DATA 1: You work for Thunderduck Custom Tables Inc. This is the first month of operations. The company designs and manufactures specialty tables. Each table is specially customized for the customer. This month, you have been asked to develop and manufacture two new tables for customers. You will design and build the tables. The company does not have indirect materials. You will keep track of the costs incurred to manufacture the tables using Job #1 Cost Sheet and Job #2 Cost Sheet. The company uses a job order costing system and applies manufacturing overhead to jobs based on direct labor hours. The total estimated manufacturing overhead costs per month are $4,800. The company estimates that there will be 120 direct labor hours worked during the month. Q1-What is the predetermined overhead rate (POHR)?

DATA 1: You work for Thunderduck Custom Tables Inc. This is the first month of operations. The company designs and manufactures specialty tables. Each table is specially customized for the customer. This month, you have been asked to develop and manufacture two new tables for customers. You will design and build the tables. The company does not have indirect materials. You will keep track of the costs incurred to manufacture the tables using Job #1 Cost Sheet and Job #2 Cost Sheet. The company uses a job order costing system and applies manufacturing overhead to jobs based on direct labor hours. The total estimated manufacturing overhead costs per month are $4,800. The company estimates that there will be 120 direct labor hours worked during the month. Q1-What is the predetermined overhead rate (POHR)?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 1CE: Ventana Window and Wall Treatments Company provides draperies, shades, and various window...

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Management of Parrent Corporation has asked your help as an intern in preparing some key reports for April. The company started the month with raw materials inventories of P32,000. During the month, the company made raw materials purchases amounting to P68,000. At the end of the month, raw materials inventories totaled P35,000. Direct labor cost was P43,000 and manufacturing overhead was P62,000. The beginning balance in the work in process account was P19,000 and the ending balance was P12,000. The beginning balance in the finished goods account was P35,000 and the ending balance was P58,000. Sales totaled P240,000. Selling expense was P18,000 and administrative expense was P42,000. The total manufacturing cost for April was: A. P170,000 B. P173,000 C. P62,000 D. F 2/3 The cost of goods manufactured for April was: A. P177,000 B. P173,000 C. P170,000 D. P163,000 The cost of goods sold for April was: A. P123,000 B. P200,00O C. P217,000 D. P154,000 The net operating income for April was:…
You work for Thunderduck Custom Tables Inc. This is the first month of operations. The company designs and manufactures specialty tables. Each table is specially customized for the customer. This month, you a 1 have been asked to develop and manufacture two new tables for customers. You will design and build the tables. The company does not have indirect materials. You will keep track of the costs incurred to manufacture the tables using Job #1 Cost Sheet and Job #2 Cost Sheet. The company uses a job order costing system and applies manufacturing overhead to jobs based on direct labor hours. The total estimated manufacturing overhead costs per month is $7,500. The company estimates that there will be 120 direct labor hours worked during the month. What is the predetermined overhead rate (POHR)?
CodeHead Software Inc. does software development. One important activity in software development is writing software code. The manager of the WordPro Development Team determined that the average software programmer could write 25 lines of code in an hour. The plan for the first week in May called for 4,650 lines of code to be written on the WordPro product. The WordPro Team has five programmers. Each programmer is hired from an employment firm that requires temporary employees to be hired for a minimum of a 40-hour week. Programmers are paid 32.00 per hour. The manager offered a bonus if the team could generate more lines for the week, without overtime. Due to a project emergency, the programmers wrote more code in the first week of May than planned. The actual amount of code written in the first week of May was 5,650 lines, without overtime. As a result, the bonus caused the average programmers hourly rate to increase to 40.00 per hour during the first week in May. Instructions 1. If the team generated 4,650 lines of code according to the original plan, what would have been the labor time variance? 2. What was the actual labor time variance as a result of generating 5,650 lines of code? 3. What was the labor rate variance as a result of the bonus? 4. The manager is trying to determine if a better decision would have been to hire a temporary programmer to meet the higher programming demand in the first week of May, rather than paying out the bonus. If another employee was hired from the employment firm, what would have been the labor time variance in the first week? 5. Which decision is better, paying the bonus or hiring another programmer?
Bumblebee Mobiles manufactures a line of cell phones. The management has identified the following overhead costs and related cost drivers for the coming year. The following were incurred in manufacturing two of their cell phones, Bubble and Burst, during the first quarter. REQUIREMENT Review the worksheet called ABC that follows these requirements. You have been asked to determine the cost of each product using an activity-based cost system. Note that the problem information is already entered into the Data Section of the ABC worksheet.
Ventana Window and Wall Treatments Company provides draperies, shades, and various window treatments. Ventana works with the customer to design the appropriate window treatment, places the order, and installs the finished product. Direct materials and direct labor costs are easy to trace to the jobs. Ventanas income statement for last year is as follows: Ventana wants to find a markup on cost of goods sold that will allow them to earn about the same amount of profit on each job as was earned last year. Required: 1. What is the markup on cost of goods sold (COGS) that will maintain the same profit as last year? (Round the percentage to two significant digits.) 2. A customer orders draperies and shades for a remodeling job. The job will have the following costs: What is the price that Ventana will quote given the markup percentage calculated in Requirement 1? (Round the price to the nearest dollar.) 3. What if Ventana wants to calculate a markup on direct materials cost, since it is the largest cost of doing business? What is the markup on direct materials cost that will maintain the same profit as last year? (Round the percentage to two significant digits.) What is the bid price Ventana will use for the job given in Requirement 2 if the markup percentage is calculated on the basis of direct materials cost? (Round to the nearest dollar.)
Assume you are the leather department manager at the Famous Football Factory. The leather department is a cost center and you are reviewing the scrap costs for the previous year, shown here: A. Using Microsoft Excel or another spreadsheet application, create a line chart with markers showing the leather scrap expense. Describe your observations. B. Knowing that leather is susceptible to indoor temperature, you decide to talk with the maintenance manager and obtain the following information: Using Microsoft Excel or another spreadsheet application, create individual line charts with markers showing the indoor temperature, spare parts inventory, and breakdowns. Describe your observations and actions you might consider.
Chrome Solutions Company manufactures special chromed parts made to the order and specifications of the customer. It has two production departments, Stamping and Plating, and two service departments, Power and Maintenance. In any production department, the job in process is wholly completed before the next job is started. The company operates on a fiscal year, which ends September 30. Following is the post-closing trial balance as of September 30: Additional information: The balance of the materials account represents the following: The company uses the FIFO method of accounting for all inventories. Material A is used in the Stamping Department, and materials B and C are used in the Plating Department. The balance of the work in process account represents the following costs that are applicable to Job 905. (The customer’s order is for 1,000 units of the finished product.) The finished goods account reflects the cost of Job 803, which was finished at the end of the preceding month and is awaiting delivery orders from the customer. At the beginning of the year, factory overhead application rates were based on the following data: In October, the following transactions were recorded: Purchased the following materials and supplies on account: The following materials were issued to the factory: Customers’ orders covered by Jobs 1001 and 1002 are for 1,000 and 500 units of finished product, respectively. Factory wages and office, sales, and administrative salaries are paid at the end of each month. (Assume FICA and federal income tax rates of 8% and 10%, respectively.) Record the company’s liability for state and federal unemployment taxes. (Assume rates of 4% and 1%, respectively, and that none of the employees had reached the $8,000 limit.) Record the payroll distribution for October. Wages of the supervisors, custodial personnel, etc., totaled $9,500; administrative salaries were $18,300. Miscellaneous factory overhead incurred during October totaled $4,230. Miscellaneous selling and administrative expenses were $1,500. These items as well as the FICA tax and federal income tax withheld for September were paid. (See account balances on the post-closing trial balance for September 30.) Annual depreciation on plant assets is calculated using the following rates (round to nearest dollar): Factory buildings–5% Machinery and equipment–20% Office equipment–20% The balance of the prepaid insurance account represents a three-year premium for a fire insurance policy covering the factory building and machinery. It was paid on the last day of the preceding month and became effective on October 1. The summary of factory overhead prepared from the factory overhead ledger is reproduced here: The total expenses of the Maintenance Department are distributed on the basis of floor space occupied by the Power Department (8,820 sq ft), Stamping Department (19,500 sq ft), and Plating Department (7,875 sq ft). The power department expenses are then allocated equally to the Stamping and Plating departments. After the actual factory overhead expenses have been distributed to the departmental accounts and the applied factory overhead has been recorded and posted, any balances in the departmental accounts are transferred to Under- and Overapplied Overhead. Jobs 905 and 1001 were finished during the month. Job 1002 is still in process at the end of the month. During the month, Jobs 803 and 905 were sold with a mark-on percentage of 50% on cost. Received $55,500 from customers in payment of their accounts. Checks were issued in the amount of $43,706 for payment of the payroll. Required: Set up the beginning trial balance in T-accounts. Prepare materials inventory ledger cards and enter October 1 balances. Prepare a Payroll Summary and Schedule of Earnings and Payroll Taxes for the month of October. Set up job cost sheets as needed. Record all transactions and related entries for October and post to T-accounts. Prepare a service department expense distribution worksheet for October. At the end of the month: Analyze the balance in the materials account, the work in process account, and the finished goods account. Prepare the statement of cost of goods manufactured for the month ended October 31.
Mimasca Inc. manufactures various holiday masks. Each mask is shaped from a piece of rubber in the molding department. The masks are then transferred to the finishing department, where they are painted and have elastic bands attached. Mimasca uses the weighted average method. In May, the molding department reported the following data: a. BWIP consisted of 15.000 units, 20% complete. Cost in beginning inventor) totaled 1,656. b. Costs added to production during the month were 26,094. c. At the end of the month, 45.000 units were transferred out to finishing. Then, 5,000 units remained in EWIP, 25% complete. Required: 1. Prepare a physical flow schedule. 2. Calculate equivalent units of production. 3. Compute unit cost. 4. Calculate the cost of goods transferred to finishing at the end of the month. Calculate the cost of ending inventor). 5. CONCEPTUAL CONNECTION Assume that the masks are inspected at the end of the molding process. Of the 45,000 units inspected, 2,500 are rejected as faulty and are discarded. Thus, only 42,500 units are transferred to the finishing department. The manager of Mimasca considers all such spoilage as abnormal and does not want to assign any of this cost to the 42.500 good units produced and transferred to finishing. Your task is to determine the cost of this spoilage of 2,500 units and then to discuss how you would account for this spoilage cost. Now suppose that the manager feels that this spoilage cost is just part of the cost of producing the good units transferred out. Therefore, he wants to assign this cost to the good production. Explain how this would be handled. (Hint: Spoiled units are a type of output, and equivalent units of spoilage can be calculated.)
Phono Company manufactures a plastic toy cell phone. The following standards have been established for the toys materials and labor inputs: During the first week of July, the company had the following results: The purchasing agent located a new source of slightly higher-quality plastic, and this material was used during the first week in July. Also, a new manufacturing layout was implemented on a trial basis. The new layout required a slightly higher level of skilled labor. The higher-quality material has no effect on labor utilization. Similarly, the new manufacturing approach has no effect on material usage. (Note: Round all variances to the nearest dollar.) Required: 1. CONCEPTUAL CONNECTION Compute the materials price and usage variances. Assuming that the materials variances are essentially attributable to the higher quality of materials, would you recommend that the purchasing agent continue to buy this quality, or should the usual quality be purchased? Assume that the quality of the end product is not affected significantly. 2. CONCEPTUAL CONNECTION Compute the labor rate and efficiency variances. Assuming that the labor variances are attributable to the new manufacturing layout, should it be continued or discontinued? Explain. 3. CONCEPTUAL CONNECTION Refer to Requirement 2. Suppose that the industrial engineer argued that the new layout should not be evaluated after only one week. His reasoning was that it would take at least a week for the workers to become efficient with the new approach. Suppose that the production is the same the second week and that the actual labor hours were 13,200 and the labor cost was 132,000. Should the new layout be adopted? Assume the variances are attributable to the new layout. If so, what would be the projected annual savings?
Eyring Manufacturing produces a component used in its production of washing machines. The time to set up and produce a batch of the components is two days. The average daily usage is 800 components, and the maximum daily usage is 875 components. Required: Compute the reorder point assuming that safety stock is carried by Eyring Manufacturing. How much safety stock is carried by Eyring?
Waterway Guitar Company makes high-quality customized guitars. Waterway uses a job order costing system. Because the guitars are handmade, the company applies overhead based on direct labor hours. At the beginning of the year, the company estimated that total manufacturing overhead costs would be $307,500 and that 20,500 direct labor hours would be worked. At year-end, Daniel, the company’s founder and CEO, gives you the following information regarding Waterway’s operations. 1. The beginning balances in the inventory accounts were: Raw Materials Inventory $7,900 Work in Process Inventory $26,000 Finished Goods Inventory $31,500 2. During the year, the company purchased raw materials costing $102,000. All purchases were made on account. 3. The production department requisitioned $98,000 of raw materials for use in production. Of those, 70% were direct materials and 30% were indirect materials. 4. The company used 21,500 direct labor hours at a cost…
Oberti Guitar Company makes high-quality customized guitars. Oberti uses a job order costing system. Because the guitars are handmade, the company applies overhead based on direct labor hours. At the beginning of the year, the company estimated that total manufacturing overhead costs would be $300,000 and that 20,000 direct labor hours would be worked. At year-end, Anthony, the company's founder and CEO, gives you the following information regarding Oberti's operations. 1. The beginning balances in the inventory accounts were: Raw Materials Inventory $8,000 Work in Process Inventory $26,000 Finished Goods Inventory $32,000 2. During the year, the company purchased raw materials costing $97,000. All purchases were made on account. 3. The production department requisitioned $100,000 of raw materials for use in production. Of those, 70% were direct materials and 30% were indirect materials. 4. The company used 21,000 direct labor hours at a cost of $14 per hour during the year (credit…