Variable selling and administrative exp.	$2,000	$ ?	$ ?	$?	$?
Total fixed selling and administrative exp.	5000	?	?	$?	?
Total selling and administrative expenses	$ 7,000	$ ?	$ ?	$ ?	$ ?

Note: The figures in parentheses arevariable costs per unit

7. Cost of goods manufactured budget:

Ginnie SpringsCompany

Cost of Goods Manufactured Budget

For the year EndedDecember 31_____________

Direct Material Used:

Direct Material Inventory,Beginning

Purchases

Cost of Direct materials available foruse

Less: Direct materials Inventory,ending

Cost of Direct Materialsused

Direct laborcosts:

Overhead costs:

Total manufacturing costs

Work in Process Inventory,beginning*

Less: work in process inventory,ending*

Cost of Goods Manufactured

Units produced

Manufactured cost perunit

It is the companyâs policy to have no units in process at theend of theyear.

8. Budgeted income statement

Ginnie Springs Company

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Sales

Cost of goods sold

Finished goods inventory beginning

Cost of goods manufactured

Cost of Goods available for sale

Less finished goods inventory, ending

Cost of good sold

Gross margin

Selling and administrative expenses

Income from operations

Income taxes expenses (30% tax rate)

Net Income

lemonhamster976

Total Manufacturing Cost, Income Statement, Unit Cost, andSelling Price Two inventors, recently

organized as Innovation, Inc., consult you regarding a plannednew product. They have estimates of the

costs of materials, labor, overhead, and other expenses for 2016but need to know how much to charge for

each unit to earn a profit in 2016 equal to 15% of theirestimated total long-term investment of $400,000

(ignore income taxes). Their plans indicate that each unit ofthe new product requires the following:

Direct material

4 lb. of a material costing $5/lb.

Direct labor

2 hrs. of a metal formerâs time at $11/hr.

0.6 hr. of an assemblerâs time at $8/hr.

Major items of production overhead would be annual rent of$46,460 for a factory building, $28,660

rent for machinery, and $21,700 of indirect material. Otherproduction overhead is estimated to be

$233,280. Selling expenses are an estimated 30% of total sales,and non-factory administrative expenses

are 20% of total sales.

The consensus at Innovation is that during 2016 10,000 units ofproduct should be produced for

selling and another 2,000 units should be produced for the nextyearâs beginning inventory. Also, an

extra 3,000 pounds of material will be purchased as beginninginventory for the next year. Because

of the nature of the manufacturing process, all units startedmust be completed, so work in process

inventories are negligible.

Required

a. Incorporate the above data into a schedule of estimated totalmanufacturing costs and compute

the unit production cost for 2016.

b. Prepare an estimated income statement that would provide thetarget amount of profit for 2016.

c. What unit sales price should Innovation charge for the newproduct?

peartrout837

AFA 200 Lecture Notes - Lecture 1: Indirect Costs, Fixed Cost

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