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Cost of Goods Manufactured StatementBB Materials Inventory $ 6,000.00
+ Materials Purchased $ 7,000.00 - EB Material Inventory ($1,000.00)= Material Used $ 12,000.00
Materials Used+ Direct Labor $ 5,000.00 + Manufacturing Overhead
+ BB Work in Process $ 800.00 - EB Work in Process $ (3,000.00)= Cost of Goods Manufactured $ 21,300.00
Income StatementBB Finished Goods $ 4,000.00
+ Cost of goods Manufactored $ 21,300.00 - EB Finished Goods $ (5,300.00)= Cost of Goods Sold $ 20,000.00
Sales $ 31,800.00 - Cost of Goods Sold $ (20,000.00)= Gross (Margin/Profit) $ 11,800.00
Sales $ 31,800.00 - Cost of Goods Sold $ (20,000.00)- Operating Expenses= Net Income $ 11,800.00
BB Finished Goods + Cost of Goods Manufactured is offten Called Goods available for Sale.
Cost of goods available for sale
Prime Cost = direct materials + direct labor
Shedule of Cost of Goods Manufactured
Direct materials:Raw materials inventory, beginningAdd: Purchases of raw materialsRaw materials available for useDeduct: Raw materials inventory, endingRaw materials used in production
Direct LaborManufacturing overheadTotal manufacturing costAdd: Work in process inventory, beginning
Sub totalDeduct: Work in process inventory, endingCost fo goods manufactured
Income StatementSalesCost of Goods Sold:
Finished goods inventory, beginningAdd: Cost of goods manufacturedGoods availabel for saleFinished goods inventory, ending
Gross MarginSelling & Admin Expenses
Selling ExpenseAdministrative ExpensesNet Income
BB Finished Goods + Cost of Goods Manufactured is offten Called Goods available for Sale.
Top Switch Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout the state of Tennessee affected Top Switch’s facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed. Before the unfortunate incident, recovery specialists cleaned the buildings. The company controller is very nervous and anxious to recover whatever records he can to support the insurance claim for the destroyed inventory. After consulting with the cost accountant, they decide to retrieve the previous year’s annual report for the beginning iThe cost accountant was working on the first quarter results before the storm hit, and to his surprise, the report was still in his desk drawer. After reviewing the data , the information shows the following information: Material purchases were $ 325,000; Direct Labor was $ 220,000. Further discussions between the controller and the cost accountant revealed that sales were $ 1,350,000 and the gross margin was 30% of sales. The cost accountant also discovered, while sifting through the information, that cost of goods available for sale was $ 1,020,000 at cost. While assessing the damage, the controller determined that the prime costs were $ 545,000 up to the time of the damage and that manufacturing overhead is 65% of conversion cost. The cost accountant is not sure about all of this, but he decides to see what he can do with the information. Inventory numbers. In addition, they also agreed that they need first quarter cost data. The beginning inventory numbers are as follows: Raw Materials, $ 41,000 Work in Process, $ 56,000 Finished Goods, $ 35,000 Required: Determine the amount of cost in the Raw Materials, Work in Process, and Finished Goods Inventory as of the date of the storm. ( Hint: You may wish to reconstruct the various schedules and statements that would have been affected by the company’s accounts during the period.)
Top Switch Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout the state of Tennessee affected Top Switch’s facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed. Before the unfortunate incident, recovery specialists cleaned the buildings. The company controller is very nervous and anxious to recover whatever records he can to support the insurance claim for the destroyed inventory. After consulting with the cost accountant, they decide to retrieve the previous year’s annual report for the beginning iThe cost accountant was working on the first quarter results before the storm hit, and to his surprise, the report was still in his desk drawer. After reviewing the data , the information shows the following information: Material purchases were $ 325,000; Direct Labor was $ 220,000. Further discussions between the controller and the cost accountant revealed that sales were $ 1,350,000 and the gross margin was 30% of sales. The cost accountant also discovered, while sifting through the information, that cost of goods available for sale was $ 1,020,000 at cost. While assessing the damage, the controller determined that the prime costs were $ 545,000 up to the time of the damage and that manufacturing overhead is 65% of conversion cost. The cost accountant is not sure about all of this, but he decides to see what he can do with the information. Inventory numbers. In addition, they also agreed that they need first quarter cost data. The beginning inventory numbers are as follows: Raw Materials, $ 41,000 Work in Process, $ 56,000 Finished Goods, $ 35,000 Required: Determine the amount of cost in the Raw Materials, Work in Process, and Finished Goods Inventory as of the date of the storm. ( Hint: You may wish to reconstruct the various schedules and statements that would have been affected by the company’s accounts during the period.)
Which costs will change with a decrease in activity within the relevant range?
An increase in the activity level within the relevant range results in:
Which costs will change with a decrease in activity within the relevant range? Unit fixed cost and total variable cost.
An increase in the activity level within the relevant range results in: A decrease in fixed cost per unit
AssumptionsUnit Price 60.00 Unit Variable Cost 36.00 Fixed Cost 28,800
AsumptionsSales - Units - Mfg VC - Mfg FC - S & A VC - S & A FC -
Transfered from previous page
An allocated protion of fixed manufacturing overhead is included in product cost under:Absorption Costing Variable Costing
A NO NOB NO YesC Yes NOD Yes Yes
ABSORPTION COSTINGA costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.
VARIABLE COSTINGA costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.
An allocated protion of fixed manufacturing overhead is included in product cost under:
A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.
A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.
Unit product cost using variable costing
Units producedUnits soldSelling price
DMC 13DLC 55Variable Mfg OH 1
Unit product cost 69 Unit product cost using variable costing
VC FC13 130,500 55 8,300
15
74 138,800 Total FC year 8,300 12
Total VC 614,200 11,567.00 per month
Unit product cost using Absorption CostingUnits producedUnits soldSelling price
DMC 13DLC 55Variable Mfg OH 1FC OH 15Unit product cost 84 Unit product cost using absorption costing
VC FC13 130,500 55 8,300
15
74 138,800 Total FC year
(𝐹𝑖𝑥𝑒𝑑 𝑀𝑓𝑔 𝑂𝐻)/(𝑈𝑛𝑖𝑡𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑)=increase or decrease
(𝐹𝑖𝑥𝑒𝑑 𝑀𝑓𝑔 𝑂𝐻)/(𝑈𝑛𝑖𝑡𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑)=increase or decrease
8,300 12Total VC 614,200 11,567.00 per month
Units produced 8,700 Units sold 8,300 Selling price $ 92.00
Unit product cost using variable costing VC S & A exp 41,500 (614200)Contribution Margin 149,400 Less: Fixed expenses: Fixed Mfg OH (130,500) Fixed S & A (8,300)Net Operating Income 10,600
VC FCDMC 13 130,500 DLC 55 8,300 VMfgOH 1V S&A 5
74 138,800 Total FC 8,300
Total VC 614,200
8,700 Units produced 8,700 8,300 Units sold 8,300 $ 92.00 Selling price $ 92.00
Sales 763,600 Less: Variable Expenses:
Unit product cost using absorption costing BB Inventory 0 CoGM 730,800 CoG Available for Sale 730,800 Less: EB Inventory (33,600) (697,200)GM 66,400 Selling & Admin exp (49,800)
Net Operating Income 16,600
(𝐹𝑖𝑥𝑒𝑑 𝑀𝑓𝑔 𝑂𝐻)/(𝑈𝑛𝑖𝑡𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑)=increase or decrease
(𝐹𝑖𝑥𝑒𝑑 𝑀𝑓𝑔 𝑂𝐻)/(𝑈𝑛𝑖𝑡𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑)=increase or decrease
AssumptionsVariable cost per unit: Manufacturing: DMC 13 DLC 55 VMfgOH 1 V S& A 5
Fixed Cost per year FMfgOH 130,500 F S& A 8,300
Units Produced 8700Units Sold 8300Selling Price 92.00
Assumptions ROIRequired ROI 0%Investment - Selling and Admin Exp 49,800 Unit product cost 84Unit sales 8,300
7%Markup percentage on absorption cost
Jan Feb Mar Apr May Jun Jul AugCurrent 30% 100,000 120,000 110,000 - - - - - 1st after 60%2nd after 8%3rd after 0%uncollect 0%
Jan Feb Mar Apr May Jun Jul Aug 30,000 36,000 33,000 - - - - - - 60,000 72,000 66,000 - - - - - - 8,000 9,600 8,800 - - - - - - - - - - - 30,000 96,000 113,000 75,600 8,800 - - -
Sep Oct Nov Dec -
Sep Oct Nov Dec - - - - - - - - - - - - - - - - - - - -
A labor efficiency variance resulting from the use of poor quality materials should be charged to: A) the production manager. B) the purchasing agent. C) manufacturing overhead. D) the engineering department.
An unfavorable labor efficiency variance indicates that: A) The actual labor rate was higher than the standard labor rate. B) The labor rate variance must also be unfavorable. C) Actual labor hours worked exceeded standard labor hours for the production level achieved. D) Overtime labor was used during the period.
A favorable labor rate variance indicates that A) actual hours exceed standard hours. B) standard hours exceed actual hours. C) the actual rate exceeds the standard rate. D) the standard rate exceeds the actual rate.
A labor efficiency variance resulting from the use of poor quality materials should be charged to:
Actual labor hours worked exceeded standard labor hours for the production level achieved.
Assumptions
Direct material 20 8.00 Direct labor 0.1 1.10 Variable Mfg OH 0.1 0.40
Unit CostProduction 4,000 Direct materials purchased 85,000 32,300.00 Direct labor worked 390 4,875.00 Variable Mfg OH incurred 1,475.00 EB Inventory of Direct materials 3,000
Materials Price Variance AP= 0.38 SP= 0.40 MPV= -1700 Display as positive number
Residual IncomeOperating Income 50,000 Less: Min Required Return 40,000 Equals: Residual Income 10,000
Return on Investment Net Operating IncomeAvg Operating Assets
=
50,000 200,000 25%
=
One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is. A) 1B) 0
29. In responsibility accounting, each segment in an organization should be charged with the costs for which it is responsible and over which it has control plus its share of common organizational costs.
A) TRUEB) 0
Some managers believe that residual income is superior to return on investment as a means of measuring performance, since it encourages the manager to make investment decisions that are more consistent with the interests of the company as a whole.
A) 1B) 0
The performance of the manager of Division A is measured by residual income. Which of the following would increase the manager's performance measure?
A) Increase in average operating assets. B) Decrease in average operating assets. C) Increase in minimum required return. D) Decrease in net operating income.
A segment of a business responsible for both revenues and expenses would be called:
A) a cost center. A business segment whose manager has control over cost but has no control over revenue or investments in operating assets.B) an investment center. A business segment whose manager has control over cost, revenue, and investments in operating assets.C) a profit center. D) residual income. The net operating income that an investment center earns above the minimum required return on its operating assets.
One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is.
29. In responsibility accounting, each segment in an organization should be charged with the costs for which it is responsible and over which it has control plus its share of common organizational costs.
Some managers believe that residual income is superior to return on investment as a means of measuring performance, since it encourages the manager to make investment decisions that are more consistent with the interests of the company as a whole.
The performance of the manager of Division A is measured by residual income. Which of the following would increase the manager's performance measure?
A segment of a business responsible for both revenues and expenses would be called:
A business segment whose manager has control over cost but has no control over revenue or investments in operating assets.A business segment whose manager has control over cost, revenue, and investments in operating assets.
The net operating income that an investment center earns above the minimum required return on its operating assets.
29. In responsibility accounting, each segment in an organization should be charged with the costs for which it is responsible and over which it has control plus its share of common organizational costs.
Some managers believe that residual income is superior to return on investment as a means of measuring performance, since it encourages the manager to make investment decisions that are more consistent with the interests of the company as a whole.
AssumptionsSales 900,000 NOI 36,000 Stockholder's Equity 100,000 Average operating assets 180,000 Minimumrequired rate of return 15%
Residual Income Operating Income 36,000 Average Operating Assets 27,000 Residual Income 9,000
ROI Operating Income 36,000 Average Operating Assets 180,000
20%=
AssumptionsCM 48,000 FC 96,000 Not Avoided 42,000
CM 48,000 Less Not Avoided 42,000
6,000 Increase
Differential Cost Per Drumb
Assumptions Make BuyDirect Material 12 Outside supplier 27Direct Labor 8 Direct Materials 12Variable OH 3 Direct Labor 8.00 Fixed OH 10 Variable OH 3Redused cost 30% 30% Supervision 0Rental 0 Fixed OH 10Supervision 0 Equipment Rental 0
30% of fixed Mfg OH will continue. No other changes
Total Differential Cost 10,000 Diff Make Buy Diff
270,000 120,000 80,000 30,000 -
- 6.00 230,000 270,000 (40,000)
Total Differential Cost 10,000 Diff Make Buy Diff
300,000 120,000 80,000 30,000 -
- 3.00 230,000 300,000 (70,000)
Orginal Costing
New Costing
Orginal Costing
New Costing
Some investment projects require that a company expand its working capital to service the greater volume of business that will be generated. Under the net present value method, the investment of working capital should be treated as: A) an initial cash outflow for which no discounting is necessary. B) a future cash inflow for which discounting is necessary. C)both an initial cash outflow for which no discounting is necessary and a future cash inflow for which discounting is necessary. D) irrelevant to the net present value analysis.
Which of the following capital budgeting techniques consider(s) cash flow over the entire life of the project?
Payback
A) Yes Yes B) Yes No C) No Yes D) No No
Internal rate of return
Some investment projects require that a company expand its working capital to service the greater volume of business that will be generated. Under the net present value method, the investment of working capital should be treated as:
both an initial cash outflow for which no discounting is necessary and a future cash inflow for which discounting is necessary.
Which of the following capital budgeting techniques consider(s) cash flow over the entire life of the project?
Some investment projects require that a company expand its working capital to service the greater volume of business that will be generated. Under the net present value method, the investment of working capital should be treated as:
Excel Finance Class 27: Asset Valuation Using Discounted Cash Flow Analysis and PV Function
ITEM YEAR(S) CASH FLOW Discount
Annual Cost Savings 5-Jan 50,000.00 10.00% $307,228.36 Initial Investment Now (200,000.00) 1 (200,000.00)Net Present Value $107,228.36
If a new machine will yield a net cash flow of $60,000.00 per month for the next 5 years and your discount rate is 10.00% compounded 1 times a year, what is the maximum amount that
you should pay for the machine?
If a new machine will yield a net cash flow of $60,000.00 per month for the next 5 years and your discount rate is 10.00% compounded 1 times a year, the the maximum amount that you should pay
for the machine is $227,447.21.
PV OF CASH FLOWS
100000300000
12%
5
If a new machine will yield a net cash flow of $60,000.00 per month for the next 5 years and your discount rate is 10.00% compounded 1 times a year, the the maximum amount that you should pay
Date Amt Date Amt Date Amt Date Amt c. kr 7,000 BB kr 60,000 k. kr 800,000 d. kr 110,000 j. kr 770,000 h. kr 18,000
Bal kr 135,000 Bal kr 30,000
Matthias Corporation has provided data concerning the company's Manufacturing Overhead account for the month of May. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $53,000 and the total of the credits to the account was $69,000. Which of the following statements is true?
A. Manufacturing overhead applied to Work in Process for the month was $69,000.B. Manufacturing overhead for the month was underapplied by $16,000.C. Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $53,000.D. Actual manufacturing overhead incurred during the month was $69,000.
BB WIP 40,000
750,000 EB WIP (30,000)
760,000
EQUIVALENT UNITS OF PRODUCTION
Transfer to next department 760,000 Ending work in process 12,000 Equivalent units of Production 772,000
COST PER EQUIVALENT UNIT
Cost of BB WIP 8,600 Cost added during the period 223,000 Total Cost (a 231,600
Equivalent units of Production (b) 772,000 0.30
Units Started into production during the month
Units completed and transferred out during month
Cost per equivalent Unit (a) ÷(b)
AssumptionsBB WIP: Units in process 40,000 % Complete materials 70% % Complete conversion 60% Cost in BB Inventory: Material cost 8,600 Conversion cost 4,800 Units started into production during month 750,000 Units transferred out during month ?Costs added to production durning month: Material cost 223,000 Conversion Cost 149,000 EB WIP: Units in process 30,000 % Complete materials 40% % Complete conversion 30%
AssumptionsEquipment purchase price - Decrease Operating Expense - Equipment useful life 0Minimum Rate of Return on Equipment 0%Present Value Factor 5.650 use PV Table
Amount of tangible cost 0 Less: Tangible Benefits 0
Net Present Value 0
Negative NPV of Equipment purchase - Present Value Factor 5.650