esZurgot Inc. has just organized a new division to manufacture and sell specially designed computer tables, using select hardwoods. Thedivision's monthly costs are shown in the schedule below:Manufacturing costs:Variable costs per unit:Direct materialsVariable manufacturing overheadFixed manufacturing overhead costs (total)Selling and administrative costs:VariableFixed (total)Units producedUnits sold5,3854,130a. Absorption costing$20$$694,665ta ta taUnit ProductCost173Zurgot regards all of its workers as full-time employees, and the company has a long-standing no-layoff policy. Furthermore,production is highly automated. Accordingly, the company includes its labour costs in its fixed manufacturing overhead. The tables sellfor $508 each.During the first month of operations, the following activity was recorded:3010% of sales$387,720Required:1. Compute the unit product cost under each of the following costing method.---K

Absorption costing method is a method of costing in which product cost is calculated by adding…

es Zurgot Inc. has just organized a new division to manufacture and sell specially designed computer tables, using select hardwoods. The division's monthly costs are shown in the schedule below: Manufacturing costs: Variable costs per unit: Direct materials. Variable manufacturing overhead Fixed manufacturing overhead costs (total) Selling and administrative costs: Variable Fixed (total) Units produced Units sold 5,385 4,130 a Absorption costing 173 20 $694,665 Zurgot regards all of its workers as full-time employees, and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labour costs in its fixed manufacturing overhead. The tables sell for $508 each. During the first month of operations, the following activity was recorded: $ $ Unit Product Cost 10% of sales $387,720 Required: 1. Compute the unit product cost under each of the following costing method. 4

es Zurgot Inc. has just organized a new division to manufacture and sell specially designed computer tables, using select hardwoods. The division's monthly costs are shown in the schedule below: Manufacturing costs: Variable costs per unit: Direct materials. Variable manufacturing overhead Fixed manufacturing overhead costs (total) Selling and administrative costs: Variable Fixed (total) Units produced Units sold 5,385 4,130 a Absorption costing 173 20 $694,665 Zurgot regards all of its workers as full-time employees, and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labour costs in its fixed manufacturing overhead. The tables sell for $508 each. During the first month of operations, the following activity was recorded: $ $ Unit Product Cost 10% of sales $387,720 Required: 1. Compute the unit product cost under each of the following costing method. 4

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 7PB: Remarkable Enterprises requires four units of part A for every unit of Al that it produces....

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The following product costs are available for Stellis Company on the production of erasers: direct materials, $22,000; direct labor, $35,000; manufacturing overhead, $17,500; selling expenses, $17,600; and administrative expenses; $13,400. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 13,750 equivalent units are produced, what is the equivalent material cost per unit? If 17,500 equivalent units are produced, what is the equivalent conversion cost per unit?
Identify cost graphs The following cost graphs illustrate various types of cost behavior: For each of the following costs, identify the cost graph that best illustrates its cost behavior as the number of units produced increases: A. Total direct materials cost B. Electricity costs of 1,000 per month plus 0.10 per kilowatt-hour C. Per-unit cost of straight-line depreciation on factory equipment D. Salary of quality control supervisor, 20,000 per month E. Per-unit direct labor cost
The following product Costs are available for Haworth Company on the production of chairs: direct materials, $15,500; direct labor, $22.000; manufacturing overhead, $16.500; selling expenses, $6,900; and administrative expenses, $15,200. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 7,750 equivalent units are produced, what is the equivalent material cost per unit? If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?
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.
Step Costs, Relevant Range Bellati Inc. produces large industrial machinery. Bellati has a machining department and a group of direct laborers called machinists. Each machinist can machine up to 500 units per year. Bellati also hires supervisors to develop machine specification plans and oversee production within the machining department. Given the planning and supervisory work, a supervisor can oversee, at most, three machinists. Bellatis accounting and production history shows the following relationships between number of units produced and the annual costs of supervision and materials handling (by machinists): Required: 1. Prepare a graph that illustrates the relationship between direct labor cost and number of units produced in the machining department. (Let cost of direct labor be the vertical axis and number of units be the horizontal axis.) Would you classify this cost as a strictly variable cost, a fixed cost, or a step cost? 2. Prepare a graph that illustrates the relationship between the cost of supervision and the number of units produced. (Let cost of supervision be the vertical axis and number of units be the horizontal axis.) Would you classify this cost as a strictly variable cost, a fixed cost, or a step cost? 3. Suppose that the normal range of production is between 1,400 and 1,500 units and that the exact number of machinists is currently hired to support this level of activity. Further suppose that production for the next year is expected to increase by an additional 500 units. What is the increase in the cost of direct labor? Cost of supervision?
The following product costs are available for Kellee Company on the production of eyeglass frames: direct materials, $32,125; direct labor, $23.50; manufacturing overhead, applied at 225% of direct labor cost; selling expenses, $22,225; and administrative expenses, $31,125. The direct labor hours worked for the month are 3,200 hours. A. What are the prime costs? B. What are the conversion costs? C. What is the total product cost? D. What is the total period cost? E. If 6.425 equivalent units are produced, what is the equivalent material cost per unit? F. What is the equivalent conversion cost per unit?
Bobcat 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?
Plata Company has identified the following overhead activities, costs, and activity drivers for the coming year: Plata produces two models of microwave ovens with the following activity demands: The companys normal activity is 21,000 machine hours. Calculate the total overhead cost that would be assigned to Model X using an activity-based costing system: a. 230,000 b. 240,000 c. 280,000 d. 190,000
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.
Evans, Inc., has a unit-based costing system. Evanss Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity, each product uses about the same labor time and materials. The plant has used direct labor hours for years to assign overhead to products. To help design engineers understand the assumed cost relationships, the Cost Accounting Department developed the following cost equation. (The equation describes the relationship between total manufacturing costs and direct labor hours; the equation is supported by a coefficient of determination of 60 percent.) Y=5,000,000+30X,whereX=directlaborhours The variable rate of 30 is broken down as follows: Because of competitive pressures, product engineering was given the charge to redesign products to reduce the total cost of manufacturing. Using the above cost relationships, product engineering adopted the strategy of redesigning to reduce direct labor content. As each design was completed, an engineering change order was cut, triggering a series of events such as design approval, vendor selection, bill of materials update, redrawing of schematic, test runs, changes in setup procedures, development of new inspection procedures, and so on. After one year of design changes, the normal volume of direct labor was reduced from 250,000 hours to 200,000 hours, with the same number of products being produced. Although each product differs in its labor content, the redesign efforts reduced the labor content for all products. On average, the labor content per unit of product dropped from 1.25 hours per unit to one hour per unit. Fixed overhead, however, increased from 5,000,000 to 6,600,000 per year. Suppose that a consultant was hired to explain the increase in fixed overhead costs. The consultants study revealed that the 30 per hour rate captured the unit-level variable costs; however, the cost behavior of other activities was quite different. For example, setting up equipment is a step-fixed cost, where each step is 2,000 setup hours, costing 90,000. The study also revealed that the cost of receiving goods is a function of the number of different components. This activity has a variable cost of 2,000 per component type and a fixed cost that follows a step-cost pattern. The step is defined by 20 components with a cost of 50,000 per step. Assume also that the consultant indicated that the design adopted by the engineers increased the demand for setups from 20,000 setup hours to 40,000 setup hours and the number of different components from 100 to 250. The demand for other non-unit-level activities remained unchanged. The consultant also recommended that management take a look at a rejected design for its products. This rejected design increased direct labor content from 250,000 hours to 260,000 hours, decreased the demand for setups from 20,000 hours to 10,000 hours, and decreased the demand for purchasing from 100 component types to 75 component types, while the demand for all other activities remained unchanged. Required: 1. Using normal volume, compute the manufacturing cost per labor hour before the year of design changes. What is the cost per unit of an average product? 2. Using normal volume after the one year of design changes, compute the manufacturing cost per hour. What is the cost per unit of an average product? 3. Before considering the consultants study, what do you think is the most likely explanation for the failure of the design changes to reduce manufacturing costs? Now use the information from the consultants study to explain the increase in the average cost per unit of product. What changes would you suggest to improve Evanss efforts to reduce costs? 4. Explain why the consultant recommended a second look at a rejected design. Provide computational support. What does this tell you about the strategic importance of cost management?
Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
Remarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?