管理会计作业1

Assignment 1

1. Contribution Format versus Traditional Income Statement

Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $125 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianos to its customers at an average price of $250 each. The selling and administrative costs that the company incurs in a typical month are presented below: Costs Selling: Advertising .................................... Delivery of pianos to customers ..... Utilities .......................................... Depreciation of sales facilities ....... Administrative: Insurance ........................................ Clerical ........................................... Depreciation of office equipment ..

During June, Marwick’s Pianos, Inc., sold and delivered 100 pianos.

Required:

1. Prepare an income statement for Marwick’s Pianos, Inc., for June. Use the traditional format, with

costs organized by function.

2. Redo (1) above, this time using the contribution format, with costs organized by behavior. Show

costs and revenues on both a total and a per unit basis down through contribution margin. 3. Refer to the income statement you prepared in (2) above. Why might it be misleading to show the

fixed costs on a per unit basis?

2. Sales Mix; Break-Even Analysis; Margin of Safety

Island Novelties, Inc., of Palau makes two products, Hawaiian Fantasy and Tahitian Joy. Present revenue, cost, and sales data for the two products follow: Hawaiian Fantasy $20.00 $14.00 25,000 Tahitian Joy $25.00 $10.00 10,000 Selling price per unit .........................Variable expenses per unit ................Number of units sold annually ..........Cost Formula $800 per month $15 per piano sold $500 per month $750 per month $250 per month $700 per month, plus $5 per piano sold $400 per month Sales salaries and commissions ...... $1,200 per month, plus 10% of sales Executive salaries .......................... $2,000 per month Fixed expenses total $270,000 per year. The Republic of Palau uses the U.S. dollar as its currency. Required:

1. Assuming the sales mix given above, do the following:

a. Prepare a contribution format income statement showing both dollar and percent columns for

each product and for the company as a whole.

b. Compute the break-even point in dollars for the company as a whole and the margin of safety

in both dollars and percent.

2. The company has just developed a new product to be called Samoan Delight. Assume that the

company could sell 12,000 units at $17.50 each. The variable expenses would be $14.00 each. The company’s fixed expenses would not change.

a. Prepare another contribution format income statement, including sales of the Samoan Delight

(sales of the other two products would not change).

b. Compute the company’s new break-even point in dollars and the new margin of safety in both

dollars and percent.

3. The president of the company examines your figures and says, “There’s something strange here.

Our fixed costs haven’t changed and you show greater total contribution margin if we add the new product, but you also show our break-even point going up. With greater contribution margin, the break-even point should go down, not up. You’ve made a mistake somewhere.” Explain to the president what has happened.

3. Changes in Fixed and Variable Costs; Break-Even and Target Profit Analysis

Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $5.50 per unit. Enough capacity exists in the company’s plant to produce 20,000 units of the toy each month. Variable costs to manufacture and sell one unit would be $2.75, and fixed costs associated with the toy would total $70,000 per month.

The company’s Marketing Department predicts that demand for the new toy will exceed the 20,000 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed cost of $5,000 per month. Variable costs in the rented facility would total $3.00 per unit, due to somewhat less efficient operations than in the main plant. Required:

1. Compute the monthly break-even point for the new toy in units and in total dollar sales. Show all

computations in good form.

2. How many units must be sold each month to make a monthly profit of $3,000?

3. If the sales manager receives a bonus of 5 cents for each unit sold in excess of the break-even point,

how many units must be sold each month to earn a return of 4.9% on the monthly investment in fixed costs?

4.Schedule of Cost of Goods Manufactured; Income Statement; Cost Behavior Selected account balances for the year ended December 31 are provided below for Superior Company: Selling and administrative salaries Insurance, factory Utilities, factory $80,000 $4,500 $20,000 Purchases of raw materials Indirect labor Direct labor Advertising expense Cleaning supplies, factory Sales commissions Rent, factory building Maintenance, factory Inventory balances at the beginning and end of the year were as follows: Work in process ..........

Beginning of End of the Year the Year $18,000 $21,500 ? ? $155,000 $36,000 ? $32,000 $3,000 $60,000 $100,000 $25,000 Raw materials ............. $13,000 Finished goods ............ $31,000 $434,000; and the cost of goods sold totaled $405,600. Required:

The total manufacturing costs for the year were $399,500; the goods available for sale totaled

1. Prepare a schedule of cost of goods manufactured and the cost of goods sold section of the

company’s income statement for the year.

2. The company produced the equivalent of 25,000 units during the year. Compute the average cost

per unit for direct materials used and the average cost per unit for rent on the factory building. 3. In the following year the company expects to produce 20,000 units. What average cost per unit and

total cost would you expect to be incurred for direct materials? For rent on the factory building? (Assume that direct materials is a variable cost and that rent is a fixed cost.)

4. Explain to the president the reason for any difference in the average cost per unit between (2) and

(3) above.

5. High-Low Method; Cost of Goods Manufactured

Carlyle Company manufactures a single product. The company keeps careful records of manufacturing activities from which the following information has been extracted:

Number of units produced....................... Cost of goods manufactured ................... Work in process inventory, beginning .... Work in process inventory, ending ......... Direct materials cost per unit .................. Direct labor cost per unit ......................... Manufacturing overhead cost, total .........

Level of Activity January–Low

7,200 $225,000 $4,500 $5,400 $3.60 $7.50

?

April–High

9,000 $270,000 $14,400 $8,100 $3.60 $7.50

?

The company’s manufacturing overhead cost consists of both variable and fixed cost elements. To have data available for planning, management wants to determine how much of the overhead cost is variable with units produced and how much of it is fixed per month. Required:

1. For both January and April, estimate the amount of manufacturing overhead cost added to

production. The company had no underapplied or overapplied overhead in either month. (Hint: A useful way to proceed might be to construct a schedule of cost of goods manufactured.) 2. Using the high-low method, estimate a cost formula for manufacturing overhead. Express the

variable portion of the formula in terms of a variable rate per unit of product.

3. If 8,400 units are produced during a month, what would the cost of goods manufactured be?

(Assume that work in process inventories do not change and that overhead cost is neither underapplied nor overapplied for the month.)

6.High-Low Analysis and Predicting Cost

Prospero Corporation’s total overhead costs at various levels of activity are presented below:

Month

August ..... September October .... November

ours 8,000 12,000 16,000 4,000

Total

Machine-HOverhead

Costs $119,400 $142,800 $166,200 $93,120

Assume that the total overhead costs above consist of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 4,000 machine-hour level of activity is:

Utilities (variable) ................ Supervisory salaries (fixed) . Maintenance (mixed) ........... Total overhead costs ............

$11,520 15,600 66,000 $93,120 Prospero Corporation’s management wants to break down the maintenance cost into its basic variable and fixed cost elements. Required:

1. Estimate how much of the $166,200 of overhead cost in October was maintenance cost. (Hint: to

do this, it may be helpful to first determine how much of the $166,200 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!) 2. Using the high-low method, estimate a cost formula for maintenance.

3. Express the company’s total overhead costs in the linear equation form Y = a + bX.

4. What total overhead costs would you expect to be incurred at an operating activity level of 15,000

machine-hours?

7.High-Low Method; Predicting Cost

Susumi Corporation, of Japan is a manufacturing company whose total factory overhead costs fluctuate considerably from year to year according to increases and decreases in the number of direct labor-hours worked in the factory. Total factory overhead costs (in Japanese yen, denoted by ￥) at high and low levels of activity for recent years are given below:

Direct labor-hours .......................

Level of Activity Low 5,000

High 6,000

Total factory overhead costs ....... ￥14,000,000 ￥15,150,000

The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 5,000-hour level of activity as follows:

Indirect materials (variable) ........ ￥ 2,500,000 Rent (fixed) .................................

7,000,000

Maintenance (mixed) .................. 4,500,000 Total factory overhead costs ....... ￥14,000,000 To have data available for planning, the company wants to break down the maintenance cost into its variable and fixed cost elements. Required:

1. Estimate how much of the ￥15,150,000 factory overhead cost at the high level of activity consists

of maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the ￥15,150,000 consists of indirect materials and rent. Think about the behavior of variable and fixed costs!)

2. Using the high-low method, estimate a cost formula for maintenance.

3. What total factory overhead costs would you expect the company to incur at an operating level of

5,200 direct labor-hours?

8.Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. A popular pastime among older Chinese men is to take their pet birds on daily excursions to teahouses and public parks where they meet with other bird owners to talk and play mahjong. A great deal of attention is lavished on these birds, and the birdcages are often elaborately constructed from exotic woods and contain porcelain feeding bowls and silver roosts. Gold Nest Company makes a broad range of birdcages that it sells through an extensive network of street vendors who receive commissions on their sales. The Chinese currency is the renminbi, which is denoted by Rmb. All of the company’s transactions with customers, employees, and suppliers are conducted in cash; there is no credit.

The company uses a job-order costing system in which overhead is applied to jobs on the basis of direct labor cost. At the beginning of the year, it was estimated that the total direct labor cost for the year would be Rmb110,000 and the total manufacturing overhead cost would be Rmb275,000. At the beginning of the year, the inventory balances were as follows:

Raw materials ...................Rmb13,000 Work in process ................Rmb30,000 Finished goods ..................Rmb65,000

During the year, the following transactions were completed:

a. Raw materials purchased for cash, Rmb150,000.

b. Raw materials requisitioned for use in production, Rmb158,000. (Materials costing Rmb135,000

were charged directly to jobs; the remaining materials were indirect.) c. Costs for employee services were incurred as follows:

Direct labor ...................... Rmb100,000 Indirect labor .................... Sales commissions ...........

Rmb40,000 Rmb22,000

Administrative salaries .... Rmb35,000

d. Rent for the year was Rmb36,000. (Rmb30,000 of this amount related to factory operations, and

the remainder related to selling and administrative activities.) e. Utility costs incurred in the factory, Rmb90,000. f. Advertising costs incurred, Rmb88,000.

g. Depreciation recorded on equipment, Rmb80,000. (Rmb66,000 of this amount was on equipment

used in factory operations; the remaining Rmb14,000 was on equipment used in selling and administrative activities.)

h. Manufacturing overhead cost was applied to jobs, Rmb ? . i. Goods that cost Rmb490,000 to manufacture according to their job cost sheets were completed

during the year.

j. Sales for the year totaled Rmb995,000. The total cost to manufacture these goods according to

their job cost sheets was Rmb550,000. Required:

1. Prepare journal entries to record the transactions for the year.

2. Prepare T-accounts for inventories, Manufacturing Overhead, and Cost of Goods Sold. Post

relevant data from your journal entries to these T-accounts. (Don’t forget to enter the beginning balances in your inventory accounts.) Compute an ending balance in each account.

3. Is Manufacturing Overheadunderapplied or overapplied for the year? Prepare a journal entry to

close any balance in the Manufacturing Overhead account to Cost of Goods Sold. 4. Prepare an income statement for the year. (Do not prepare a schedule of cost of goods

manufactured; all of the information needed for the income statement is available in the journal entries and T-accounts you have prepared.)

9.Harwood Company is a manufacturer that operates a job-order costing system. Overhead costs are

applied to jobs on the basis of machine-hours. At the beginning of the year, management estimated that the company would incur $380,000 in manufacturing overhead costs and work 47,500 machine-hours. Required:

1. Compute the company’s predetermined overhead rate.

2. Assume that during the year the company works only 45,000 machine-hours and incurs the

following costs in the Manufacturing Overhead and Work in Process accounts:

Copy the data in the T-accounts above onto your answer sheet. Compute the amount of overhead

cost that would be applied to Work in Process for the year and make the entry in your T-accounts.

Manufacturing Overhead (Maintenance) (Indirect materials) (Indirect labor) (Utilities) (Insurance) (Depreciation) 47,000 20,000 105,000 77,500 26,000 91,500 ?

(Direct labor) (Overhead)

Work in Process

170,000 ? (Direct materials) 980,000 3. Compute the amount of underapplied or overapplied overhead for the year and show the balance in

your Manufacturing Overhead T-account. Prepare a journal entry to close out the balance in this account to Cost of Goods Sold.

4. Explain why the manufacturing overhead was underapplied or overapplied for the year.

10.Contrasting ABC and Conventional Product Costs

Siegel Corporation manufactures a product that is available in both a deluxe and a regular model. The company has made the regular model for years; the deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the company’s profits have steadily declined. Sales of the deluxe model have been increasing rapidly.

Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $3,080,000 in overhead costs would be incurred and the company would produce and sell 10,000 units of the deluxe model and 50,000 units of the regular model. The deluxe model requires 2.0 hours of direct labor time per unit, and the regular model requires 1.0 hours. Materials and labor costs per unit are given below:

Deluxe Regular

$30.00 $15.00

Direct materials cost per unit .... $50.00 Direct labor cost per unit ........... $30.00

Required

1. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating

overhead costs to products. Compute the unit product cost for one unit of each model.

2. An intern suggested that the company use activity-based costing to cost its products. A team was

formed to investigate this idea. . It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed below:

Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools. 3. Assume that actual activity is as expected for the year. Using activity-based costing, do the

following:

a. Determine the total amount of overhead that would be applied to each model for the year. b. Compute the unit product cost for one unit of each model.

4. Can you identify a possible explanation for the company’s declining profits? If so, what is it?

Activity Cost Pool and Activity Measure Rework requests (number of requests) ........... Product testing (number of tests) ...................

Estimated Overhead Cost

500 800

Activity 1,000 2,000

1,500 2,800

Deluxe Regular Total

Purchase orders (number of orders) ............... $ 60,000

280,000

240,000 7,000

3,000 10,000 8,000 12,500

Machine-related (machine-hours) .................. 2,500,000 4,500

$3,080,000

11.Cost flows and Unit Product Costs in Activity-Based Costing

Hunter Corporation uses activity-based costing to determine product costs for external financial reports. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools:

Activity Cost Pool

Activity Measure

Estimated Overhead Cost $200,000 $110,000 $108,000 $960,000 $1,260,000

Expected Activity 20,000 DLHs 5,000 orders 1,800 receipts 12,000 relays 70,000 MHs

Labor related ............. Direct labor-hours Production orders ...... Number of orders Material receipts........ Number of receipts Relay assembly ......... Number of relays General factory ......... Machine-hours

Required

1. Compute the activity rate (i.e., predetermined overhead rate) for each of the activity cost pools. 2. During the year, actual overhead cost and activity were recorded as follows:

Activity Cost Pool

Production orders ......... Material receipts........... Relay assembly ............

Actual Overhead Cost 107,000 112,000 980,000

Actual Activity 22,000 DLHs 4,500 orders 2,000 receipts 13,000 relays 73,000 MHs

Labor related ................ $ 205,000

General factory ............ 1,300,000 Total overhead cost ...... $2,704,000 a. Prepare a journal entry to record the incurrence of actual manufacturing overhead cost for the

year (credit Accounts Payable). Post the entry to the company’s Manufacturing Overhead T-account.

b. Determine the amount of overhead cost applied to production during the year.

c. Prepare a journal entry to record the application of manufacturing overhead cost to Work in

Process for the year. Post the entry to the company’s Manufacturing Overhead T-account. d. Determine the amount of underapplied or overapplied manufacturing overhead for the year. 3. The actual activity for the year was distributed among the company’s four products as follows:

a. Determine the total amount of overhead cost applied to each product.

Activity Cost Pool Labor related (DLHs) ............ Production orders (orders) .... Material receipts (receipts).... Relay assembly (relays) ........

7,000 800 400 3,500

Actual Activity

Product A Product B Product C Product D

1,000 900 800 2,000 26,000

8,000 1,100 300 3,000 17,000

6,000 1,700 500 4,500 14,000

General factory (MHs) .......... 16,000

b. Does the total amount of overhead cost applied to the products above tie in to the T-accounts

in any way? Explain.

12 .Equivalent Units; Cost Reconciliation—Weighted Average Method

Martin Company manufactures a single product. The company uses the weighted-average method in its process costing system. Activity for June has just been completed. An incomplete production report for the first processing department follows: Quantity Schedule and Equivalent Units Units to be accounted for: Work in process, June 1 (materials 80% complete; labor and overhead 60% complete) ............................... 10,000 Units accounted for as follows: Work in process, June 30 (materials 50% complete, labor and overhead 20% complete) ............................... 6,000 Cost per EU, (a) ÷ (b) ............................ Cost Reconciliation Cost accounted for as follows: Total Cost Cost per Equivalent Unit Cost to be accounted for: Total Cost Labor Unit Whole Total units ............................................. 74,000 ? ? ? ? ? ? Started into production ...................... 64,000 Total units ............................................. 74,000 ? Labor ? Overhead ? Quantity Schedule Equivalent units (EU) Materials Transferred to the next department .... 68,000 Materials Overhead $ 3,000 31,600 $34,600 69,200 Work in process, June 1 ..................... $ 11,900 $ 6,800 Cost added by the department ........... 107,270 53,550 Total cost (a) ......................................... $119,170 $60,350 Equivalent units (b) ............................... 71,000 $ 2,100 22,120 $24,220 69,200 $0.85 + $0.35 + $0.50 = $1.70

Required:

? ? 1. Prepare a schedule showing how the equivalent units were computed for the first processing

department.

2. Complete the “Cost Reconciliation” part of the production report for the first processing

department.

13. Interpreting A Production Report—Weighted-Average Method

Cooperative San José of southern Sonorastate in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as a flavoring for drinks and for use in desserts. The bottles are sold for $11.00 each. (The Mexican currency is the peso and is denoted by $.) The first stage in the production process is carried out in the Mixing Department, which removes foreign matter from the raw materials and mixes them in the proper proportions in large vats. The company uses the weighted-average method in its process costing system.

Cost Reconciliation Cost accounted for as follows: Total Cost Cost to be accounted for: Units accounted for as follows: Work in process, April 30 (materials 100% complete, conversion 30% complete) ......... 6,000 Total units accounted for ................................ 161,000 Quantity Schedule Units to be accounted for: Work in process, April 1 (materials 100% complete; conversion 95% complete) ......... 11,000 Started into production ................................... 150,000 Total units to be accounted for ....................... 161,000 Transferred to the next department ................. 155,000 A hastily prepared report for the Mixing Department for April appears below:

Work in process, April 1 ................................ $ 22,810 Cost added during the month .......................... 599,000 Total cost to be accounted for......................... $621,810 Transferred to the next department ................. $604,500 Work in process, April 30 .............................. 17,310 Total cost accounted for ................................. $621,810

Cooperative San José has just been acquired by another company, and the management of the

acquiring company wants some additional information about its operations. Required:

1. What were the equivalent units for the month?

2. What were the costs per equivalent unit for the month? The beginning inventory consisted of the

following costs: materials, $19,450; and conversion cost, $3,360. The costs added during the month consisted of: materials, $375,000; and conversion cost, $224,000.

3. How many of the units transferred to the next department were started and completed during the

month?

4. The manager of the Mixing Department, anxious to make a good impression on the new owner,

stated, “Materials prices jumped from about $1.80 per unit in October to $2.50 per unit in April, but due to good cost control I was able to hold our materials cost to less than $2.50 per unit for the month.” Should this manager be rewarded for good cost control? Explain.

Cooperative San José has just been acquired by another company, and the management of the

acquiring company wants some additional information about its operations. Required:

1. What were the equivalent units for the month?

2. What were the costs per equivalent unit for the month? The beginning inventory consisted of the

following costs: materials, $19,450; and conversion cost, $3,360. The costs added during the month consisted of: materials, $375,000; and conversion cost, $224,000.

3. How many of the units transferred to the next department were started and completed during the

month?

4. The manager of the Mixing Department, anxious to make a good impression on the new owner,

stated, “Materials prices jumped from about $1.80 per unit in October to $2.50 per unit in April, but due to good cost control I was able to hold our materials cost to less than $2.50 per unit for the month.” Should this manager be rewarded for good cost control? Explain.

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