The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at $5.00 per unit

ACC 560 Week 7 Assignment

E11-5 The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at $5.00 per unit. During June, 28,000 units of direct materials are purchased at a cost of $4.70 per unit, and 28,000 units of direct materials are used to produce 9,000 units of Product B.

Instructions:
a) Compute the total materials variance and the price and quantity variances.

b) Repeat the question above, assuming the purchase price is $5.20 and the quantity purchased and used is 26,200 units.

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Suburban Lifestyles, Inc. has manufactured prefabricated houses for over 20 years

13-29 Suburban Lifestyles, Inc. has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers’ lots. Suburban Lifestyles expanded into the precut housing market when it acquired Fairmont Company, one of its suppliers. In this market, various types of lumber are precut into the appropriate lengths, banded into packages, and shipped to customers’ lots for assembly. Suburban Lifestyles’ management designated the Fairmont Division as an investment center. Suburban uses return on investment (ROI) as a performance measure with investment defined as average productive assets. Management bonuses are based in part on ROI. All investments are expected to earn a minimum return of 15 percent before income taxes. Fairmont’s ROI has ranged from 19.3 to 22.1 percent since it was acquired. Fairmont had an investment opportunity in 20x1 that had an estimated ROI of 18 percent. Fairmont’s management decided against the investment because it believed the investment would decrease the division’s overall ROI. The 20x1 income statement for Fairmont Division follows. The division’s productive assets were $25,200,000 at the end of 20x1, a 5 percent increase over the balance at the beginning of the year.

FAIRMONT DIVISION
Income Statement
For the Year Ended December 31, 20x1
(in thousands)
Sales revenue $48,000
Cost of goods sold 31,600
Gross margin $16,400
Operating expenses:
Administrative $4,280
Selling 7,200 11,480
Income from operations before income taxes $ 4,920

Required:
1. Calculate the following performance measures for 20x1 for the Fairmont Division.
a. Return on investment (ROI).
b. Residual income.
2. Would the management of Fairmont Division have been more likely to accept the investment opportunity it had in 20x1 if residual income were used as a performance measure instead of ROI? Explain your answer.
3. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements


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The demand for solvent, one of numerous products manufactured by Hipp Industries Inc., has dropped sharply because of recent competition from a similar product

The demand for solvent, one of numerous products manufactured by Hipp Industries Inc., has dropped sharply because of recent competition from a similar product. The company's chemists are currently completing tests of various new formulas, and it is anticipated that the manufacture of a superior product can be started on June 1, one month in the future. No changes will be needed in the present production facilities to manufacture the new product because only the mixture of the various materials will be changed.

The controller has been asked by the president of the company for advice on whether to continue production during May or to suspend the manufacture of solvent until June 1. The controller has assembled the following pertinent data:

Hipp Industries Inc.
Income Statement-Solvent
For the Month Ended April 31,2013

Sales (2,800 units)…................... $215,600
Cost of good sold……..................... 187,320
Gross profit………………..................... $28,280
Selling and administrative expenses….... 41,780
Loss from operations…………………........... $(13,500)

The production costs and selling and administrative expenses, based on production of 2,800 units in April, are as follows:

Direct Materials $30.00 Per unit
Direct labor 10.50 per unit
Variable manufacturing cost 9.90 per unit
Variable selling and administrative expenses 5.60 Per unit
Fixed manufacturing cost $46,200 for April
Fixed selling and administrative expense 26,100 For April

Sales for May are expected to drop about 25% below those of the preceding month. No significant changes are anticipated in the fixed costs or variable costs per unit. No extra costs will be incurred in discontinuing operations in the portion of the plant associated with solvent. The inventory of solvent at the beginning and end of May is expected to be inconsequential.

1. Prepare an estimated income statement in absorption costing form for May for solvent, assuming that production continues during the month. Round amounts to two decimals. Enter all amounts as positive numbers.
2. Prepare an estimated income statement in variable costing form for May for solvent, assuming that production continues during the month. Round amounts to two decimals. Enter all amounts as positive numbers
3. What would be the estimated loss in income from operations if the solvent production were temporarily suspended for May?

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The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation

The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. June is Zygon's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $895,000, while conversion costs equaled $4,225,000. Accounting records indicate that 475,000 chips were started in June, and that 425,000 chips were completed.

Ending inventory was 50% complete as to conversion costs.

Required:
a. What is the total manufacturing cost per chip for June?
b. Allocate the total costs between the completed chips and the chips in ending inventory.

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