Entrepreneurial Finance
6th Edition
ISBN: 9781337635653
Author: Leach
Publisher: Cengage
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Comprehensive Problem 5
Part A:
Note: You must complete part A before completing parts B and C.
Genuine Spice Inc. began operations on January 1 of the current year. The company produces eight- ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January direct materials, direct labor, and factory overhead costs are as follows:
|
Part A—Break-Even Analysis
The management of Genuine Spice Inc. wants to determine the number of cases required to break even per month. The utilities cost, which is part of factory overhead, is a mixed cost. The following information was gathered from the first six months of operation regarding this cost:
| Case Production | Utility Total Cost | |
| January | 500 | $600 |
| February | 800 | 660 |
| March | 1,200 | 740 |
| April | 1,100 | 720 |
| May | 950 | 690 |
| June | 1,025 | 705 |
Required:
1. Determine the fixed and variable portion of the utility cost using the high-low method. Round the per unit cost to the nearest cent.
| At High Point | At Low Point | |
| Variable cost per unit | $ | $ |
| Total fixed cost | $ | $ |
| Total cost | $ | $ |
2. Determine the contribution margin per case. Enter your answer to the nearest cent.
Contribution margin per case $
3. Determine the fixed costs per month, including the utility fixed cost from part (1).
| Utilities cost (from part 1) | $ |
| Facility lease | |
| Equipment depreciation | |
| Supplies | |
| Total fixed costs | $ |
4. Determine the break-even number of cases per month.
cases
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(Appendix 11A) Cycle Time and Velocity, Manufacturing Cycle Efficiency A company like Kicker performs warranty repair work on speakers in a manufacturing cell. The typical warranty repair involves taking the defective speaker apart, testing the components, and replacing the defective components. The maximum capacity of the cell is 1,000 repairs per month. There are 500 production hours available per month. Required: 1. Compute the theoretical velocity (per hour) and the theoretical cycle time (minutes per unit repaired). 2. Speaker repair uses 4 minutes of move time, 10 minutes of wait time, and 6 minutes of inspection time. Calculate the MCE. 3. Using the information from Requirement 2, calculate the actual cycle time and the actual velocity for speaker repair.
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Comprehensive Problem 5Part A:
Note: You must complete part A before completing parts B and C.
Genuine Spice Inc. began operations on January 1 of the current year. The company produces eight- ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January direct materials, direct labor, and factory overhead costs are as follows:
DIRECT MATERIALS
CostBehavior
Unitsper Case
Costper Unit
Direct MaterialsCost per Case
Cream base
Variable
100 ozs.
$0.02
$2.00
Natural oils
Variable
30 ozs.
0.30
9.00
Bottle (8-oz.)
Variable
12 bottles
0.50
6.00
$17.00
DIRECT LABOR
Department
CostBehavior
Timeper Case
Labor Rateper Hour
Direct LaborCost per Case
Mixing
Variable
20
min.
$18.00
$6.00
Filling
Variable
5
14.40
1.20
25
min.
$7.20
FACTORY OVERHEAD
Cost Behavior
Total Cost…
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Part A:
Note: You must complete part A before completing parts B and C.
Genuine Spice Inc. began operations on January 1 of the current year. The company produces 8-ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January direct materials, direct labor, and factory overhead costs are as follows:
DIRECT MATERIALS
CostBehavior
Unitsper Case
Costper Unit
Direct MaterialsCost per Case
Cream base
Variable
100 ozs.
$0.02
$2.00
Natural oils
Variable
30 ozs.
0.30
9.00
Bottle (8-oz.)
Variable
12 bottles
0.50
6.00
$17.00
DIRECT LABOR
Department
CostBehavior
Timeper Case
Labor Rateper Hour
Direct LaborCost per Case
Mixing
Variable
20 min
$18.00
$6.00
Filling
Variable
5
14.40
1.20
25min
$7.20
FACTORY OVERHEAD
Cost Behavior
Total Cost
Utilities
Mixed
$600
Facility lease…
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problem 5
Marites Company employs standard absorption system for product costing. The standard cost of this product is as follows: Raw Materials – P14.50; Direct Labor for 2 hours @ P8/hr is P16; Manufacturing overhead for 2 hours @ P11/hr is P22. The total cost/unit (14.50+16+22) = P52.50. The manufacturing overhead rate is based upon normal annual activity level of 600,000 direct labor hours. The company planned to produce 25,000 units each month during 2020. Budgeted factory overhead for 2020 is composed of P3,600,000 variable and P3,000,000 fixed. During April 2021, 26,000 units of product were produced using 53,500 direct labor hours at a cost of P433,350. Actual manufacturing overhead for the month was P260,000 fixed and P315,000 variable. The total manufacturing overhead applied during April was P572,000. The variable overhead spending variance must be:
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Item 3
Dawson Toys, Ltd., produces a toy called the Maze. The company has recently created a standard cost system to help control costs and has established the following standards for the Maze toy:
Direct materials: 6 microns per toy at $0.32 per micron
Direct labor: 1.3 hours per toy at $6.70 per hour
During July, the company produced 5,400 Maze toys. The toy's production data for the month are as follows:
Direct materials: 73,000 microns were purchased at a cost of $0.30 per micron. 32,500 of these microns were still in inventory at the end of the month.
Direct labor: 7,420 direct labor-hours were worked at a cost of $52,682.
Required:
1. Compute the following variances for July: (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations. Round final answer to the nearest whole dollar amount.)
a. The materials price…
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Queston 3 Part 2
The Advent Corporation also manufactures chairs and tables at one of their divisions. The following isdata for its chair manufacturing department for the month of February.Actual Sales 4,500 ChairsSelling Price $60.00 per chairVariable Costs $15.00 per chairFixed Costs $72,000
d. Calculate the Margin of Safety in revenue dollars. e. If the company wishes to increase its total dollar contribution margin by 50% in March, by how muchwill it have to increase sales, in units, if all factors remain the same?
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5.
Lean Accounting
Westgate Inc. uses a lean manufacturing strategy to manufacture DVR (digital video recorder) players. The company manufactures DVR players through a single product cell. The budgeted conversion cost for the year is $869,700 for 2,230 production hours. Each unit requires 12 minutes of cell process time. During March, 990 DVR players were manufactured in the cell. The materials cost per unit is $69. The following summary transactions took place during March:
Materials were purchased for March production.
Conversion costs were applied to production.
990 DVR players were assembled and placed in finished goods.
940 DVR players were sold for $260 per unit.
a. Determine the budgeted cell conversion cost per hour. If required, round to the nearest dollar.$fill in the blank c00542f5ffcb016_1 per hour
b. Determine the budgeted cell conversion cost per unit. If required, round to the nearest dollar.$fill in the blank c00542f5ffcb016_2 per unit
c.…
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Cornerstones of Cost Management 4th Ed. - Chapter 4
Scenario IV: Goodmark Company produces two types of birthday cards: scented and regular. Expected product data for the coming year are given below. Overhead costs are identified by activity.
Scented Cards
Regular Cards
Total
Units produced
20,000
200,000
-
Prime costs
$160,000
$1,500,000
$1,660,000
Direct labor hours
20,000
160,000
180,000
Number of setups
60
40
100
Machine hours
10,000
80,000
90,000
Inspection hours
2,000
16,000
18,000
Number of moves
180
120
300
Overhead costs:
Setting up equipment
$240,000
Moving materials
120,000
Machining
200,000
Inspecting products
160,000
Required:
1.
Answer the following questions:
a.
Calculate the activity consumption ratios for Scented cards (round to two decimal places).
Setups:
Moving materials:
Machining:
Inspection:
b.
If only one rate based on direct labor hours were used to assign overhead, Scented Cards would receive…
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problem 3
Marina Bottlers Inc, a leading softdrinks company is producing their bottle requirements. For each case of 24 eight-ounce bottles, the company prescribed the following standard product mix:
Material A @ 2.4 lb, P50/lbs
Material B @ 6 lb, P22/lbs
Material C @ 1.6 lb, P15/lbs
During the month of august, 25,000 cases were produced from an input of:
Material
Pounds
Cost/lb
A
63,700
P49.00
B
125,200
20.50
C
48,100
16.00
Required: Compute for the following:
MATERIALS MIX VARIANCE
MATERIALS YIELD VARIANCE
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Question 1
Flounder Company specializes in manufacturing a unique model of bicycle helmet. The model is well accepted by consumers, and the company has enough orders to keep the factory production at 10,000 helmets per month (80% of its full capacity). Flounder’s monthly manufacturing cost and other expense data are as follows.
Rent on factory equipment
$12,000
Insurance on factory building
1,780
Raw materials used (plastics, polystyrene, etc.)
80,800
Utility costs for factory
920
Supplies for general office
320
Wages for assembly line workers
59,700
Depreciation on office equipment
830
Miscellaneous materials (glue, thread, etc.)
1,470
Factory manager’s salary
6,200
Property taxes on factory building
490
Advertising for helmets
14,900
Sales commissions
10,900
Depreciation on factory building
1,640
Prepare an answer sheet with the following column headings.Enter each cost item on your answer sheet, placing the dollar amount under…
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Question 3 Part II The Advent Corporation also manufactures chairs and tables at one of their divisions. The following isdata for its chair manufacturing department for the month of February.Actual Sales 4,500 ChairsSelling Price $60.00 per chairVariable Costs $15.00 per chairFixed Costs $72,000
Required:a. Calculate the Contribution Margin per chair. b. Compute the Contribution Margin Ratio. c. Determine the break-even point in revenue dollars. d. Calculate the Margin of Safety in revenue dollars. e. If the company wishes to increase its total dollar contribution margin by 50% in March, by how muchwill it have to increase sales, in units, if all factors remain the same?
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Ornamental Sculptures Mfg. manufactures garden sculptures. Each sculpture requires 8 pounds of direct materials at a cost of $3 per pound and 0.5 direct labor hours at a rate of $18 per hour. Variable manufacturing overhead is charged at a rate of $3 per direct labor hour. Fixed manufacturing overhead is $4,000 per month. The company’s policy is to maintain direct materials inventory equal to 20% of the next month’s materials requirement. At the end of February the company had 5,280 pounds of direct materials in inventory. The company’s production budget reports the following. Prepare budgets for March and April for (1) direct materials, (2) direct labor, and (3) factory overhead. Production Budget March April May Units to be produced . 3,300 4,600 4,800
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