Summit Manufacturing, Inc. produces snow shovels

Summit Manufacturing, Inc. produces snow shovels. The selling price per snow shovel is $30.

Costs involved in production are:
Direct material $5
Direct labor 4
Variable manufacturing overhead 3
Total variable manufacturing costs per unit $12
Fixed manufacturing overhead per year $180,000

In addition, the company has fixed selling and administrative costs of $160,000 per year.

EXERCISE 5-11. [LO 1] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is the value of ending inventory using full costing?

EXERCISE 5-12. [LO 1, 2] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is the value of ending inventory using variable costing?

EXERCISE 5-13. [LO 1, 2, 3] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
Calculate the difference in full costing net income and variable costing net income without preparing either income statement.

EXERCISE 5-14. [LO 1] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is cost of goods sold using full costing?

EXERCISE 5-15. [LO 1, 2] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is variable cost of goods sold?

EXERCISE 5-16. [LO 1] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is net income using full costing?

EXERCISE 5-17. [LO 1, 2] During the year, Summit produces 40,000 snow shovels and sells 37,000 snow shovels.
Required
What is net income using variable costing?

Click here for the solution: Summit Manufacturing, Inc. produces snow shovels

Regal Company produces hospital uniforms

P19-33B Regal Company produces hospital uniforms. The company allocates manufacturing overhead based on the machine hours each job uses. Regal reports the following cost data for 2009:

Accounting for manufacturing overhead
Budget
Actual
Machine hours
7,000 hours
6,500 hours

Indirect materials
50,000
52,000

Depreciation on trucks used to deliver uniforms to customers
14,000
12,000

Depreciation on plant and equipment
65,000
67,000

Indirect manufacturing labor
40,000
43,000

Customer service hotline
19,000
21,000

Plant utilities
27,000
20,000

Requirements
1. Compute the predetermined manufacturing overhead rate. (p. 955)
2. Post actual and allocated manufacturing overhead to the Manufacturing Overhead T-account. (pp. 957–958)
3. Close the under- or overallocated overhead to Cost of Goods Sold. (pp. 958–959)
4. How can managers use accounting information to help control manufacturing overhead costs? (pp. 955–956)

Click here for the solution: Regal Company produces hospital uniforms

Boutique Ads Co. produces advertising videos

PR 9-4A Boutique Ads Co. produces advertising videos. During the last 6 months of the current fiscal year, Boutique Ads Co. received the following notes:

1. May 9 -- $19,200 -- 45 days -- 9%
2. July 15 -- 11,250 -- 60 days -- 8%
3. Aug 1 -- 43,200 -- 90 days -- 7%
4. Sept 4 -- 20,000 -- 90 days -- 6%
5. Nov 26 -- 13,500 -- 60 days -- 8%
6. Dec 16 -- 21,600 -- 60 days -- 13%

Instructions:
1. Determine for each note (a) the due date and (b) the amount of interest due at maturity, identifying each note by number.
2. Journalize the entry to record the dishonor of note #3 on its due date.
3. Journalize the adjusting entry to record the accrued interest on notes 5 and 6 on December 31.
4. Journalize the entries to record the receipt of the amounts due on notes 5 and 6 in January and February

Click here for the solution: Boutique Ads Co. produces advertising videos

Benson, Inc. produces three separate products from a common process costing $100,000

ACC 560 Week 5 Assignment

E7-8 Benson, Inc. produces three separate products from a common process costing $100,000. Each of the products can be sold at the split-off point or can be processed further and then sold for a higher price. Shown below are cost and selling price data for a recent period.

Sales Value at Split-off Point Cost to Process Further Sales Value After Further Processing
Product 12 $50,000 $100,000 $190,000
Product 14 10,000 30,000 35,000
Product 16 60,000 150,000 220,000

a. Determine total net income if all products are sold at the split-off point.
b. Determine total net income if all products are sold after further processing.
c. Using incremental analysis, determine which products should be sold at the split-off point and which should be processed further.
d. Determine total net income using the results from the previous part of the question.

Click here for the solution: Benson, Inc. produces three separate products from a common process costing $100,000

Peter Catalano's Verde Vineyards in Oakville, California produces three varieties of wine

Peter Catalano's Verde Vineyards in Oakville, California produces three varieties of wine: Merlot, Viognier, and Pinot Noir. His winemaster, Kyle Ward, has identified the following activities as cost pools for accumulating overhead and assigning it to products:

Choices:
Number of bottles
Number of boxes
Gallons of wine or months of aging
Number of cartfuls
Labor hours
Number of shipments
Gallons of juice
Number of gallons processed
Gallons of chemicals
Number or cartruls or labor hours

1. Culling and replanting. Dead or overcrowded vines are culled, and new vines are planted or relocated. (Separate vineyards by variety.)
2. Tying. The posts and wires are reset, and vines are tied to the wires for the dormant season.
3. Trimming. At the end of the harvest the vines are cut and trimmed back in preparation for the next season.
4. Spraying. The vines are sprayed with chemicals for protection against insects and fungi.
5. Harvesting. The grapes are hand-picked, placed in carts, and transported to the crushers.
6. Stemming and crushing. Cartfuls of bunches of grapes of each variety are separately loaded into machines which remove stems and gently crush the grapes.
7. Pressing and filtering. The crushed grapes are transferred to presses which mechanically remove the juices and filter out bulk and impurities.
8. Fermentation. The grape juice, by variety, is fermented in either stainless-steel tanks or oak barrels.
9. Aging. The wines are aged in either stainless-steel tanks or oak barrels for one to three years depending on variety
10. Bottling and corking. Bottles are machine-filled and corked.
11. Labeling and boxing. Each bottle is labeled, as is each nine-bottle case, with the name of the vintner, vintage, and variety.
12. Storing. Packaged and boxed bottles are stored awaiting shipment.
13. Shipping. The wine is shipped to distributors and private retailers.
14. Heating and air-conditioning of plant and offices
15. Maintenance of buildings and equipment. Printing, repairs, replacements, and general maintenance are performed in the off-season.

Instructions

For each of Verde's fifteen activity cost pools, identify a probable cost driver that might be used to assign overhead costs to its three wine varieties.

Click here for the solution: Peter Catalano's Verde Vineyards in Oakville, California produces three varieties of wine

Calibri Company produces three products

Calibri Company produces three products: F, G, and H. The selling price, variable costs, and contribution margin for one unit of each product follow:

Product
F G H
Selling price $40 $110 $50
Variable costs:
Direct materials $16 $25 $20
Direct labor $11 $20 $12
Variable manufacturing $10 $10 $8
overhead
Total variable costs $37 $55 $40
Contribution margin $3 $55 $10
Contribution margin ratio 7.5% 50% 20%

One of two major machines used to produce these products has broken down and a new one is on backorder, so the company is down to one machine. Product F takes 0.20 machine hours to produce one unit, Product G takes 11 machine hours to produce one unit, and Product H takes 2.5 machine hours. There are 1,000 machine hours available on the new machine.

a. What is the amount of contribution margin that will be obtained per machine hour on each product?
b. Which product would you recommend that the company work on next week – the orders for product F, product G or product H? Show your computations.

Click here for the solution: Calibri Company produces three products

Cool Spring Company produces premium bottled water

E17A-10 Computing equivalent units, computing cost per equivalent unit; assigning costs; journalizing; second department, weighted-average method

Cool Spring Company produces premium bottled water. In the second department, the Bottling Department, conversion costs are incurred evenly throughout the bottling process, but packaging materials are not added until the end of the process. Costs in beginning Work in process inventory include transferred in costs of $1,700, direct labor of $700, and manufacturing overhead of $330. February data for the Bottling Department follow:

Requirements
1. Compute the Bottling Department equivalent units for the month of February. Use the weighted-average method.
2. Compute the cost per equivalent unit for February.
3. Assign the costs to units completed and transferred out and to ending Work in process inventory.
4. Prepare the journal entry to record the cost of units completed and transferred out.
5. Post all transactions to the Work in process inventory—Bottling Department T-account. What is the ending balance?

Click here for the solution: Cool Spring Company produces premium bottled water

Jay Levitt Company produces one product, a putter called GO-Putter

E11-11 Jay Levitt Company produces one product, a putter called GO-Putter. Levitt uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 100,000 units per year. The total budgeted overhead at normal capacity is $800,000 comprised of $200,000 of variable costs and $600,000 of fixed costs. Levitt applies overhead on the basis of direct labor hours.
During the current year, Levitt produced 90,000 putters, worked 94,000 direct labor hours, and incurred variable overhead costs of $186,000 and fixed overhead costs of $600,000.

Instructions:
a) Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.
b) Compute the applied overhead for Levitt for the year.
c) Compute the total overhead variance.

Click here for the solution: Jay Levitt Company produces one product, a putter called GO-Putter

Mendocino Corporation produces two grades of wine from grapes that it buys from California growers

Problem 4-4A (P4-4A) Assign overhead costs using traditional costing and ABC; compare results.

Mendocino Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600,000 5-liter jugs Mendocino also produces and sells roughly 300,000 liters per year of a low-volume, high-cost product called LiteMist. LiteMist is sold in 1-liter bottles. Based on recent data, the CoolDay product has not been as profitable as LiteMist. Management is considering dropping the inexpensive CoolDay line so it can focus more attention on the LiteMist product. The LiteMist product already demands considerably more attention than the CoolDay line.
Tyler Silva, president and founder of Mendocino, is skeptical about this idea. He points out that for many decades the company produced only the CoolDay line, and that it was always quite profitable. It wasn't until the company started producing the more complicated LiteMist wine that the profitability of CoolDay declined. Prior to the introduction of LiteMist, the company had simple equipment, simple growing and production procedures, and virtually no need for quality control. Because LiteMist is bottled in 1-liter bottles, it requires considerably more time and effort, both to bottle and to label and box than does CoolDay. The company must bottle and handle 5 times as many bottles of LiteMist to sell the same quantity as CoolDay. CoolDay requires 1 month of aging; LiteMist requires 1 year. CoolDay requires cleaning and inspection of equipment every 10,000 liters; LiteMist requires such maintenance every 600 liters.
Tyler has asked the accounting department to prepare an analysis of the cost per liter using the traditional costing approach and using activity-based costing. The following information was collected.
CoolDay LiteMist
Direct materials per liter $0.40 $1.20
Direct labor cost per liter $0.25 $0.50
Direct labor hours per liter 0.05 0.09
Total direct labor hours 120,000 25,000

Activity Cost Pools Cost Drivers Estimated Overhead Expected Use of Cost Drivers Expected Use of Cost Drivers per Product
CoolDay LiteMist
Grape processing Cart of grapes $ 145,860 6,600 6,000 600
Aging Total months 396,000 6,600,000 3,000,000 3,600,000
Bottling and corking Number of bottles 270,000 900,000 600,000 300,000
Labeling and boxing Number of bottles 189,000 900,000 600,000 300,000
Maintain and inspect equipment Number of inspections 240,800 800 350 450
$1,241,660

Instructions
Answer each of the following questions. (Round all calculations to three decimal places.)
A. Under traditional product costing using direct labor hours, compute the total manufacturing cost per liter of both products.
B. Under ABC, prepare a schedule showing the computation of the activity-based overhead rates (per cost driver).
C. Prepare a schedule assigning each activity's overhead cost pool to each product, based on the use of cost drivers. Include a computation of overhead cost per liter.
D. Compute the total manufacturing cost per liter for both products under ABC.
E. Write a memo to Tyler Silva discussing the implications of your analysis for the company's plans. In this memo provide a brief description of ABC, as well as an explanation of how the traditional approach can result in distortions.

Check: (a) Cost/liter—C.D. $1.078; (c) Cost/liter—C.D. $.241

Click here for the solution: Mendocino Corporation produces two grades of wine from grapes that it buys from California growers

ACC 349 Week 3 Mendocino Corporation produces two grades of wine from grapes that it buys from California growers

ACC 349 Week 3 (Week Three)

Problem 4-4A (P4-4A) Assign overhead costs using traditional costing and ABC; compare results.

Mendocino Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600,000 5-liter jugs Mendocino also produces and sells roughly 300,000 liters per year of a low-volume, high-cost product called LiteMist. LiteMist is sold in 1-liter bottles. Based on recent data, the CoolDay product has not been as profitable as LiteMist. Management is considering dropping the inexpensive CoolDay line so it can focus more attention on the LiteMist product. The LiteMist product already demands considerably more attention than the CoolDay line.

Tyler Silva, president and founder of Mendocino, is skeptical about this idea. He points out that for many decades the company produced only the CoolDay line, and that it was always quite profitable. It wasn't until the company started producing the more complicated LiteMist wine that the profitability of CoolDay declined. Prior to the introduction of LiteMist, the company had simple equipment, simple growing and production procedures, and virtually no need for quality control. Because LiteMist is bottled in 1-liter bottles, it requires considerably more time and effort, both to bottle and to label and box than does CoolDay. The company must bottle and handle 5 times as many bottles of LiteMist to sell the same quantity as CoolDay. CoolDay requires 1 month of aging; LiteMist requires 1 year. CoolDay requires cleaning and inspection of equipment every 10,000 liters; LiteMist requires such maintenance every 600 liters.

Tyler has asked the accounting department to prepare an analysis of the cost per liter using the traditional costing approach and using activity-based costing. The following information was collected.

CoolDay LiteMist
Direct materials per liter $0.40 $1.20
Direct labor cost per liter $0.25 $0.50
Direct labor hours per liter 0.05 0.09
Total direct labor hours 120,000 25,000

Activity Cost Pools Cost Drivers Estimated Overhead Expected Use of Cost Drivers Expected Use of Cost Drivers per Product

CoolDay LiteMist
Grape processing Cart of grapes $ 145,860 6,600 6,000 600
Aging Total months 396,000 6,600,000 3,000,000 3,600,000
Bottling and corking Number of bottles 270,000 900,000 600,000 300,000
Labeling and boxing Number of bottles 189,000 900,000 600,000 300,000
Maintain and inspect equipment Number of inspections 240,800 800 350 450
$1,241,660

Instructions
Answer each of the following questions. (Round all calculations to three decimal places.)
A. Under traditional product costing using direct labor hours, compute the total manufacturing cost per liter of both products.
B. Under ABC, prepare a schedule showing the computation of the activity-based overhead rates (per cost driver).
C. Prepare a schedule assigning each activity's overhead cost pool to each product, based on the use of cost drivers. Include a computation of overhead cost per liter.
D. Compute the total manufacturing cost per liter for both products under ABC.
E. Write a memo to Tyler Silva discussing the implications of your analysis for the company's plans. In this memo provide a brief description of ABC, as well as an explanation of how the traditional approach can result in distortions.

Check: (a) Cost/liter—C.D. $1.078; (c) Cost/liter—C.D. $.241


Click here for the solution: ACC 349 Week 3 Mendocino Corporation produces two grades of wine from grapes that it buys from California growers

Tessmer Manufacturing Company produces inventory in a highly automated assembly plant in Olathe, KS

Tessmer Manufacturing Company produces inventory in a highly automated assembly plant in Olathe, KS. The automated system is in its first year of operation and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operation, the following data was collected:

Machine-hours Kilowatt-hours Total Overhead Costs
January 3,800 4,520,000 $138,000
February 3,650 4,340,000 136,800
March 3,900 4,500,000 139,200
April 3,300 4,290,000 136,800
May 3,250 4,200,000 126,000
June 3,100 4,120,000 120,000

Question 1: Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.

Question 2: Use the high-low method to determine the estimating cost function with kilowatt-hours as the cost driver.

Question 3: For July, the company ran the machines for 3,000 hours and used 4,000,000 kilowatt-hours of power. The overhead costs totaled $114,000. Which cost driver was the best predictor for July?


Click here for the solution: Tessmer Manufacturing Company produces inventory in a highly automated assembly plant in Olathe, KS

Timberland produces treated wood chips as a by-product of pulp manufacturing

Timberland produces treated wood chips as a by-product of pulp manufacturing. The Company purchases materials (chemicals, etc.) for $32 per ton of chips. Variable costs, including labor, costs $10 per ton. The chips can be sold for $70 per ton. Fixed costs, all unavoidable, equals $84,000.Timberland's incremental tax rate is 30%.

Required: 1. Prepare a budgeted income statement assuming that Timberland sells 2,500 tons.
2. What is the contribution margin per ton?
3. Calculate breakeven.
4. Assume the Company requires income of $14,000, how much in dollars does Timberland have to sale to achieve $14,000 profit?
5. Now assume the Company wishes to earn $35,711 after tax. What is the target operating income?
6. Next assume the Company now anticipates selling 3,200 tons of chips. Management believes that if $10,000 is invested in advertising the sale of chips will increase to 4,000 tons. Would you recommend the advertising?
7. As an alternative to advertising the factory foreman suggests that if the Company reduces the selling price to $61 per ton sales can be increased to 4,500 tons. Do you recommend the reduction in sales price?


Click here for the solution: Timberland produces treated wood chips as a by-product of pulp manufacturing

Topple Company produces a single product

Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year is presented below:

Units in beginning inventory 2,000
Units produced 9,000
Units sold 10,000
Sales $100,000
Less cost of goods sold:

Beginning inventory 12,000
Add cost of goods manufactured 54,000
Goods available for sale 66,000
Less ending inventory 6,000
Cost of goods sold 60,000
Gross margin 40,000
Less selling & admin. expenses 28,000
Net operating income $12,000

Variable manufacturing costs are $4 per unit. Fixed factory overhead totals $18,000 for the year. This overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold.

Required: Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements.


Click here for the solution: Topple Company produces a single product

Nottaway Flooring produces custom-made floor tiles

Nottaway Flooring produces custom-made floor tiles. The company's Raw Material Inventory account contains both direct and indirect materials. Until the end of April 2010, the company worked solely on a large job (#4263) for a major client. Near the end of the month, Nottaway began Job #4264. The following information was obtained relating to April production operations.

Raw material purchased on account, $204,000.
Direct material issued to Job #4263 cost $163,800; indirect material issued for that job cost $12,460. Direct material costing $1,870 was issued to start production of Job #4264.
Direct labor hours worked on Job #4263 were 3,600. Direct labor hours for Job #4264 were 120. All direct factory employees were paid $15 per hour.
Actual factory overhead costs incurred for the month totaled $68,700. This overhead consisted of $18,000 of supervisory salaries, $21,500 of depreciation charges, $7,200 of insurance, $12,500 of indirect labor, and $9,500 of utilities. Salaries, insurance, and utilities were paid in cash, and indirect labor charges were accrued.
Overhead is applied to production at the rate of $18 per direct labor hour.
Beginning balances of Raw Material Inventory and Work in Process Inventory were, respectively, $4,300 and $11,400. Of the beginning WIP balance, $800 was related to Job #4263. Job #4263 was completed during April.

a. Prepare journal entries for each transaction.

1. Raw material purchased on account, $204,000.
2. Direct material issued to Job #4263 cost $163,800; indirect material issued for that job cost $12,460. Direct material costing $1,870 was issued to start production of Job #4264.
3. Direct labor hours worked on Job #4263 were 3,600. Direct labor hours for Job #4264 were 120. All direct factory employees were paid $15 per hour.
4. Actual factory overhead costs incurred for the month totaled $68,700. This overhead consisted of $18,000 of supervisory salaries, $21,500 of depreciation charges, $7,200 of insurance, $12,500 of indirect labor, and $9,500 of utilities. Salaries, insurance, and utilities were paid in cash, and indirect labor charges were accrued.
5. Overhead is applied to production at the rate of $18 per direct labor hour.

b. Determine the balance in Raw Material Inventory at the end of the month.
c. Determine the balance in Work in Process Inventory at the end of the month.
d. Determine the cost of the goods manufactured during April. If completed goods consist of 10,000 similar units, what was the cost per unit?
e. What is the amount of underapplied or overapplied overhead at the end of April?


Click here for the solution: Nottaway Flooring produces custom-made floor tiles

Farmer Frank’s produces items from local farm products and distributes them to supermarkets

Ethics and Standard Costs

Farmer Frank’s produces items from local farm products and distributes them to supermarkets. Over the years, price competition has become increasingly important, so Susan Kramer, the company’s controller, is planning to implement a standard cost system for Farmer Frank’s. She asked her cost accountant, Margaret Chang, to gather cost information on the production of blueberry preserves (Farmer Frank’s most popular product). Margaret reported that blueberries cost $.75 per quart, the price she intends to pay to her good friend who has been operating a blueberry farm that has been unprofitable for the last few years. Because of an oversupply in the market, the price for blueberries has dropped to $.60 per quart. Margaret is sure that the $.75 price will be enough to pull her friend’s farm out of the red and into the black.

Required:
Is Margaret’s behavior regarding the cost information she provided to Susan unethical? Explain your answer.


Click here for the solution: Farmer Frank’s produces items from local farm products and distributes them to supermarkets

Delaware Bay Chemical Company produces three products: ethylene, butane, and ester

PR 25-6A Delaware Bay Chemical Company produces three products: ethylene, butane, and ester. Each of these products has high demand in the market, and Delaware Bay Chemical is able to sell as much as it can produce of all three. The reaction operation is a bottleneck in the process and is running at 100% of capacity. Delaware Bay wants to improve chemical operation profitability. The variable conversion cost is $7 per process hour. The fixed cost is $550,000. In addition, the cost analyst was able to determine the following information about the three products:

AND SO ON

The reaction operation is part of the total process for each of these three products. Thus, for example, 1.0 of the 3 hours required to process ethylene are associated with the reactor.

Instructions
1. Determine the unit contribution margin for each product.
2. Provide an analysis to determine the relative product profitabilities, assuming that the reactor is a bottleneck.
3. Assume that management wishes to improve profitability by increasing prices on selected products. At what price would ethylene and ester need to be offered in order to produce the same relative profitability asbutane?


Click here for the solution: Delaware Bay Chemical Company produces three products: ethylene, butane, and ester

Sherene Nili manages a company that produces wedding gowns

Sherene Nili manages a company that produces wedding gowns. She produces both a custom product that is made to order and a standard product that is sold in bridal salons. Her accountant prepared the following forecasted income statement for March, which is a busy month:

…………………………………Custom Dresses……Standard Dresses…….Total
Number of dresses…………………….10……………...……20…………..…..…30
Sales revenue……………………..50,000………………25,000……….……75,000
Materials………………………….10,000……………..…8,000………….…18,000
Labor……………………………..20,000…………..……9,000……….……29,000
Machine depreciation…………..600…………….……300…………..……900
Rent………………………………..4,200…………..……2,800……..….……7,000
Heat and Light………………..1,000…………………600…………...….1,600
Other production costs………..........................................2,800
Marketing and administration……………………………………………..7,700
Total costs………………………………………………………………..……67,000
Operating profit…………………………………………………………………8,000

Ms. Nili already has orders for the 10 custom dresses reflect in the March forecasted income statement. The depreciation charges are for march used in the respective product lines. Machines depreciate at the rate of $1 per hour based on hours used, so these are variable cost. In March, cutting and sewing machines are expected to operate for 900 hours, of which 600 hours will be used to make custom dresses. The rent is for the building space, which has been leased for several years at $7,000 per month. The rent, heat, and light are allocated to the product lines based on the amount of floor space occupied.
A valued customer, who is a wedding consultant, has asked Ms. Nili for a special favor. This customer has a client who wants to get married in early April. Ms. Nili’s company is working at capacity and would have to give up some other business to make this dress. She can’t renege on custom orders already agreed to, but she can reduce the number of standard dresses produced in March to 10. Ms Nili would lose permanently the opportunity to make up the lost production of standard dresses because she has no unused capacity for the foreseeable future. The customer is willing to pay $25,000 for the special order. Materials and labor for the order will cost $6,000 and $10,000, respectively. The special order would require 140 hours of machine time. Ms. Nili’s company would save 150 hours of machine time from the standard dress business given up. Rent, heat and light, and other production cost would not be affected by the special order.

Question
1. Should Ms. Nili take the order? Explain?
2. What is the minimum price Ms. Nili should accept to take the special order?
3. What are the other factors, if any, besides price that she should consider?


Click here for the solution: Sherene Nili manages a company that produces wedding gowns

GAMMA produces over a hundred different types of residential water faucets as its Delta, Florida plant

GAMMA produces over a hundred different types of residential water faucets as its Delta, Florida plant. This plant uses activity–based costing to calculate product costs. The following table summarizes the plant's overhead for the year and the cost drivers

Used for each activity center:
Summary of plant Overhead and Activity Centers
Total cost
(millions Activity center of dollars)
Cost driver Amount of cost Activity cost per unit Driver of cost drive
Materials handling $20.8 Direct materials $130 million $ 0.16
Purchasing 13.8 part numbers 800 $17,250
Set-up labor 6.8 Batches 500 $13,600
Engineering 10.9 Number of products 125 $87,200
Occupancy 16.2 Direct labor $ 90 million $0.18
----------------
Total plant overhead $ 68.5
----------------

One faucet model GAMMA manufactures is Explorer .Its total product cost is as follows:
Direct labor $ 121,700
Direct materials 90,500
Materials handling $ 90,500 $ 0.16 14,480
Purchasing 9 17,250 155,250
Setup ; 8 13,600 108,800
Engineering 1 87,200 87, 200
Occupancy $121,70 0 $0.18 21,906
---------------------
Total cost $599,836

Number of units manufactured 12,500
---------------------
Product cost per unit $ 47.99
----------------------

Required Question:
Calculate the product cost per unit of the Explorer faucet using absorption costing where plant overhead is assigned to products using direct labor dollars.

Click here for the solution: GAMMA produces over a hundred different types of residential water faucets as its Delta, Florida plant

The One Product economy, which produces and sells only personal computers (PCs), expects that it can sell 500 more, or 12,500 PCs, next year

11. The One Product economy, which produces and sells only personal computers (PCs), expects that it can sell 500 more, or 12,500 PCs, next year. Nominal GDP was $20 million this year, and the money supply was $7 million. The central bank for the One Product economy plans to increase the money supply by 10 percent next year.

a. What was the average selling price for the personal computers this year?
b. What is the expected average selling price next year for personal computers if the velocity of money remains at this year’s turnover rate? What percentage change in price level is expected to occur?
c. If the objective is to keep the price level the same next year (i.e., no inflation), what percentage increase in the money supply should the central bank plan for?
d. How would your answer in (c) change if the velocity of money is expected to be three times next year? What is it now?

Click here for the solution: The One Product economy, which produces and sells only personal computers (PCs), expects that it can sell 500 more, or 12,500 PCs, next year

Denny Corporation, a manufacturing company, produces a single product

Denny Corporation, a manufacturing company, produces a single product. The following information has been taken from the company’s production, sales, and cost records for the just completed year:

Production in units 51,000
Direct labor $120,325
Raw materials purchased $325,019
Manufacturing overhead $250,265
Selling and administrative expenses $422,100
Raw Materials, Beginning $62,900
Raw Materials, Ending $45,345
Work in Process, Beginning $52,984
Work in Process, Ending $58,777

Prepare the Cost of Goods Manufactured Statement.

Click here for the solution: Denny Corporation, a manufacturing company, produces a single product