Direct materialsDirect laborVariable factory overheadFixed manufacturing overheadFixed non-manufacturing overheadPurchase price of 18,000 monitorsDifferential cost to make:Direct materialsDirect laborTotal cost ofproducing18,000 monitors$ 2,160,0001,224,000630,000504,000756,000$ 5,274,000OverheadMake or Buy DecisionsDifferential Analysis ReportUnit costYou are asked to look over the intern's estimate before the information is shared with members of managementthem. The company's controller believes that the estimate may be incorrect because it includes costs that are nforce currently employed in producing the monitors will be terminated and there would be no termination coststo suppliers to purchase materials, so all materials would need to be purchased to make the monitors. Variablemanufacturing overhead costs would be reduced by $55,000, but non-manufacturing costs would remain the saFill in the differential analysis.Differential income (loss) from making monitors2,160,000$ 1201,224,00068352842$293.X3,816,000

Avoidable costs are those costs which can be avoided if a particular product line is not continued.…

Answered: Total cost of producing 18,000 monitors…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Peter Ltd produces two products, Small and Large. The company currently absorbs overheads on the basis of units produced, but they have read about a method based on activities undertaken and have asked you to help them investigate the method. The output is Small 15,000 and Large 12,000. The company has provided the following information Overhead activity Annual costs Cost driver Amount of activity Small Large Production £129,800 Machine hours 1260 1100 Quality inspection £58,080 No. of production runs 80 30 Material purchased £71,820 Purchase orders 30 12 Deliveries to retailers £18,080 Shipments 20 12 a) Produce a statement showing the overhead split using Activity Based Costing. Show the amount per unit produced.
Fountain Water Products (FWP) manufacturers water bottles. They have historically used a traditional system that allocated the manufacturing overhead costs based on machine hours. FWP is looking at switching to an ABC system in order to ensure more accurate product costing. They first want to compare the traditional and ABC costing systems to determine if it is worth the effort and costs to implement and maintain. They estimate a total overhead cost of $459,000. Under the traditional system they identified machine hours as the cost driver, and estimated a total of 51,000 machine hours. They actually incurred 48,700 machine hours in production. The total applied MOH calculated under the more precise ABC system was $320,000. The ABC costing system will cost $50,000 to implement. FWP has determined that a benefit of more accurate costing by $80,000 is worth the $50,000 implementation cost. What is the difference between the ABC costing and traditional system? Enter your number as a…
Finch Construction Company is a building contractor specializing in small commercial buildings. The company has the opportunity to accept one of two jobs; it cannot accept both because they must be performed at the same time and Finch does not have the necessary labor force for both jobs. Indeed, it will be necessary to hire a new supervisor if either job is accepted. Furthermore, additional insurance will be required if either job is accepted. The revenue and costs associated with each job follow. Cost Category Contract price Unit-level materials. Unit-level labor Unit-level overhead Supervisor's salary Rental equipment costs Depreciation on tools (zero market value) Allocated portion of company-wide facility-sustaining Insurance cost for job Required Required A B costs Required a. Assume that Finch has decided to accept one of the two jobs. Fill in the information relevant to selecti versus the other. Recommend which job to accept. one job b. Assume that Job A is no longer available.…
An operations manager is deciding on the level of automation for a new process. The fixed cost for automation includes the equipment purchase price, installation, and initial spare parts. The variable costs per unit for each level of automation are primarily labor related. Each unit can be sold for $81. As in many cases, you have the default alternative of doing nothing ($0 fixed cost, $0 variable costs). Hint: For these questions, also consider the “Do Nothing” option as a viable option when making your decision. Alternative Fixed Costs Variable Costs per Unit A $100,000 $54 B $272,000 $31 C $560,000 $20 Recommended: graph each alternative with units on the x-axis and $ on the y-axis. Also, include revenue on the chart. Identify the break-even points and points of indifference.
317-25. Developing and Using a Predetermined Overhead Rate: High-Low Cost Estimation prices on cost plus a markup of 30% . Recently the marketing manager, Holly Adams, and the produc- Devears, Mattoon Components Company has used an actual plantwide overhead rate and based its LO pmanager, Sue Walsh, confronted the controller with a common problem. The marketing manager rpressed a concern that Mattoon's prices seem to vary widely throughout the year. According to Adams, "It seems irrational to charge higher prices when business is bad and lower prices when busi- ness is good. While we get a lot of business during high-volume months because we charge less than competitors, it is a waste of time to even call on customers during low-volume months because MBC our we are raising prices while our competitors are lowering them." Walsh also believed that it was "folly to be so pushed that we have to pay overtime in some months and then lay employees off in others." She commented, "While there…
Waterways Corporation uses very stringent standard costs in evaluating its manufacturing efficiency. These standards are not "ideal" at this point, but the management is working toward that as a goal. At present, the company uses the following standards. Materials Item Per unit Cost Metal 1 lb. 63¢ per lb Plastic 12 oz. $1.00 per Ib. Rubber 4 oz. 88¢ per Ib. Direct labor Item Per unit Cost Labor 15 min. $9.00 per hr. Predetermined overhead rate based on direct labor hours = $424 The January figures for purchasing, production, and labor are: The company purchased 228,200 pounds of raw materials in January at a cost of 79¢ a pound. Production used 228,200 pounds of raw materials to make 115,000 units in January. Direct labor spent 18 minutes on each product at a cost of $8.80 per hour. Overhead costs for January totaled $54,597 variable and $72,000 fixed. Answer the following questions about standard costs. Your answer is partially correct. What is the materials price variance? (Round…
Accounting Evman Company has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system or a labour-intensive production system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows: computer-assisted manufacturing system labour-intensive production system Direct Material $5.00 $5.60 Direct Labour .5DLH @ $12 $6.00 .8 DLH @ $9 $7.20 Variable Overhead .5 DLH @ $6 $3.00 .8 DLH @ $6 $4.80 Fixed Overhead * $2,440,000 $1,320,000 These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. The company’s marketing research department has recommended an introductory sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit…
The president of Mission Inc. has been concerned about the growth in costs over the last several years. The president asked the controller to perform an activity analysis to gain a better insight into these costs. The activity analysis revealed the following: Activities Activity Cost Correcting invoice errors $8,500 Disposing of income materials with poor quality 16,000 Disposing of scrap 28,500 Expediting late production 21,500 Final inspection 19,000 Inspecting incoming materials 5,000 Inspecting work in process 25,000 Preventive machine maintenance 15,000 Producing product 95,500 Responding to customer quality complaints 15,000 Total 249,000 The production process is complicated by quality problems, requiring the production manager to expedite production and dispose of scrap. Prepare a Pareto chart of the company activities. Classify the activities into prevention, appraisal, internal failure,…
INA TOLOWING ASTIMATAS that are relate to the operation menanments is as Thin Required information Number of employees Number of customers Number of billable hours Total overhead cost Multiple Choice O O O $37,200 $292,200 The Company uses the step method for cost allocation as the administrative service department also provides services to the machine maintenance department. Assume that costs are allocated between service departments based on the # of employees. Using the information provided, what is the total amount of machine maintenance cost that will be allocated to the operating departments? Note: Round your intermediate calculations to the nearest whole dollar. $92,000 properties 40 125 $124,000 3,000 $ 455,000 properties 20 160 2,000 $ 374,000 Maintenance 15 n/a n/a n/a Total 75 285 5,000 $ 829,000
Required information [The following information applies to the questions displayed below.] Celestial Products, Inc., has decided to introduce a new product, which can be manufactured by either a computer- assisted manufacturing system or a labor-intensive production system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows: Direct material Direct labor (DLH denotes direct-labor hours) Variable overhead Fixed overhead* Computer-Assisted Manufacturing System $ Volume 0.5DLH @ $25.50 0.5DLH @ $16.50 9.00 12.75 8.25 $4,410,000 units Labor-Intensive Production System $ 0.8DLH @ $21.00 0.8DLH @ $16.50 *These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. 9.90 16.80 13.20 $2,730,000 The company's marketing research department has recommended an introductory unit sales price of $75.00. Selling expenses are estimated to be $900,000…
The management of Winterroth Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The Corporation's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours. Estimated at the Beginning of the Year Сapacity Actual Machine-hours 60,000 $1,849,400 70,000 56,000 Manufacturing overhead $1,849,400 $1,849,400 If the Corporation bases its predetermined overhead rate on capacity, then as shown on the income statement prepared for internal management purposes, the cost of unused capacity would be closest to: Multiple Choice $264,200 $369,880 $186,000 $123,293

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