Carbon Company provides the following information about resources: Unused Resources Capacity Cost Driver Volume Resources used Materials $ 2,000 8,000 pounds Energy 1,560 340 machine-hours Setups -0-80 setups Purchasing 1,800 80 purchase orders Customer service 7,600 50 returns Long-term labor 3,400 320 labor-hours Administrative 2,800 420 labor-hours Resources supplied Materials $ 98,000 Energy 17,880 Setups 24,000 Purchasing 21,000 Customer service 15,600 Long-term labor 29,000 Administrative 28,000
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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- Carbon Company provides the following information about resources. Unused Resources Capacity Cost Driver Volume Resources used Materials $ 2,200 9,000 pounds Energy 2,740 380 machine-hours Setups 0 89 setups Purchasing 4,600 90 purchase orders Customer service 7,800 80 returns Long-term labor 5,440 330 labor-hours Administrative 4,640 440 labor-hours Resources supplied Materials $ 101,200 Energy 20,980 Setups 24,920 Purchasing 26,200 Customer service 21,400 Long-term labor 29,200 Administrative 28,400 Sales revenue for Carbon Company is $580,000. Required: a. Prepare a traditional income statement.b. Prepare an activity-based income statement.Carbon Company provides the following information about resources. Unused Resources Capacity Cost Driver Volume Resources used Materials $ 2,100 9,000 pounds Energy 3,490 390 machine-hours Setups 0 81 setups Purchasing 3,700 90 purchase orders Customer service 4,000 90 returns Long-term labor 4,800 340 labor-hours Administrative 8,820 440 labor-hours Resources supplied Materials $ 101,100 Energy 21,430 Setups 24,300 Purchasing 26,200 Customer service 17,500 Long-term labor 30,300 Administrative 31,700 Sales revenue for Carbon Company is $550,000. Required: A. Prepare a traditional income statement. Traditional Income Statement Total costs B. Prepare an activity-based income statement.…Carbon Company provides the following information about resources. Unused Resources Capacity Cost Driver Volume Resources used Materials $ 2,500 10,000 pounds Energy 4,670 350 machine-hours Setups 0 86 setups Purchasing 3,600 100 purchase orders Customer service 7,000 90 returns Long-term labor 4,960 340 labor-hours Administrative 7,760 440 labor- hours Resources supplied Materials $ 122,500 Energy 21,820 Setups 24,080 Purchasing 26,600 Customer service 20,500 Long- term labor 29,100 Administrative 30,200 Sales revenue for Carbon Company is $590,000. Required: a. Prepare a traditional income statement. b. Prepare an activity- based income statement.
- Hosmer Industries provides the following information about resources and usage: Unused Resources Capacity Cost Driver Volume Resources used Materials Power Setups Purchasing $ 4,800 $ 3,744 $ 1,800 $ 4,320 Client assistance $18,240 $ 8,160 $ 6,720 6,400 272 62 64 $ 235,200 $ 42,912 $ 57,600 $ 50,400 $ 37,440 $ 69,600 $ 67,200 40 256 3,360 Supervision Facility cost Resources supplied Materials Power Setups Purchasing Client assistance Supervision Facility cost Sales revenue for Hosmer Industries is $720,000. Required: Prepare a traditional income statement. Prepare an activity-based income statement. pounds hours setups purchase orders inquiries labor-hours square metersPer Unit Total\\nDirect materials $ 5.00 \\nDirect labor 2.00 \\nSupervision 1.90 $ 123,500\\nDepreciation 1.40 $ 91,000\\nVariable manufacturing overhead 0.60 \\nRent 0.60 $ 39,000\\nTotal product cost $ 11.50 \\n \\n\\nIf Futura decides to make the starters, a supervisor would have to be hired (at a salary of $123,500) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $81,000 per period. Depreciation is due to obsolescence rather than wear and tear.\\n\\n \\n\\nRequired:\\n\\nWhat is the financial advantage (disadvantage) of making the 65,000 starters instead of buying them from an outside supplier?EstimatedFixedCost EstimatedVariableCost(perunitsold) Production costs: Direct materials $19 Direct labor 13 Factory overhead $261,300 10 Selling expenses: Sales salaries and commissions 54,300 4 Advertising 18,400 Travel 4,100 Miscellaneous selling expense 4,500 4 Administrative expenses: Office and officers' salaries 53,100 Supplies 6,500 2 Miscellaneous administrative expense 6,040 2 Total $408,240 $54 It is expected that 8,640 units will be sold at a price of $135 a unit. Maximum sales within the relevant range are 11,000 units. Required: Question Content Area 1. Prepare an estimated income statement for 20Y7. Belmain Co.Estimated Income StatementFor the Year Ended December 31, 20Y7 $- Select - Cost of goods sold: $- Select - - Select - - Select -…
- Exercise 7-4 (Algo) Second-Stage Allocation [LO7-4] Klumper Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Machine processing Machine setups Number of units produced per year Direct labor-hours Activity Rate $ 11 per direct labor-hour $5 per machine-hour $ 45 Production orders Shipments $ 120 per shipment Product sustaining $ 900 per product Activity data have been supplied for the following two products: Machine-hours Machine setups Production orders Shipments Product sustaining per setup $ 160 per order Total Expected Activity K425 M67 2,000 200 1,025 2,600 7 7 14 3 50 40 3 3 3 3 Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?Cost Pools Machine setup Materials handling Electric power Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours Activity Costs $ 284,000 75,000 26,000 The following cost information pertains to the production of A and B, just two of Hakara's Product A Product B A 5,000 $ 25,000 $ 28,000 Cost per Unit Cost Drivers 100 1,000 2,000 Setup hours Pounds of materials Kilowatt-hours Activity Drive Consumption 4,000 15,000 26,000 B 10,000 $ 33,000 $ 39,000 100 2,000 2,000 Required: 1. Use activity-based costing to determine a unit cost for each product. (Round your finalActivity Cost Pool Cost Driver EstimatedOverhead Use perProduct A Use perProduct B Machine Setups Setups $144,000 6,000 2,000 Assembly Number of Parts 71,000 25,000 46,000 Machine Maintenance Machine Hours 200,000 13,000 37,000 Compare the overhead allocation using (A) the traditional allocation method and (B) the activity-based costing method. (Hint: the traditional method uses machine hours as the allocation base.) For those boxes in which you must enter subtractive or negative numbers use a minus sign.
- Accounting QuestionWaterway Industries incurs the following costs to produce 10600 units of a subcomponent: Direct materials $8904Direct labor 11978Variable overhead 13356Fixed overhead 16200 An outside supplier has offered to sell Waterway the subcomponent for $2.85 a unit. If Waterway accepts the offer, by how much will net income increase (decrease)? a. $(3074)b. $(9328)c. $4028d. $20228Allocating Service Department Costs: Allocation Basis Alternatives Weld-Rite Fabricators has two producing departments, P1 and P2, and one service department, S1. Estimated directed overhead costs per month are as follows: P1 $450,000 P2 750,000 $1 273,000 Other data follow: Numbers of employees Production capacity (units) Space occupied (square feet) Five-year average of $1's service output used P1 P2 150 50 100,000 60,000 5,000 15,000 65% 35% For each of the following allocation bases, determine the total estimated overhead cost for P1 and P2 after allocating 51 cost to the producing departments. 1. Based on number of employees $ P1 P2 $ 2. Production capacity in units 3. Space occupied 4. Five-year average of $1 service used 627,450✔ 845,550✔ 5. Estimated direct overhead costs