ACC E113 Lecture Notes - Lecture 5: Financial Statement, Income Statement, Weighted Arithmetic Mean

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26 Aug 2020

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Inventory costing2 unit costs are applied to quantities to arrive at total cost of cogs and. Ending inventory: tricky when a specific item is purchased at different prices during the period, no accounting requirement that the method be consistent with the physical movement of goods. Earliest goods purchased are the first to be sold. Cogs includes unit costs of early purchases. Ending inventory figured by taking the unit cost of the most recent purchase, working backward until all the units have been costed (last2in, still here2 lish) Ending inventory is computed; back into cogs: last2in, first2out (lifo) Last goods purchased are the first to be sold. Cogs reflects unit costs of most recent purchases. Ending inventory determined by taking the unit cost of the earliest goods available for sale, working forward until all the units have been costed (first2in, still here fish) Lifo seldom reflects actual flow of goods.

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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

1. ABC generally causes the least amount of cost distortionamong products because indirect costs are allocated to the productsbased on

types of activities used by theproduct.

the extent to which the activitiesare used.

both A and B.

none of the above.

Chicago Steel's operating activities for the year are listedbelow:

Beginning inventory	$1,000,800
Ending inventory	$350,500
Purchases	$750,300
Sales revenue	$1,500,400
Operating expenses	$700,200

What is the cost of goods sold for the year?

$1,751,100

$1,400,600

$750,100

$50,100

The following is selected financial data from Turtle BayManufacturing for the most recent year:

Ending raw materials inventory	$21,200
Ending work in process inventory	$44,900
Ending finished goods inventory	$53,200
Amount of underallocated manufacturing overhead	$5,100
Cost of goods sold for year	$85,500
Cost of raw materials purchased during year	$45,700
Cost of direct materials requisitioned during year	$44,300
Cost of indirect materials requisitioned during year	$7,200
Cost of goods completed during year	$120,200
Manufacturing overhead allocated	$60,400
Manufacturing overhead % of direct labor cost	135%

What is the beginning raw materials inventory?

$27,000

$51,500

$19,800

$5,800

4. Which of the following is not an activity inan ABC system that determines the cost of a manufacturedproduct?

Materials handling

Inspecting

Machining

Accounting

5. Which type of company utilizes managerialaccounting?

Manufacturers

Service

Retailers

All of the above

6. On a traditional income statement, all manufacturing-relatedcosts, whether fixed or variable, are listed

above the gross profit line.

below the operating incomeline.

above the sales line.

above the contribution margin line.

7. In a process costing system, direct labor and manufacturingoverhead are normally

incurred evenly throughout theprocess.

incurred at the end of theprocess.

incurred in full at the beginningof the process.

not recorded.

8. Manufacturing overhead costs for a productinclude

operating expenses.

indirect manufacturing costs.

direct material.

prime costs.

Here are selected basic data for Wilson Company:

Estimated manufacturing overhead	$243,750	Factory utilities	$30,900
Estimated labor hours	35,000	Indirect labor	$22,600
Actual direct labor hours	36,000	Sales commissions	$54,600
Estimated direct labor cost	$325,000	Factory rent	$47,800
Actual direct labor cost	$320,000	Factory property taxes	$28,700
Factory depreciation	$65,600	Indirect materials	$33,300

If the company allocates overhead based on direct labor cost,what are the total actual manufacturing overhead costs?

$173,000

$283,500

$228,900

$260,900

10. ERP stands for

	Enterprise Resource Planning.
	Enclosed Resource Placement.
	Edwin R. Perry, the man thatcreated the first system.
	Entity Replacement Product.

lavendermarten476

Which of the following is a common factor in most unethical or criminal behavior incidents?

	a.	The capacity for rationalization
	b.	The presence of an opportunity
	c.	The existence of pressure
	d.	All of the above

During its most recent accounting period, Battle Creek Manufacturing Company made 5,000 units of product of which 4,500 units were sold. If the management of Battle Creek misclassified a GS&A expense as a product cost, the mistake would:

	a.	increase net income and any executive compensation bonuses that were based on net income.
	b.	increase net income and the resultant income taxes.
	c.	decrease net income, executive compensation and the resultant income taxes.
	d.	a and b.

During its first year of operations, the Johnson company paid $16,000 for direct material and $17,000 in wages for production workers. Lease payments and utilities on the administrative building amounted to $6,000. The Company owns $30,000 of manufacturing equipment. The equipment has a 4-year useful life and a $2,000 salvage value and uses straight-line depreciation. The company produced 5,000 units and sold 4,000 units at a price of $15.00 a unit. The average cost per unit used to determine cost of goods sold and ending inventory is which of the following amounts?

	a.	$10.0
	b.	$9.2
	c.	$8.0
	d.	$11.5

Brock Company makes candy. During the most recent accounting period Brock paid $3,000 for raw materials, $4,000 for labor, $6,000 for general, selling, and administrative expenses and $2,000 for overhead costs that were incurred to make candy. Brock started and completed 10,000 units of candy of which 8,000 were sold at a price of $10 a unit. Based on this information Brock would recognize which of the following amounts as cost of goods sold on the income statement?

	a.	None of the above.
	b.	$7,200
	c.	$9,000
	d.	$12,000

raspberryjackal990

ACC E113 Lecture Notes - Lecture 5: Financial Statement, Income Statement, Weighted Arithmetic Mean

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