1.
Prepare the production budget for the three products of E Chemical Company for 20x2.
1.
Explanation of Solution
Production Budget: The production budget refers to that budget which
Prepare the production budget for the three products of E Chemical Company for 20x2:
Particulars | Product Y | Product D | Product N |
Sales for 20x2 | 60,000 | 40,000 | 25,000 |
Add: Inventory, 12/31/x2 | 5,200 | 2,800 | 2,400 |
Total required | 65,200 | 42,800 | 27,400 |
Less: Inventory, 12/31/x1 | (4,800) | (3,200 | ( 2,000) |
Required production in 20x2 | 60,400 | 39,600 | 25,400 |
Table (1)
Working note 1:
Calculate the inventory in 21/31/20x2:
For Product Y:
For Product D:
For Product N:
Working note 2:
Calculate the inventory in 21/31/20x1:
For Product Y:
For Product D:
For Product N:
2.
Calculate the E Chemical Company conversion cost budget for 20x2.
2.
Explanation of Solution
Budget: Budget is a statement prepared by the management for a specific tenure in future, to accomplish the goal of management in that particular period of time. Budget is basically expressed in the financial terms.
Calculate the E Chemical Company conversion cost budget for 20x2:
Step 1: Calculate the conversion hours required for Product Y.
Step 2: Calculate the conversion hours required for Product D.
Step 3: Calculate the conversion hours required for Product N.
Step 4: Calculate the total conversion hours required.
Step 5: Calculate the conversion cost budget for 20x2.
Therefore, the conversion cost budget for 20x2 is $245,040.
3.
Prepare the company’s raw material purchases budget for 20x2.
3.
Explanation of Solution
Prepare the company’s raw material purchases budget for 20x2:
Particulars | Amount ($) |
Quantity of Islin required for production in 20x2 | 100,820 |
Add: Required inventory, 12/31/x2 | 10,082 |
Subtotal | 110,902 |
Less: Inventory, 1/1/x2 | 10,000 |
Required purchases (gallons) | 100,902 |
Purchases budget | $504,510 |
Table (1)
Working note 1:
Calculate the quantity of Islin required for production in 20x2:
Working note 2:
Calculate the required inventory on 12/31/20x2:
Working note 2:
Calculate the inventory on 1/1/20x2:
Therefore, the company’s raw material purchases budget for 20x2 is $504,510.
4.
Conclude whether the management can use Philin raw material or Islin raw material for the 20x2 production.
4.
Explanation of Solution
Calculate whether the management can use Philin raw material or Islin raw material for the 20x2 production:
20x2 production requirements: | Amount ($) |
Philin raw material | 604,920 |
Islin raw material | 504,100 |
Increase in cost of raw material (A) | $100,820 |
Change in conversion cost from substituting Philin for Islin: | |
Philin raw material | $220,536 |
Islin raw material | 245,040 |
Decrease in conversion cost (B) | $(24,504) |
Net increase in production cost (C = A-B) | $76,316 |
Table (2)
Working note 1:
Calculate the production requirement in 20x2 for Philin raw material:
Working note 2:
Calculate the production requirement in 20x2 for Islin raw material:
Working note 3:
Calculate the conversion cost for Philin raw material:
Working note 4:
Calculate the conversion cost for Islin raw material:
The company can use Islin raw material because the cost of using Philin raw material is more than the cost of Islin ($76,316).
Hence, the company should use Islin raw material for the 20x2 production.
Want to see more full solutions like this?
Chapter 9 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
- Raiden Sdn. Bhd. manufactures two products: A and B. The company predicts a sales volume of 10,000 units for product A and ending finished-goods inventory of 2,000 units. These numbers for product B are 12,000 and 3,000, respectively. Raiden Sdn. Bhd currently has 7,000 units of A in inventory and 9,000 units of B. The following raw materials are required to manufacture these products: Description Raw Required for Product A Cost per Kilo gram (RM / KG) 2.00 Material 2 kg 1 kg 1 kg 3 kg Y 2.50 1.25 Product A requires three hours of cutting time and two hours of finishing time; B requires one hour and three hours, respectively. The direct labour rate for cutting is RM10 per hour and RM18 per hour for finishing. Required to prepare: (a) Production budget in units for products A and B. (b) Materials usage budget in kilogram and cost for materials X, Y. and Z. (c) Direct labour budget in hours and cost for product A.arrow_forwardBienestar Inc., has the following departmental structure for producing a well-known multivitamin: A consultant designed the following cellular manufacturing structure for the same product: The times above the processes represent the time required to process one unit of product. Required: 1. Calculate the time required to produce a batch of 15 bottles using a batch-processing departmental structure. 2. Calculate the time to process 15 units using cellular manufacturing. 3. How much manufacturing time will the cellular manufacturing structure save for a batch of 15 units?arrow_forwardCorazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?arrow_forward
- Taylor Company produces two industrial cleansers that use the same liquid chemical input: Pocolimpio and Maslimpio. Pocolimpio uses two quarts of the chemical for every unit produced, and Maslimpio uses five quarts. Currently, Taylor has 6,000 quarts of the material in inventory. All of the material is imported. For the coming year, Taylor plans to import 6,000 quarts to produce 1,000 units of Pocolimpio and 2,000 units of Maslimpio. The detail of each products unit contribution margin is as follows: Taylor Company has received word that the source of the material has been shut down by embargo. Consequently, the company will not be able to import the 6,000 quarts it planned to use in the coming years production. There is no other source of the material. Required: 1. Compute the total contribution margin that the company would earn if it could import the 6,000 quarts of the material. 2. Determine the optimal usage of the companys inventory of 6,000 quarts of the material. Compute the total contribution margin for the product mix that you recommend. 3. Assume that Pocolimpio uses three direct labor hours for every unit produced and that Maslimpio uses two hours. A total of 6,000 direct labor hours is available for the coming year. a. Formulate the linear programming problem faced by Taylor Company. To do so, you must derive mathematical expressions for the objective function and for the materials and labor constraints. b. Solve the linear programming problem using the graphical approach. c. Compute the total contribution margin produced by the optimal mix.arrow_forwardBox Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?arrow_forwardColonels uses a traditional cost system and estimates next years overhead will be $480,000, with the estimated cost driver of 240,000 direct labor hours. It manufactures three products and estimates these costs: If the labor rate is $25 per hour, what is the per-unit cost of each product?arrow_forward
- Mabbut Company has the following departmental manufacturing layout for one of its plants: A consulting firm recommended a value stream with the following manufacturing cell: Required: 1. Calculate the total time it takes to produce a batch of 10 units using the traditional departmental manufacturing layout. 2. Using cellular manufacturing, how much time is saved producing the same batch of 10 units? Assuming the cell operates continuously, what is the production rate? Which process controls this production rate? 3. Assume the processing time of Welding is reduced to 6 minutes, while the times of the other processes stay the same. What is the production rate now, and how long will it take to produce a batch of 10 units if the cell is in a continuous production mode?arrow_forwardGumbrecht Company has the following departmental manufacturing layout for one of its plants: A consulting firm has recommended a value stream with the following manufacturing cell: Required: 1. Calculate the total time it takes to produce a batch of 20 units using the traditional departmental manufacturing layout. 2. Using cellular manufacturing, how much time is saved producing the same batch of 20 units? Assuming the cell operates continuously, what is the production rate? Which process controls this production rate? 3. Assume the processing time of Casting is reduced to 9 minutes, while the times of the other processes stay the same. What is the production rate now, and how long will it take to produce a batch of 20 units if the cell is in a continuous production mode?arrow_forwardBobcat uses a traditional cost system and estimates next years overhead will be $800.000, as driven by the estimated 25,000 direct labor hours. It manufactures three products and estimates the following costs: If the labor rate is $30 per hour, what is the per-unit cost of each product?arrow_forward
- The Lakers Corporation uses a joint manufacturing process that produces three products. The process produced1,000 units of Product A, 500 units of Product B, and 500 units of Product C in January. The joint cost incurred in this process is $200,000. All three products can be sold at the split-off point; $20 for Product A, $200 for Product B, and $160 for Product C. Alternatively, the products can be processed further and sold at a final stage. The following information relates to processing these products further: Final Selling Price $ 40 300 180 Separable Costs $15,000 30,000 2,000 Product B' C At the inventory at the end of January includes 100 units of Product A, 300 units of Product B, and 200 units of Product C. Required: a. Calculate the value of ending inventory of the three products based on (1) the sales value at split-off and (2) the physical measures approach using units. b. Assume that product A is a byproduct and joint costs are allocated based on number of units. Lakers…arrow_forwardA company manufactures three products using the same production process. The costs incurred up to the split-off point are $207,500. These costs are allocated to the products on the basis of their sales value at the split-off point. The number of units produced, the selling prices per unit of the three products at the split-off point and after further processing, and the additional processing costs are as follows. Number of Product Units Produced Selling Price at Split-Off Selling Price after Processing Additional Processing Costs D 4,730 $10.20 $15.50 $18,980 E 6,490 11.60 15.80 19,500 F 2,120 19.20 22.90 10,820 (b1) Determine the incremental profit (loss) of each product(s). (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Incremental profit (loss) Product D Product E (b2) Which product(s) should be processed further and which should be sold at the split-off point? Product D Product E Product F Product Farrow_forwardCraig, Inc., has provided the following information for one of its products for each hour of production: Actual velocity: 100 units (per hour) Move time: 20 minutes Inspection time: 18 minutes Rework time: 12 minutes Required: Calculate MCE. Comment on its significance.arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College