Pastel Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a year and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the pro- duction of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows: Pastel Bags Budget for Costs and Activities For the Year Ended February 28, 2017 Direct materials-purses $ 319,155 Direct materials-backpacks Direct manufacturing labor-purses Direct manufacturing labor-backpacks Setup Shipping Design Plant utilities and administration 454,995 99,000 113,000 64,000 73,000 169,000 221,000 $1,513,150 Total Other budget information follows: Backpacks 6,175 Purses Total 3,075 Number of bags Hours of production 9,250 1,665 2,585 4,250 Number of batches 120 80 200 Number of designs 4

Pastel Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a year and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the pro- duction of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows: Pastel Bags Budget for Costs and Activities For the Year Ended February 28, 2017 Direct materials-purses $ 319,155 Direct materials-backpacks Direct manufacturing labor-purses Direct manufacturing labor-backpacks Setup Shipping Design Plant utilities and administration 454,995 99,000 113,000 64,000 73,000 169,000 221,000 $1,513,150 Total Other budget information follows: Backpacks 6,175 Purses Total 3,075 Number of bags Hours of production 9,250 1,665 2,585 4,250 Number of batches 120 80 200 Number of designs 4

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 26E: Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other...

See similar textbooks

Related questions

Q: Define cost behaviour.

A: High-Low Method: The high-low method is the method by which the variable component and the fixed…

Q: Define product cost with an example?

A: Cost: Cost refers to the expenses incurred by the business to earn revenue from sales, in other…

Q: When assigning indirect costs to a cost object, an ideal cost-allocation base measures ________. A)…

A: A measure of input or output that defines the amount of cost to be allocated to a specific cost…

Q: What are the factors Affecting Cost Management?

A: The objective of this question is to identify and explain the various factors that can influence…

Q: Classify the following cost drivers as structural, executional, or operational.

A: Classification of cost derives: Classification 0f the given cost drivers as structural, executional,…

Q: Explanation of the meaning of the target costing ?

A: Cost accounting system is a framework that guides the firm to calculate their cost and helps in…

Q: Q- 8: opportunity cost, and sunk cost. Define the following terms: differential cost,

Q: Summary, identify and relate the concepts of costs variable, step-variable, fixed, step-fixed,…

A: Answer:- Cost meaning:- Cost is the sum money that a business spends on the development or…

Q: How many cost pools are in an activity-based costing system?

A: Activity-Based Costing: Activity-Based Costing refers to the allocation of the factory overheads…

Q: Why is it important to keep track of both direct and indirect costs? How do these costs effect…

A: (a )If we keep a tracking record of direct and indirect costs we can determine the firm's…

Q: Which one of the following is another name for product costs? Select one: a. Direct costs b. Period…

A: Product cost means the cost of producing one unit of finished goods.

Q: Why is it important to classify costs into a cost hierarchy?

Q: Explain the features of cost management.

A: Cost management is a process of planning and controlling the costs of a business organisation. This…

Q: Briefly define total cost and marginal cost.

A: Cost: The amount paid to purchase the asset, install it, and put it into operations, is referred to…

Q: Explain Classifying Costs for Predicting Cost Behavior?

Q: What is meant by the term cost driver? What is a volume-based cost driver?

A: Activity-based costing: It is a method that helps in finding the activities performed by a company…

Q: List three methods to measure cost behavior.

Q: What is standard cost ? Explain four purposes of standard costing. NB: This concept should be in…

A: Solution:- Standard cost means as follows under:-

Q: explain the importance of cost behavior

A: Cost behavior refers to any change in the behavior of cost due to change in the level of output or…

Q: How does GPK compare to ABC costing?

A: GPK is a German costing methodology which was developed to provide an accurate calculation of the…

Q: Discuss factor(s) that should be considered besides total cost.

A: Economic order quantity is the optimal quantity of units that can be purchased with minimum…

Q: Describe the concepts of contribution margin, relevant range, and relevant costs

A: Solution:- Analysis the concepts of contribution margin, relevant range, and relevant costs as…

Q: 1. What are the key cost categories in the traditional view?

A: Traditional view is the type of costing wherein the allocation of factory overheads is done based on…

Q: What Is Total Cost Reporting?

A: Cost accounting is the branch of accounting that inspects the cost structure of a business. This…

Concept explainers

Management by Exception

A manager’s job is a very tough one. A manager needs to look at the various areas of work and as a manager he has to look after two or more important jobs or activities at the same time for the growth of the business. In order to do all these things in an effective manner, a manager must adopt or practice different management styles and tactics.

Question

Q.Identify the cost hierarchy level for each cost category

Pastel Bags (PB) is a
designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes
out with new designs for the backpack and for the purse. The company uses these designs for a year and
then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to
operate at capacity. The equipment must be switched over to a new design and set up to prepare for the pro-
duction of each new batch of products. When completed, each batch of products is immediately shipped to a
wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows:
Pastel Bags
Budget for Costs and Activities
For the Year Ended February 28, 2017
Direct materials-purses
$ 319,155
Direct materials-backpacks
Direct manufacturing labor-purses
Direct manufacturing labor-backpacks
Setup
Shipping
Design
Plant utilities and administration
454,995
99,000
113,000
64,000
73,000
169,000
221,000
$1,513,150
Total
Other budget information follows:
Backpacks
6,175
Purses
Total
3,075
Number of bags
Hours of production
9,250
1,665
2,585
4,250
Number of batches
120
80
200
Number of designs
4

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Green Grow Incorporated (GGI) manufactures lawn fertilizer. Because of the product’s very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGI’s operating capacity is 22,000 one-hundred-pound bags per month, and it currently is selling 20,000 bags manufactured in 20 batches of 1,000 bags each. The firm just received a request for a special order of 5,000 one-hundred-pound bags of fertilizer for $130,000 from APAC, a research organization. The production costs would be the same, but there would be no variable selling costs. Delivery and other packaging and distribution services would cause a one-time $2,500 cost for GGI. The special order would be processed in two batches of 2,500 bags each. (No incremental batch-level costs are anticipated. Most of the batch-level costs in this case are short-term fixed costs,…
Q.Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver.
The Sandstone Corporation uses an injection molding machine to make a plastic product, Z35, after receiving firm orders from its customers. Sandstone estimates that it will receive 60 orders for Z35 during the coming year. Each order of Z35 will take 100 hours of machine time. The annual machine capacity is 8,000 hours. Q. Calculate (a) the average amount of time that an order for Z35 will wait in line before it is processed and (b) the average manufacturing cycle time per order for Z35.
The Sandstone Corporation uses an injection molding machine to make a plastic product, Z35, after receiving firm orders from its customers. Sandstone estimates that it will receive 60 orders for Z35 during the coming year. Each order of Z35 will take 100 hours of machine time. The annual machine capacity is 8,000 hours. Q. Sandstone is considering introducing a new product, Y21. The company expects it will receive 30 orders of Y21 in the coming year. Each order of Y21 will take 40 hours of machine time. Assuming the demand for Z35 will not be affected by the introduction of Y21, calculate (a) the average waiting time for an order received and (b) the average manufacturing cycle time per order for each product, if Sandstone introduces Y21.
At Soothing Serums, Inc., Division A produces a lotion base that is purchased by customers who add additional ingredients to create their own skin care products. Soothing Serums has decided to create a new Division B that would add some ingredients and allow Soothing Serums to enter the skin care market themselves. Division A has the capacity to produce 30,000 gallons of lotion base per month and the variable cost of each gallon is $35. Currently, Division A sells approximately 25,000 gallons of lotion base each month to customers for $47 per gallon. If they were to create Division B, it would need to purchase 15,000 gallons of lotion base per month from Division A. Division A would not realize any savings in variable costs from selling the lotion base to Division B instead of selling to outside customers. From Division A's standpoint, the lowest acceptable transfer price would be: Multiple Choice $43.00 per unit $47.00 per unit $20.00 per unit $35.00 per unit
Quality Clothing, Inc., produces skorts and jumper uniforms for school children. In the process of cutting out the cloth pieces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorge's Scrap Warehouse for $3.15 per pound. Last year, the company sold 40,000 lb. of scrap, which would be enough to make 10,000 teddy bears that the management of Quality is now interested in producing. Their processes would need some reprogramming, particularly in the cutting and stitching processes, but it would require no additional worker training. However, new packaging would be needed. The total variable cost to produce the teddy bears $3.85. Fixed costs would increase by $95,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 10,000 teddy bears per year. Finished teddy bears could be sold for $18.00 each. Calculate the effect on operating income. Round your answers to the nearest dollar. Sell at…
Catch, Inc., is a designer and manufacturer of backpacks and purses. The equipment must be switched over to a new setting and set up to prepare for each new batch of products. This setup process is very technical and requires a highly qualified team of engineers. Setting up each product requires different efforts. Here is the information about manufacturing costs for one month in the year 2020: Direct Manufacturing Costs: Purses Backpacks Direct Materials $379,290 $412,920 Direct Manufacturing Labor $98,000 $120,000 Manufacturing Overheads: Setup Costs $66,000 Machine-Related Costs $384,000 (Utilities, Maintenance, etc.) Factory Rent $100,000 Here is some information on potential allocation bases/cost drivers for overheads cost: Purses Backpacks Number of batches 120 60 Setup Time 0.5 hours/batch 4 hours/batch Machine-Hours 2,600 1,400 Number of bags 3,600 6,000 Production area used 4,000 sq. ft. 6,000 sq. ft. Q1: Using the above information, choose allocation bases for each…
Guthrie Generators manufactures a solenoid that it uses in several of its products. Management is considering whether to continue manufacturing the solenoids or to buy them from an outside source. The following information is available: 1. The company needs 20,000 solenoids per year. The solenoids can be purchased from an outside supplier at a cost of $15 per unit. 2. The unit cost of manufacturing the solenoids is $20, computed as follows: Direct materials Direct labor Factory overhead: Variable Fixed Total manufacturing costs Cost per unit ($400,000 ÷ 20,000 units) 3. If the company decides not to manufacture the solenoids, it will eliminate all of the raw materials and direct labor costs but only 75 percent of the variable factory overhead costs. 4. If the solenolds are purchased from the outside source, machinery used in the production of solenoids will be sold at its book value. Accordingly, no gain or loss will be recognized. The sale of this machinery would also eliminate $5,000…
Quality Clothing, Inc., produces skorts and jumper uniforms for school children. In the process of cutting out the cloth pieces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorge's Scrap Warehouse for $3.15 per pound. Last year, the company sold 39,000 lb. of scrap, which would be enough to make 9,750 teddy bears that the management of Quality is now interested in producing. Their processes would need some reprogramming, particularly in the cutting and stitching processes, but it would require no additional worker training. However, new packaging would be needed. The total variable cost to produce the teddy bears $3.80. Fixed costs would increase by $94,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 9,750 teddy bears per year. Finished teddy bears could be sold for $18.00 each. Calculate the effect on operating income. Round your answers to the nearest dollar. Sell…
Quality Clothing, Inc., produces skorts and jumper uniforms for school children. In the process of cutting out the cloth pieces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorge's Scrap Warehouse for $3.15 per pound. Last year, the company sold 39,000 lb. of scrap, which would be enough to make 9,750 teddy bears that the management of Quality is now interested in producing. Their processes would need some reprogramming, particularly in the cutting and stitching processes, but it would require no additional worker training. However, new packaging would be needed. The total variable cost to produce the teddy bears $3.80. Fixed costs would increase by $94,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 9,750 teddy bears per year. Finished teddy bears could be sold for $18.00 each. Calculate the effect on operating income. Round your answers to the nearest dollar. Sell at…
Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Ingles, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 16 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40 percent of next months sales are in the finished goods inventory. Ingles also purchases sufficient materials to ensure that materials inventory is 60 percent of the following months scheduled production. Ingless sales budget in units for the next quarter is as follows: Ingless ending inventories in units for July 31 are as follows: Required: 1. Calculate the number of tables to be produced during August. 2. Disregarding your response to Requirement 1, assume the required production units for August and September are 2,100 and 1,900, respectively, and the July 31 materials inventory is 4,000 units. Compute the number of table legs to be purchased in August. 3. Assume that Ingles Corporation will produce 2,340 units in September. How many employees will be required for the Assembly Department in September? (Fractional employees are acceptable since employees can be hired on a part-time basis. Assume a 40-hour week and a 4-week month.) (CMA adapted)
Michelin is considering going “lights out” in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires. New technology is available that has the reliability and consistency desired toequal or exceed the quality of blend now achieved manually. It requires aninvestment of $3.75 million, with $80,000 per year operational costs and will replace all of the manual effort described above. a. How are the current manual expenditures handled for tax purposes? b. How would the new technology expenditures be handled for tax purposes?