Company A, which follows the normal cost system, had the following information for the fiscal year just ended: Cost of sales: ₱576,000 Direct materials used: ₱204,000 Gross profit rate on sales: 36% Net operating income: ₱48,000 Total manufacturing costs: ₱528,000 Finished goods inventory, beginning is ₱61,000, while its ending balance is ₱9,000. Manufacturing overhead is applied at 50% of direct labor cost. Raw materials inventory, beginning is 87.5% more than its ending balance of ₱16,000. Sixty percent of the company’s total operating expenses are distribution costs. There were no other income nor other expenses during the fiscal year. Work-in-process inventory, end is ₱22,000. 1. How much should be the total amount of inventory presented in Company A’s statement of financial position? 2. How much was Company A’s work-in-process inventory beginning balance? 3. How much was Company A’s cost of raw materials purchases? 4. this independently from other questions: If actual manufacturing overhead costs were ₱150,933, how much would have been Company A’s adjusted cost of sales if overhead variances were directly written off to cost of sales? 5. How much were Company A’s total administrative expenses? 6. How much was Company A’s cost of goods available for sale?
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Company A, which follows the normal cost system, had the following information for the fiscal year just ended:
- Cost of sales: ₱576,000
- Direct materials used: ₱204,000
- Gross profit rate on sales: 36%
- Net operating income: ₱48,000
- Total
manufacturing costs: ₱528,000 - Finished goods inventory, beginning is ₱61,000, while its ending balance is ₱9,000.
- Manufacturing
overhead is applied at 50% of direct labor cost. - Raw materials inventory, beginning is 87.5% more than its ending balance of ₱16,000.
- Sixty percent of the company’s total operating expenses are distribution costs.
- There were no other income nor other expenses during the fiscal year.
- Work-in-process inventory, end is ₱22,000.
1. How much should be the total amount of inventory presented in Company A’s
2. How much was Company A’s work-in-process inventory beginning balance?
3. How much was Company A’s cost of raw materials purchases?
4. this independently from other questions: If actual manufacturing overhead costs were ₱150,933, how much would have been Company A’s adjusted cost of sales if overhead variances were directly written off to cost of sales?
5. How much were Company A’s total administrative expenses?
6. How much was Company A’s cost of goods available for sale?
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