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ACCT 386 - Week 6 - Homework 6

ACCT 386 - Week 6 - Homework 6
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ACCT 386 - Week 6 - Homework 6

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Question 1

You have just been hired by SecuriDoor Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

       After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for April:

 

Cost Formula

Actual Cost in April

  Utilities

  $16,200 plus $.16 per machine-hour

$

21,360    

  Maintenance

  $38,800 plus $1.90 per machine-hour

$

72,500    

  Supplies

  $.40 per machine-hour

$

8,200    

  Indirect labor

  $94,200 plus $1.60 per machine-hour

$

128,700    

  Depreciation

  $67,900

$

69,600    


During April, the company worked 19,000 machine-hours and produced 13,000 units. The company had originally planned to work 21,000 machine-hours during April.

 

Question 2

Verona Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well offering takeout and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made. Data concerning the pizzeria’s costs appear below:

 

Fixed Cost
per Month

Cost per
Pizza

Cost per
Delivery

  Pizza ingredients

 

 

$4.40  

 

  Kitchen staff

$

6,200  

 

 

  Utilities

$

540  

$.10  

 

  Delivery person

 

 

 

$2.90   

  Delivery vehicle

$

690  

 

$1.70   

  Equipment depreciation

$

387  

 

 

  Rent

$

1,760  

 

 

  Miscellaneous

$

710  

$.01  

 


       In October, the pizzeria budgeted for 1,200 pizzas at an average selling price of $12.00 per pizza and for 210 deliveries.

Data concerning the pizzeria’s operations in October appear below:

 

Actual
Results

  Pizzas

 

1,300  

  Deliveries

 

190  

  Revenue

$

16,240  

  Pizza ingredients

$

5,830  

  Kitchen staff

$

6,140  

  Utilities

$

795  

  Delivery person

$

551  

  Delivery vehicle

$

1,159  

  Equipment depreciation

$

387  

  Rent

$

1,760  

  Miscellaneous

$

715  


 

 

Question 3

Portland Company's Ironton Plant produces precast ingots for industrial use. Carlos Santiago, who was recently appointed general manager of the Ironton Plant, has just been handed the plant’s contribution format income statement for October. The statement is shown below:

 

Budgeted

Actual

  Sales (6,000 ingots)

$

225,000   

$

225,000   

    





  Variable expenses:

 

  

 

  

     Variable cost of goods sold*

 

73,620   

 

88,700   

     Variable selling expenses

 

17,000   

 

17,000   

    





  Total variable expenses

 

90,620   

 

105,700   

    





  Contribution margin

 

134,380   

 

119,300   

    





  Fixed expenses:

 

  

 

  

     Manufacturing overhead

 

53,000   

 

53,000   

     Selling and administrative

 

68,000   

 

68,000   

    





  Total fixed expenses

 

121,000   

 

121,000   

    





  Net operating income (loss)   

$

13,380   

$

(1,700)  

    










*Contains direct materials, direct labor, and variable manufacturing overhead.

     Mr. Santiago was shocked to see the loss for the month, particularly because sales were exactly as budgeted. He stated, "I sure hope the plant has a standard cost system in operation. If it doesn't, I won't have the slightest idea of where to start looking for the problem."

     The plant does use a standard cost system, with the following standard variable cost per ingot:

 

Standard Quantity or Hours

Standard Price
or Rate

Standard Cost

  Direct materials

   3.3 pounds

$

2.30 per pound

$

7.59   

  Direct labor

   0.6 hours

$

6.30 per hour

  

3.78   

  Variable manufacturing overhead

   0.5 hours*

$

1.80 per hour

  

0.90   

    

 

 

 



  Total standard variable cost

 

 

 

$

12.27   

    

 

 

 






*Based on machine-hours.

During October the plant produced 6,000 ingots and incurred the following costs:

a.

Purchased 24,800 pounds of materials at a cost of $2.75 per pound. There were no raw materials in inventory at the beginning of the month.

b.

Used 19,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)

c.

Worked 4,200 direct labor-hours at a cost of $6.00 per hour.

d.

Incurred a total variable manufacturing overhead cost of $7,260 for the month. A total of 3,300 machine-hours was recorded.

It is the company’s policy to close all variances to cost of goods sold on a monthly basis.

 

Question 4

Monte Rosa Corporation produces two products, Alpha8s and Zeta9s, which pass through two operations, Sintering and Finishing. Each of the products uses two raw materials, X342 and Y561. The company uses a standard cost system, with the following standards for each product (on a per unit basis):

 

Raw Material

 

Standard Labor Time

Product  

X342

Y561

 

Sintering

Finishing

    Alpha8

1.6 kilos

2.2 liters

 

0.20 hours

0.80 hours

    Zeta9

2.6 kilos

4.2 liters

 

0.35 hours

0.90 hours


Information relating to materials purchased and materials used in production during May follows:

Material

Purchases

Purchase Cost

Standard
Price

Used in
Production

    X342

13,000 kilos

$48,100

$3.5

 per kilo

8,500

 kilos

    Y561

19,000 liters

$20,900

$1.2

 per liter

14,000

 liters


The following additional information is available:

a.

The company recognizes price variances when materials are purchased.

b.

The standard labor rate is $18 per hour in Sintering and $17 per hour in Finishing.

c.

During May, 1,200 direct labor-hours were worked in Sintering at a total labor cost of $24,600, and 2,820 direct labor-hours were worked in Finishing at a total labor cost of $53,580.

d.

Production during May was 1,500 Alpha8s and 2,000 Zeta9s.

 

Question 5

Dresser Company uses a standard cost system and sets predetermined overhead rates on the basis of direct labor-hours. The following data are taken from the company’s budget for the current year:

 

 

 

  Denominator activity (direct labor-hours)

 

13,000  

  Variable manufacturing overhead cost at 13,000 direct labor-hours

$

49,400  

  Fixed manufacturing overhead cost

$

143,000  


The standard cost card for the company’s only product is given below:

 

 

 

  Direct materials, 2 pounds at $3.20 per pound

$

6.40   

  Direct labor, 2 direct labor-hours at $12.00 per direct labor-hour

 

24.00   

  Overhead, 123.33% of direct labor cost

 

29.60   

 



  Standard cost per unit

$

60.00   

 






During the year, the company produced 5,300 units of product and incurred the following costs:

 

 

 

  Materials purchased, 30,000 pounds at $2.70 per pound

$

81,000  

  Materials used in production (in pounds)

 

26,000  

  Direct labor cost incurred, 12,000 direct labor-hours at $8.6 per direct labor-hour

$

103,200  

  Variable manufacturing overhead cost incurred

$

35,600  

  Fixed manufacturing overhead cost incurred

$

33,400  


 

 

 

Question 6

Topline Surf Boards manufactures a single product. The standard cost of one unit of this product is as follows:

 

 

 

  Direct materials: 5 feet at $0.90 per foot

$

4.50  

  Direct labor: 1 hour at $5.20 per hour

 

5.20  

  Variable manufacturing overhead: 1 hour at $2.70 per hour

 

2.70  

 



  Total standard variable cost per unit

$

12.40  

 






During October, 5,900 units were produced. Selected data relating to the month’s production follow:

 

 

 

 

  Material purchased: 65,000 feet at $0.85 per foot

$

55,250

 

  Material used in production: 38,200 feet

 

 

  Direct labor: ? hours at $ ? per hour

$

25,600

 

  Variable manufacturing overhead cost incurred

$

20,420

 

  Variable manufacturing overhead efficiency variance&