Hermon Company, amanufacturing company, produces a single product. Thefollowing information has been takenfrom the company's production, sales, and cost records for the just completed year. Hermon Company Production in units 29,000 Sales in units ? Ending finished goods inventory inunits ? Sales in dollars $1,300,000 Costs: Advertising $105,000 Entertainment and travel $40,000 Direct labor $90,000 Indirect labor $85,000 Raw materials purchased $480,000 Building rent (production uses 80% of thespace; administrative andsales offices use the rest) $40,000 Utilities, factory $108,000 Royalty paid for use of production patent,$1.50 per unit produced ? Maintenance, factory $9,000 Rent for special production equipment,$7,000 per year plus $0.30 perunit produced ? Selling and administrative salaries $210,000 Other factory overhead costs $6,800 Other selling and administrativeexpenses $17,000 Inventories: Beginning End of of the Year theYear Raw materials $20,000 $30,000 Work in process $50,000 $40,000 Finished goods $0 ? The finished goods inventoryis being carried at the average unit production cost for theyear. The selling price is $50 per unit. Required: Use the P3 Solution Sheet 1. Prepare a schedule of costof goods manufactured for the year. 2. Compute the following: a.The number of units in the finished goods inventory at the end ofthe year. b.The cost of the units in the finished goods inventory at the end ofthe year. 3. Prepare an income statement for theyear. show all work
Hermon Company, amanufacturing company, produces a single product. Thefollowing | ||||||
information has been takenfrom the company's production, sales, and cost records for the | ||||||
just completed year. | ||||||
Hermon Company | ||||||
Production in units | 29,000 | |||||
Sales in units | ? | |||||
Ending finished goods inventory inunits | ? | |||||
Sales in dollars | $1,300,000 | |||||
Costs: | ||||||
Advertising | $105,000 | |||||
Entertainment and travel | $40,000 | |||||
Direct labor | $90,000 | |||||
Indirect labor | $85,000 | |||||
Raw materials purchased | $480,000 | |||||
Building rent (production uses 80% of thespace; | ||||||
administrative andsales offices use the rest) | $40,000 | |||||
Utilities, factory | $108,000 | |||||
Royalty paid for use of production patent,$1.50 | ||||||
per unit produced | ? | |||||
Maintenance, factory | $9,000 | |||||
Rent for special production equipment,$7,000 per | ||||||
year plus $0.30 perunit produced | ? | |||||
Selling and administrative salaries | $210,000 | |||||
Other factory overhead costs | $6,800 | |||||
Other selling and administrativeexpenses | $17,000 | |||||
Inventories: | Beginning | End of | ||||
of the Year | theYear | |||||
Raw materials | $20,000 | $30,000 | ||||
Work in process | $50,000 | $40,000 | ||||
Finished goods | $0 | ? | ||||
The finished goods inventoryis being carried at the average unit production cost for theyear. | ||||||
The selling price is $50 per unit. | ||||||
Required: Use the P3 Solution Sheet | ||||||
1. Prepare a schedule of costof goods manufactured for the year. | ||||||
2. Compute the following: | ||||||
a.The number of units in the finished goods inventory at the end ofthe year. | ||||||
b.The cost of the units in the finished goods inventory at the end ofthe year. | ||||||
3. Prepare an income statement for theyear. | show all work | |||||
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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
Susquehanna Corp. is a manufacturer of earrings. You have been hired as a new management trainee of the company. In the past, the company has done very little in budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming year. You have gathered the beginning balance sheet and the necessary assumptions for you to create the budget. The company has an agreement with a bank that allows the company to borrow in increments of $10,000 at the beginning of each quarter. The interest is 2% per quarter and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company will pay the bank all of the accumulated interest for the quarter on the loan and as much of the loan as possible (in increments of $10,000), while still retaining at least $40,000 in cash. Insurance for the whole year will be paid in January. Prepare the master budget for the year 2017. | |||||||||||||
0 | |||||||||||||
Earrings Corp. | Earrings Corp. | ||||||||||||
Balance Sheet | Budgeting Assumptions | ||||||||||||
December 31, 2016 | |||||||||||||
2017 | 2018 | ||||||||||||
Assets | Sales Budget Assumptions | Same for all quarters | Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | Quarter 1 | Quarter 2 | |||||
Current assets: | Budgeted sales in pairs of earrings | 105,000 | 50,000 | 60,000 | 100,000 | 135,000 | 65,000 | ||||||
Cash | $ 48,000 | Selling price per pair | $ 23.50 | ||||||||||
Accounts receivable | 224,000 | Percentage of sales collected in the quarter of sale | 60% | ||||||||||
Raw materials inventory (240,000 grams of silver) | 120,000 | Percentage of sales collected in the quarter after sale | 40% | ||||||||||
Finished goods inventory (48,000 pairs of earrings) | 480,000 | ||||||||||||
Total current assets | $ 872,000 | Production Budget Assumptions | |||||||||||
Plant and equipment: | Percentage of next quarter's sales needed in ending finished goods inventory | 40% | |||||||||||
Land | 50,000 | ||||||||||||
Buildings and equipment | 650,000 | Direct Materials Budget Assumptions | |||||||||||
Accumulated depreciation | (330,000) | Grams of silver per pair of earring | 10 | ||||||||||
Total Plant and equipment, net | 370,000 | Cost per gram of silver | $ 0.50 | ||||||||||
Total assets | $ 1,242,000 | Percentage of next quarter's production needs in ending inventory | 20% | ||||||||||
Percentage of purchases paid in the quarter of purchase | 55% | ||||||||||||
Liabilities and Stockholders' Equity | Percentage of purchases paid in the quarter after purchase | 45% | |||||||||||
Current liabilities: | |||||||||||||
Accounts payable | $ 93,000 | Direct Labor Budget Assumptions | |||||||||||
Stockholders' equity: | Direct labor-hours required per pair | 0.20 | |||||||||||
Common stock | $ 700,000 | Direct labor cost per hour | $ 12.00 | ||||||||||
Retained earnings | 449,000 | ||||||||||||
Total stockholders' equity | 1,149,000 | Manufacturing Overhead Budget Assumptions | |||||||||||
Total liabilities and stockholders' equity | $ 1,242,000 | Variable manufacturing overhead per direct labor-hour | $ 1.50 | ||||||||||
Fixed manufacturing overhead excluding depreciation per quarter | $ 145,950 | ||||||||||||
Depreciation on factory assets per quarter | $ 25,000 | $ 30,000 | $ 32,000 | $ 33,000 | |||||||||
Selling and Administrative Expense Budget Assumptions | |||||||||||||
Variable selling and administrative expense per pair | $ 2.80 | ||||||||||||
Fixed selling and administrative expense: | |||||||||||||
Advertising expense per quarter | $ 270,000 | ||||||||||||
Executive salaries per quarter | $ 105,000 | ||||||||||||
Insurance expense per quarter | $ 48,000 | (the whole year's insurance will be paid in January) | |||||||||||
Rent expense per quarter | $ 240,000 | ||||||||||||
Depreciation on non-factory assets per quarter | $ 14,000 | $ 16,000 | $ 17,000 | $ 18,000 | |||||||||
Cash Budget Assumptions | |||||||||||||
Minimum cash balance | $ 40,000 | ||||||||||||
Equipment purchases | $ 20,000 | $ 40,000 | $ 15,000 | $ 10,000 | |||||||||
Dividends per quarter | $ 15,000 | ||||||||||||
Interest rate per quarter | 2% | ||||||||||||
Loans can be made and repaid in increments of $10,000 | |||||||||||||
Earrings Corp. | |||||||||||||
Master Budget | |||||||||||||
For the Year Ended December 31, 2017 | |||||||||||||
Sales Budget | Quarter | ||||||||||||
1 | 2 | 3 | 4 | Year | |||||||||
Budgeted unit sales (in pairs) | ? | ? | ? | ? | ? | ||||||||
Selling price per unit | ? | ? | ? | ? | ? | ||||||||
Total sales | ? | ? | ? | ? | ? | ||||||||
Schedule of Expected Cash Collections | |||||||||||||
Beginning accounts receivable | ? | ? | |||||||||||
First quarter sales | ? | ? | ? | ||||||||||
Second quarter sales | ? | ? | ? | ||||||||||
Third quarter sales | ? | ? | ? | ||||||||||
Fourth quarter sales | ? | ? | |||||||||||
Total cash collections | ? | ? | ? | ? | ? | ||||||||
Production Budget | Quarter | ||||||||||||
1 | 2 | 3 | 4 | Year | |||||||||
Budgeted unit sales | ? | ? | ? | ? | ? | ||||||||
Add: Desired units of ending finished goods inventory | ? | ? | ? | ? | ? | ||||||||
Total needs | ? | ? | ? | ? | ? | ||||||||
Less: Units of beginning finshed goods inventory | ? | ? | ? | ? | ? | ||||||||
Required production in units | ? | ? | ? | ? | ? | ||||||||
Direct Materials Budget | Quarter | ||||||||||||
1 | 2 | 3 | 4 | Year | |||||||||
Required production in pairs | ? | ? | ? | ? | ? | ||||||||
Units of raw materials needed per pair | ? | ? | ? | ? | ? | ||||||||
Units of raw materials needed to meet production | ? | ? | ? | ? | ? | ||||||||
Add desired units of ending raw materials inventory | ? | ? | ? | 214,000 | ? | ||||||||
Total units of raw materials needed | ? | ? | ? | ? | ? | ||||||||
Less units of beginning raw materials inventory | ? | ? | ? | ? | ? | ||||||||
Units of raw materias to be purchased | ? | ? | ? | ? | ? | ||||||||
Cost of raw materials per pound | ? | ? | ? | ? | ? | ||||||||
Cost of raw materials to be purchased | ? | ? | ? | ? | ? | ||||||||
Schedule of Expected Cash Disbursements for Purchases of Materials | |||||||||||||
Beginning accounts payable | ? | ? | |||||||||||
First quarter purchases | ? | ? | ? | ||||||||||
Second quarter purchases | ? | ? | ? | ||||||||||
Third quarter purchases | ? | ? | ? | ||||||||||
Forth quarter purchases | ? | ? | |||||||||||
Total cash disbursements for materials | ? | ? | ? | ? | ? | ||||||||
Direct Labor Budget | Quarter | ||||||||||||
1 | 2 | 3 | 4 | Year | |||||||||
Required production in pairs | ? | ? | ? | ? | ? | ||||||||
Direct labor-hours per pair | ? | ? | ? | ? | ? | ||||||||
Total direct labor-hours needed | ? | ? | ? | ? | ? | ||||||||
Direct labor cost per hour | ? | ? | ? | ? | ? | ||||||||
Total direct labor cost | ? | ? | ? | ? | ? | ||||||||
Manufacturing Overhead Budget | Quarter | ||||||||||||
1 | 2 | 3 | 4 | Year | |||||||||
Budgeted direct labor-hours | ? | ? | ? | ? | ? | ||||||||
Variable manufacturing overhead rate | ? | ? | ? | ? | ? | ||||||||
Variable manufacturing overhead | ? | ? | ? | ? | ? | ||||||||
Fixed manufacturing overhead | ? | ? | ? | ? | ? | ||||||||
Total manufacturing overhead | ? | ? | ? | ? | ? | ||||||||
Less depreciation on factory assets | ? | ? | ? | ? | ? | ||||||||
Cash disbursements for manufacturing overhead | ? | ? | ? | ? | ? | ||||||||
Total manufacturing overhead | ? | ||||||||||||
Budgeted direct labor-hours | ? | ||||||||||||
Predetermined overhead rate for the year 2017 | ? | ||||||||||||
Ending Finished Goods Inventory Budget (absorption costing basis) | |||||||||||||
Item | Quantity | Cost | Total | ||||||||||
Production cost per case: | |||||||||||||
Direct materials | ? | grams | ? | per gram | ? | ||||||||
Direct labor | ? | hours | ? | per hour | ? | ||||||||
Manufacturing overhead | ? | hours | ? | per hour | ? | ||||||||
Unit product cost | ? | ||||||||||||
Budgeted finished goods inventory: | |||||||||||||
Ending finished goods inventory in cases | ? | ||||||||||||
Unit product cost | ? | ||||||||||||
Ending finished goods inventory in dollars | ? | ||||||||||||
Selling and Administrative Expense Budget | Quarter | ||||||||||||
1 | 2 | 3 | 4 | Year | |||||||||
Budgeted unit sales | ? | ? | ? | ? | ? | ||||||||
Variable selling and administrative expense per pair | ? | ? | ? | ? | ? | ||||||||
Total variable selling and administrative expense | ? | ? | ? | ? | ? | ||||||||
Fixed selling and administrative expense per quarter: | |||||||||||||
Advertising | ? | ? | ? | ? | ? | ||||||||
Executive salaries | ? | ? | ? | ? | ? | ||||||||
Insurance | ? | ? | ? | ? | ? | ||||||||
Rent | ? | ? | ? | ? | ? | ||||||||
Depreciation on non-factory assets | ? | ? | ? | ? | ? | ||||||||
Total fixed selling and administrative expense | ? | ? | ? | ? | ? | ||||||||
Total selling and administrative expense | ? | ? | ? | ? | ? | ||||||||
Adjustment for prepaid insurance | #VALUE! | #VALUE! | #VALUE! | #VALUE! | #VALUE! | ||||||||
Less depreciation on non-factory assets | ? | ? | ? | ? | ? | ||||||||
Cash disbursements for selling and administrative expense | ? | ? | ? | ? | ? | ||||||||
Cash Budget | Quarter | ||||||||||||
1 | 2 | 3 | 4 | Year | |||||||||
Beginning cash balance | ? | ? | ? | ? | ? | ||||||||
Add cash receipts: | |||||||||||||
Collections from customers | ? | ? | ? | ? | ? | ||||||||
Total cash available | ? | ? | ? | ? | ? | ||||||||
Less cash disbursements: | |||||||||||||
Direct materials | ? | ? | ? | ? | ? | ||||||||
Direct labor | ? | ? | ? | ? | ? | ||||||||
Manufacturing overhead | ? | ? | ? | ? | ? | ||||||||
Selling and administrative | ? | ? | ? | ? | ? | ||||||||
Equipment purchases | ? | ? | ? | ? | ? | ||||||||
Dividends | ? | ? | ? | ? | ? | ||||||||
Total cash disbursements | ? | ? | ? | ? | ? | ||||||||
Excess (deficiency) of cash available over disbursements | ? | ? | ? | ? | ? | ||||||||
Financing: | |||||||||||||
Borrowings (at the beginnings of quarters) | $ 50,000.00 | $ - | ? | ||||||||||
Repayments (at end of the year) | $ - | ? | ? | ||||||||||
Interest | $ (1,000.00) | ? | ? | ||||||||||
Total financing | $ 49,000.00 | ? | ? | ? | ? | ||||||||
Ending cash balance | ? | ? | ? | ? | ? |
Mannarelli Corporation uses the FIFO method in its processcosting system. Operating data for the Casting Department for themonth of September appear below:
Units | PercentComplete with Respect to Conversion | |
Beginning workin process inventory | 19,000 | 25% |
Transferred infrom the prior department during September | 99,000 | |
Ending work inprocess inventory | 29,000 | 90% |
According to the company's records, the conversion cost inbeginning work in process inventory was $16,160 at the beginning ofSeptember. Additional conversion costs of $531,556 were incurred inthe department during the month. |
The cost per equivalent unit for conversion costs for Septemberis closest to (Round off to three decimal places.): |
$4.642
$4.817
$5.369
$4.669
During February, Degan Inc. transferred $55,000 from Work inProcess to Finished Goods and recorded a Cost of Goods Sold of$60,000 (assume there was enough beginning balance in the Finishedgoods inventory account). The journal entries to record thesetransactions would include a:
credit to Finished Goods of $55,000
debit to Finished Goods of $60,000
credit to Cost of Goods Sold of $60,000
credit to Work in Process of $55,000
Carr Company produces a single product. During the past year,Carr manufactured 42,000 units and sold 28,500 units. Productioncosts for the year were as follows:
Fixed manufacturing overhead | $ 420,000 |
Variable manufacturing overhead | $ 525,000 |
Direct labor | $ 344,400 |
Direct materials | $ 445,200 |
Sales totaled $2,137,500, variable selling expenses totaled$424,200, and fixed selling and administrative expenses totaled$187,000. There were no units in beginning inventory. Assume thatdirect labor is a variable cost.
Under absorption costing, the ending inventory for the year wouldbe valued at (Do not round your intermediate calculations.):
$557,550
$646,129
$752,657
$711,284
The followingdata were taken from the accounting records of Abacus Company whichuses the FIFO method in its process costing system: |
Beginning work in process inventory: | 30,000 units(materials 100% complete, labor and overhead 70% complete) |
Started in process during the period: | 100,000units |
Endingwork in process inventory: | 40,000 units(materials 100% complete, labor and overhead 80% complete) |
The equivalent units are:
Material, 134,000 units; labor and overhead, 132,000 units
Material, 130,000 units; labor and overhead, 122,000 units
Material, 100,000 units; labor and overhead, 101,000 units
Material, 91,000 units; labor and overhead, 83,000 units
Budget data for the Bidwell Company are as follows:
Sales (170,000 units) | $1,700,000 | ||
Expenses: | Fixed | Variable | |
Raw materials | $ 510,000 | ||
Direct labor | 340,000 | ||
Overhead | $ 170,000 | 255,000 | |
Selling and administrative | 187,000 | 85,000 | |
Total expenses | $ 357,000 | $ 1,190,000 | 1,547,000 |
Netoperating income | $ 153,000 |
The number ofunits Bidwell would have to sell to earn a net operating income of$255,000 is: |
170,000 units
119,000 units
204,000 units
255,000 units
DeAnne Company produces a single product. The company's variablecosting income statement for August appears below:
DeAnne Company Income statement For the month ended August 31 | |
Sales ($21 per unit) | $1,134,000 |
Variable expenses: | |
Variable cost of goods sold | 486,000 |
Variable selling expense | 108,000 |
Total variable expenses | 594,000 |
Contribution margin | 540,000 |
Fixed expenses: | |
Fixed manufacturing | 147,000 |
Fixed selling and administrative | 49,000 |
Total fixed expenses | 196,000 |
Netoperating income | $344,000 |
The company produced 49,000 units in August and the beginninginventory consisted of 22,000 units. Variable production costs perunit and total fixed costs have remained constant over the pastseveral months.
The value of the company's inventory on August 31 under theabsorption costing method is (Do not round your intermediatecalculations.):
$204,000
$238,000
$153,000
$253,426
Candice Corporation has decided to introduce a new product. Theproduct can be manufactured using either a capital-intensive orlabor-intensive method. The manufacturing method will not affectthe quality or sales of the product. The estimated manufacturingcosts of the two methods are as follows:
Capital-Intensive | Labor-Intensive | |||||||
Variable manufacturing cost per unit | $ | 14.00 | $ | 17.60 | ||||
Fixed manufacturing cost per year | $ | 2,606,000 | $ | 1,417,600 | ||||
The company's market research department has recommended anintroductory selling price of $30 per unit for the new product. Theannual fixed selling and administrative expenses of the new productare $600,000. The variable selling and administrative expenses are$2 per unit regardless of how the new product is manufactured. |
Required: | |
a. | Calculate the break-even point in units if Candice Corporationuses the (Do not round intermediatecalculations.): |
Break-evenpoint in units | |
Capital-intensive manufacturing method | |
Labor-intensive manufacturing method | |
b. | Determine the unit sales volume at which the net operatingincome is the same for the two manufacturing methods. (Donot round intermediate calculations. Round your answer to thenearest whole number.) |
Sales volume |
c. | Assuming sales of 440,000 units, what is the degree of operatingleverage if the company uses the: (Do not roundintermediate calculations. Round your answers to 2 decimalplaces.) |
Degree ofoperating leverage | |
Capital-intensive manufacturing method | |
Labor-intensive manufacturing method | |
d. | What is your recommendation to management concerning whichmanufacturing method should be used, if the sales volume is inexcess of the one calculated under Requirement (b)? | ||||
|
Hickory Company manufactures two productsâ13,000 units ofProduct Y and 5,000 units of Product Z. The company uses aplantwide overhead rate based on direct labor-hours. It isconsidering implementing an activity-based costing (ABC) systemthat allocates all of its manufacturing overhead to four costpools. The following additional information is available for thecompany as a whole and for Products Y and Z: (The totalestimated overhead cost may not agree with the sum of allocatedoverhead costs to each product.)
|
Ermoin Inc. uses the FIFO method in its process costing system.The following data concern the operations of the company's firstprocessing department for a recent month.
Workin process, beginning: | |||||
Units in process | 2,400 | ||||
Percent complete with respect tomaterials | 70 | % | |||
Percent complete with respect toconversion | 30 | % | |||
Costs in the beginning inventory: | |||||
Materials cost | $ | 4,140 | |||
Conversion cost | $ | 6,265 | |||
Units started into production during the month | 17,900 | ||||
Units completed and transferred out | 17,900 | ||||
Costs added to production during the month: | |||||
Materials cost | $ | 165,490 | |||
Conversion cost | $ | 560,270 | |||
Workin process, ending: | |||||
Units in process | 2,400 | ||||
Percent complete with respect tomaterials | 50 | % | |||
Percent complete with respect toconversion | 30 | % | |||
Required: |
Using the FIFO method: |
a. | Determine theequivalent units of production for materials and conversioncosts. |
Materials | Conversion | |
Equivalent units of production | ||
b. | Determine the cost per equivalent unit for materials andconversion costs. (Round your answers to 2 decimalplaces.) |
Materials | Conversion | |
Costper equivalent unit | $ | $ |
c. | Determine the cost of ending work in process inventory.(Round your intermediate calculations to 2 decimal placesand final answer to the nearest dollar amount.) |
Costof ending work in process inventory | $ |
d. | Determine the cost of units transferred out of the departmentduring the month. (Round your intermediate calculations to2 decimal places and final answer to the nearest dollaramount.) |
Costof units transferred out | $ |