Part 2QUESTION 1Oceania Ltd makes three models of tasers. Information on the three products is given below: Spotter Snooker Stunner Sales $ 300,000 $ 500,000 $ 200, 000 Variable expenses 150,000 200,000 145,000 Contribution margin 150,000 300,000 55,000 Fixed expenses 120,000 230,000 95,000 Net income $ 30,000 $ 70,000 $ ( 40,000)4Fixed expenses consist of $ 300,000 of common costs allocated to the three products based on relative sales and additional fixed expenses of $30,000 (spotter), $ 80,000 (Snooker) and $ 35,000 (Stunner). The common costs will be incurred regardless of how many models are produced. The other expenses would be eliminated if a model is phased out. The managing director of the company feels the Stunner line should be discontinued to increase the company’s net income.Requirements:a) Compute current net income for Oceania Ltd. b) Compute net income by product line and in total for Oceania Ltd if the company discontinues the Stunner product line. (Hint: Allocate the $ 300,000 common costs to the two remaining product lines based on their relative sales). c) Should Oceania eliminate the Stunner product line? Why or why not? QUESTION 2Tasman Company Ltd manufactures tennis rackets. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and costs data for the month of July 2017 are as follows:Production data – Tennis rackets Units Percentage complete Work in process units, July 1 500 60% Units started into production 1,000 Work in process units, July 31 600 40% Cost data – Tennis rackets Work in process, July 1 Materials $750 Conversion costs 600 $ 1,350 Direct materials 2,400 Direct labour 1,580 Manufacturing overhead 1,240Requirements: a) Calculate the following.1) The equivalent units of production for materials and conversion costs.2) The unit costs of production for materials and conversion costs. 3) The assignment of costs to units transferred out and in process at the end of the accounting period.b) Prepare a production cost report for the month of July for the tennis rackets.
Part 2
QUESTION 1
Oceania Ltd makes three models of tasers. Information on the three products is given below: Spotter Snooker Stunner Sales $ 300,000 $ 500,000 $ 200, 000 Variable expenses 150,000 200,000 145,000 Contribution margin 150,000 300,000 55,000 Fixed expenses 120,000 230,000 95,000 Net income $ 30,000 $ 70,000 $ ( 40,000)
4
Fixed expenses consist of $ 300,000 of common costs allocated to the three products based on relative sales and additional fixed expenses of $30,000 (spotter), $ 80,000 (Snooker) and $ 35,000 (Stunner). The common costs will be incurred regardless of how many models are produced. The other expenses would be eliminated if a model is phased out. The managing director of the company feels the Stunner line should be discontinued to increase the company’s net income.
Requirements:
a) Compute current net income for Oceania Ltd. b) Compute net income by product line and in total for Oceania Ltd if the company discontinues the Stunner product line. (Hint: Allocate the $ 300,000 common costs to the two remaining product lines based on their relative sales). c) Should Oceania eliminate the Stunner product line? Why or why not?
QUESTION 2
Tasman Company Ltd manufactures tennis rackets. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and costs data for the month of July 2017 are as follows:
Production data – Tennis rackets Units Percentage complete Work in process units, July 1 500 60% Units started into production 1,000 Work in process units, July 31 600 40% Cost data – Tennis rackets Work in process, July 1 Materials $750 Conversion costs 600 $ 1,350 Direct materials 2,400 Direct labour 1,580 Manufacturing
Requirements:
a) Calculate the following.
1) The equivalent units of production for materials and conversion costs.2) The unit costs of production for materials and conversion costs. 3) The assignment of costs to units transferred out and in process at the end of the accounting period.b) Prepare a production cost report for the month of July for the tennis rackets.
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