13 Jane Finch started a company to manufacture and sell dental accessories last year. Jane was able to increase her sales and (variable costing) net operating income (NOI) in Year 2. Below are her selected actual operating results for the first two years of operation (her cost structure and selling prices were the same in Year 1 and Year 2). She allocates her fixed manufacturing overhead costs to the number of units produced in each year. Year 2 35,000 Year 1 Units produced 35,000| Units sold Absorption costing NOI Variable costing NOI 31,000 36,000 ?? ?? $ 85,000 S 110,000| What was the total net operating income under absorption costing for the two years (Year1+Year 2)? A. $108,000 B. $195,000 C. $220,000 D. $201,000 E. None of the above

13 Jane Finch started a company to manufacture and sell dental accessories last year. Jane was able to increase her sales and (variable costing) net operating income (NOI) in Year 2. Below are her selected actual operating results for the first two years of operation (her cost structure and selling prices were the same in Year 1 and Year 2). She allocates her fixed manufacturing overhead costs to the number of units produced in each year. Year 2 35,000 Year 1 Units produced 35,000| Units sold Absorption costing NOI Variable costing NOI 31,000 36,000 ?? ?? $ 85,000 S 110,000| What was the total net operating income under absorption costing for the two years (Year1+Year 2)? A. $108,000 B. $195,000 C. $220,000 D. $201,000 E. None of the above

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 10E: SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that...

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Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings: Next year, HHH expects to purchase 25,600 of direct materials. Projected beginning and ending inventories for direct materials are as follows: There is no work-in-process inventory; in other words, a cleaning is started and completed on the same day. Required: 1. Prepare a statement of services produced in good form. 2. What if HHH planned to purchase 30,000 of direct materials? Assume there would be no change in beginning and ending inventories of materials. Explain which line items on the statement of services produced would be affected and how (increase or decrease).
Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings: Next year, HHH expects to purchase 25,600 of direct materials. Projected beginning and ending inventories for direct materials are as follows: There is no work-in-process inventory and no finished goods inventory; in other words, a cleaning is started and completed on the same day. HHH expects to sell 15,000 cleanings at a price of 45 each next year. Total selling expense is projected at 22,000, and total administrative expense is projected at 53,000. Required: 1. Prepare an income statement in good form. 2. What if Jean and Tom increased the price to 50 per cleaning and no other information was affected? Explain which line items in the income statement would be affected and how.
SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost = 543,000 + 1.34X, where X equals number of smokers. Last year, SmokeCity produced 20,000 smokers. Actual overhead costs for the year were as expected. Required: 1. What is the driver for the overhead activity? 2. What is the total overhead cost incurred by SmokeCity last year? 3. What is the total fixed overhead cost incurred by SmokeCity last year? 4. What is the total variable overhead cost incurred by SmokeCity last year? 5. What is the overhead cost per unit produced? 6. What is the fixed overhead cost per unit? 7. What is the variable overhead cost per unit? 8. Recalculate Requirements 5, 6, and 7 for the following levels of production: (a) 19,500 units and (b) 21,600 units. (Round your answers to the nearest cent.) Explain this outcome.
The expected costs for the Maintenance Department of Stazler, Inc., for the coming year include: Fixed costs (salaries, tools): 64,900 per year Variable costs (supplies): 1.35 per maintenance hour Estimated usage by: Actual usage by: Required: 1. Calculate a single charging rate for the Maintenance Department. 2. Use this rate to assign the costs of the Maintenance Department to the user departments based on actual usage. Calculate the total amount charged for maintenance for the year. 3. What if the Assembly Department used 4,000 maintenance hours in the year? How much would have been charged out to the three departments?
Using the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.
Natur-Gro, Inc., manufactures composters. Based on past experience, Natur-Gro has found that its total annual overhead costs can be represented by the following formula: Overhead cost = 264,000 + 1.42X, where X equals number of composters. Last year, Natur-Gro produced 30,000 composters. Actual overhead costs for the year were as expected. Total overhead for per unit was a. 1.42 b. 8.80 c. 11.63 d. 10.22
2. Gemini is having trouble understanding its manufacturing overhead costs. A couple of years ago, management used the conference method and determined that the its monthly manufacturing overhead costs consisted of $10,000 plus $50 for every machine hour. The actual costs and those based on the conference method were significantly different from each other the last few months. Management has asked you to analyze its costs to better predict manufacturing overhead costs. Management has the following data from the past year for you. Manufacturing Month Machine Hours Overhead Costs 1 1,200 $74,000 2 1,000 70,000 1,400 82,000 4 1,700 86,000 1,650 87,500 6 1,800 87,000 1,900 92,000 8 1,800 90,000 9. 2,000 98,000 10 3,000 130,000 11 2,200 102,000 12 2,600 109,000 1. Use the High-Low method and estimate the linear cost relationship for manufacturing overhead costs. 2. Compare the predicted costs for months 11 and 12 using your cost relationship to that previously used. Which is better and why?…
Solaria Inc. manufactures mechanical pencils. Based on past experience, the company has found that total delivery costs can be represented by the following formula: Delivery costs = $4,800 + 1.25 X where X = the number mechanical pencils produced. Last year, Solaria Inc. produced 15,000 mechanical pencils. Actual delivery costs for the year were as expected. What is the total delivery costs incurred by the company last year? What is the total fixed delivery costs incurred last year? What is the total variable delivery costs incurred last year? What is the delivery cost per unit produced? What is the fixed delivery cost per unit? What is the variable delivery costs per unit?
VII. Polytech Inc. produces a laptop. The selling price per unit of the laptop is $500. Data for last year's operations follow: Sales (1,000 units) Variable manufacturing overhead Fixed selling and administrative costs Direct materials used Direct labor Fixed manufacturing overhead Variable selling and administrative $500,000 120,000 50,000 100,000 60,000 90,000 30,000 Required: (1) Compute the operating income or loss (2) What is the company's break-even point in number of units sold? (3) What is the company's break-even point in $ sales?
Royal Lawncare Company produces and sells two packaged products—Weedban and Greengrow. Revenue and cost information relating to the products follow: Product Weedban GreengrowSelling price per unit $ 9.00 $ 33.00Variable expenses per unit $ 2.50 $ 12.00Traceable fixed expenses per year $ 136,000 $ 41,000 Common fixed expenses in the company total $110,000 annually. Last year the company produced and sold 37,000 units of Weedban and 19,500 units of Greengrow. Required: Prepare a contribution format income statement segmented by product lines.
Appendix: EPR Rachelle Razer has taken a job as production superintendent in a plant that makes, among other products, jewelry cases. She is trying to determine how many cases to produce on each production run (EPR). Discussions reveal that last year the plant made 14,100 such cases, and this level of demand is expected for the coming year. The setup cost of each run is $400, and the cost of carrying a case in inventory for a year is estimated at $2.50. a. Calculate the EPR for jewelry cases and the total cost associated with it. Note: Round your answers to the nearest whole unit. ERP 2,124 units Total cost $ 5,312 x b. Recalculate the EPR and total cost if the annual cost of carrying a case in inventory is $10 and the setup cost is $100. Note: Round your answer to the nearest whole unit. ERP 531 units Total cost $ 531,000 x
Dixon Robotics manufactures three robot models: the A3B4, the BC11, and the C3PO. Dixon allocates manufacturing overhead to each model based on machine-hours. A large portion of the company’s manufacturing overhead costs is incurred by the Maintenance Department. This year, the department anticipates that it will incur $100,000 in total costs. The following estimates pertain to the upcoming year. Model Estimated Machine-Hours Estimated Unitsof Production A3B4 20,000 6,250 BC11 15,000 5,000 C3PO 5,000 2,500 Ed Smith, Dixon’s cost accountant, suspects that unit costs are being distorted by using a single activity base to allocate Maintenance Department costs to products. Thus, he is considering the implementation of activity-based costing (ABC). Under the proposed ABC method, the costs of the Maintenance Department would be allocated to the following activity cost pools using the number of work orders as an activity base: (1) the repairs pool and (2) the janitorial…