Prepare a profit-volume graph for these two methods, and then comment at which levels of activity the one production method would be preferred over the other.
Q: Smith Co. is considering acquiring a manufacturing plant. The purchase price is $1,250,000. The…
A: Payback Period Payback period is defined as the number of years required to recover the original…
Q: Required information [The following information applies to the questions displayed below.] Lansing…
A: Introduction: The direct method of operating activities cash flows is one of two methods in a cash…
Q: A machine purchased for P315374 has a depreciable life of 7 years, and it has a terminal book…
A: Depreciation is the allocation of cost of asset over the useful life of the asset. Under straight…
Q: The EFG Partnership shares profits and losses 25%, 35%, and 40 %. The partnership is a general…
A:
Q: Examples for the permanent differences between financial reporting and reporting for the IRS in…
A: Answer:- Financial reporting meaning:- The process for recording and communicating financial…
Q: 29. On 8-17-XX, Judy purchased items for resale from Ralph's Pet Supply RALPH'S PET SUPPLY 454 8TH…
A: A journal entry is a form of accounting entry that is used to report a business transaction in a…
Q: View Policies Current Attempt in Progress Culver Company is preparing its direct labor budget for…
A: Introduction: The direct labor budget is used to calculate the number of work hours needed to…
Q: PROBLE On January 2, 2021, Apple Co. sold merchandise to Mango, Inc. for P1,500,000. The cost of…
A: Lets understand the basics. Installment sales is a sales in which seller allows buyer to pay amount…
Q: A state issued muni bond offered at a coupon rate of 4% is preferred over a junk bond of 6% when a…
A: Municipal securities, sometimes known as "muni bond," are bonds issued by states, cities, counties,…
Q: Problem 21-1A (Algo) Preparing and analyzing a flexible budget LO P1 Required: 1&2. Prepare flexible…
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: 2020 2019 Receivable from Construction contract Costs incurred each year. Construction in…
A: Contract costing is one of the important concept used in cost accounting. Under this, costs are…
Q: Some accountants believe that deferred taxes should not be recognized for certain temporary…
A: The Difference between the amount of expenses and income that are Considered in Books of Account…
Q: 1. calculate the actual cost versus the budgeted cost of the planning project, which ic now…
A: Cost variance tells about the performance of a project financially. It tells about the difference in…
Q: The following events occur for The Underwood Corporation during 2021 and 2022, its first two years…
A: Accounts receivables are current assets which shows that the amount that an entity has to collect…
Q: QUESTION 2 "Internal audit is process improvement and optimisation," says ICAEW member Abigail…
A: Information technology audits to determine if IT controls safeguard corporate assets, uphold the…
Q: Reported revenues 12k supplies expense 3k and net income is 2k for the most recent period. If the…
A: Revenues are the incomes earned by an entity during a period, expenses are the amounts incurred on…
Q: An entity is a dealer in equipment and uses leases to facilitate the sale of its product. The entity…
A: It has been given in the question that the equipment which has been provided by the dealer on the…
Q: Ocean and Fish is a takeout food store at a popular beachside resort. Tommy Tillett, owner of Ocean…
A: Introduction: The contribution margin is the percentage of a product's total sales that is not…
Q: Fast Wire Incorporated manufactures a scrambling device for cellular phones. The main component of…
A: Introduction: The productivity ratio is a numerical statistic used to compare output across time.…
Q: Audit sampling involves applying an audit procedure to less than 100 percent of the population for…
A: Sampling Risk :- Sampling threat is the opportunity that the objects decided on in a pattern…
Q: Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: 7-5: Massey Electronics Massey Electronics manufactures heat sinks. Heat sinks are small devices…
A: Predetermined Overhead rate=Estimated overhead costAllocation base
Q: Milano Gallery purchases the copyright on a painting for $480,000 on January 1. The copyright is…
A: Copyright :— A copyright is the Legal Privileges given to Owner to Publish & Sell. Copyright…
Q: Alex Ltd. Is taken over by Billy Ltd. On the following terms: The assets and liabilities of Alex…
A: Purchase consideration :- The payment made by the acquiring company to the vendor company in…
Q: Corporation BBB, a public company, give you the following Financial Information for this year: ($)…
A: Rental Profit: $10,000 Taxable Capital Gains: $30,000 Net Capital Loss Carry Forward: $20,000
Q: Morgensen Software Corp. has assembled the following data for the years ending December 31, 2021 and…
A: The cash flow statement is part of the financial statements of the company. It is prepared at the…
Q: Brave Company maintains a branch in Davao City and makes inventory shipment to its branch at 20%…
A: In case of group entities usually they sell the products to their group with margin. In case of…
Q: Suppose that you are a bank with the following: $100 of capital, and • $2,000 of deposits. In this…
A: A monetary entity with permission to accept deposits and issue loans is known as a bank. Even more…
Q: (iii) Pau Bhd, a public company, purchases a 60% interest of another company, Pol Sdn Bhd, on 1…
A:
Q: Auerbach Inc. Issued 10% bonds on October 1, 2021. The bonds have a maturity date of September 30,…
A: Bonds are a form of debt or liability for the business, on which regular interest payments also…
Q: Prepare a flexible budgeted statement for comprehensive incomes for 40 000 units using the above…
A: Flexible Budget :— Flexible Budget is the Cost accounting techniques which help.to.find out the…
Q: Prepare an amortization schedule for the Minco Inc. bond showing only 2020. (Round your intermediate…
A: You have quoted multiple questions under a single question and the bond amortization schedule is the…
Q: Which of the following is NOT true about capitalizing interest under U.S. GAAP? (A 24) Group of…
A: Introduction: The Financial Accounting Standards Board issues a set of accounting rules, standards,…
Q: What is the payback period? Round your answer 2 decimals
A: Pay Back Period is a measure by which we find out that in how many years our initial investment will…
Q: Why is it necessary for accountants to assume that business entity will remain a going concern?
A: Introduction: The going concern concept is a fundamental of accounting. It assumes that a business…
Q: Austin, Inc. manufactures model airplane kits and projects production at 150, 450, 250, and 300 kits…
A: Direct material budget :— This budget is prepared to estimate the units of raw materials needed for…
Q: Company Co. has 1,000 employees and it decides to grant each of the employees 200 share options as…
A: Non-vesting condition determines whether the award holder will get the share-based payment, but does…
Q: In preparing a Master Budget, the starting point and the first budget to be prepared is usually the…
A: The production budget is related to the estimated units to be manufactured or produced considering…
Q: Handerson Corporation makes a product with the following standard costs: Standard Quantity or Hours…
A: Variable overhead rate variance: Variable Overhead Rate Variance is the difference between what the…
Q: The beginning inventory and the purchases and sales of inventory for March for the Carolina Company…
A: The inventory can be valued using various methods as FIFO, LIFO and weighted average method. Using…
Q: How much is the Inventory on January 1 of the Branch that came from the Home Office?
A: In case of group entities usually they sell the products to their group with margin. In case of…
Q: as per information viii - the depreciation for Vehicles 25% "reducing balance", not on cost. 2) vi.…
A: It has been mentioned in the question that the depreciation on the vehicle is 25% but the same is…
Q: 1. Accounting rate of return. 2. Payback period. 3. Net present value (NPV).
A: 1 Annual net income 37800 Divide by Investment cost 420000 Accounting Rate of Return 9.00%
Q: Gates Gems purchased a display case for $4,500 on September 1st of 2013. Estimated useful life is 5…
A: The depreciable cost of an asset is calculated as the difference between the cost and salvage value…
Q: Complete the inventory schedule assuming the Weighted Average (WAVG) inventory…
A: It has been mentioned in the question that the average weighted inventory valuation has been used by…
Q: On 6/2/Y3, Brad sold the car purchased in Y1 for $7,500. On 10/3/Y3, Brad sold the equipment…
A: Depreciation is the amount an asset loses in value over the usage of time. MACRS is a method of…
Q: What are c Post-audit Tasks?
A: Post-audit tasks are required for some SORs who have not successfully demonstrated adherence to the…
Q: Callaho Inc. completed the following petty cash transactions during May and June in 2014 May 1: Drew…
A: Petty cash :— It is the amount of fund used for the payment of small day to day expenditures.…
Q: QUESTION 4 A. An internal auditor needs to be competent, capable and objective if their services are…
A: Internal Auditing The purpose of internal auditing is to offer value and enhance an organization's…
Q: 1. On May 1, 2008, Jose and Pedro formed a partnership and agreed to share profits and losses in the…
A: Introduction: A partnership is a contract or association formed by two or more partners to invest…
Accounting
Evman Company has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system or a labour-intensive production system. The manufacturing method will not affect the quality of the product. The estimated
|
computer-assisted manufacturing system
|
labour-intensive production system |
Direct Material
|
$5.00 |
$5.60 |
Direct Labour
|
.5DLH @ $12 $6.00 |
.8 DLH @ $9 $7.20 |
Variable |
.5 DLH @ $6 $3.00 |
.8 DLH @ $6 $4.80
|
Fixed Overhead *
|
$2,440,000 |
$1,320,000
|
These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. The company’s
REQUIRED
Prepare a profit-volume graph for these two methods, and then comment at which levels of activity the one production method would be preferred over the other.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
- Southward Company has implemented a JIT flexible manufacturing system. John Richins, controller of the company, has decided to reduce the accounting requirements given the expectation of lower inventories. For one thing, he has decided to treat direct labor cost as a part of overhead and to discontinue the detailed direct labor accounting of the past. The company has created two manufacturing cells, each capable of producing a family of products: the radiator cell and the water pump cell. The output of both cells is sold to a sister division and to customers who use the radiators and water pumps for repair activity. Product-level overhead costs outside the cells are assigned to each cell using appropriate drivers. Facility-level costs are allocated to each cell on the basis of square footage. The budgeted direct labor and overhead costs are as follows: The predetermined conversion cost rate is based on available production hours in each cell. The radiator cell has 45,000 hours available for production, and the water pump cell has 27,000 hours. Conversion costs are applied to the units produced by multiplying the conversion rate by the actual time required to produce the units. The radiator cell produced 81,000 units, taking 0.5 hour to produce one unit of product (on average). The water pump cell produced 90,000 units, taking 0.25 hour to produce one unit of product (on average). Other actual results for the year are as follows: All units produced were sold. Any conversion cost variance is closed to Cost of Goods Sold. Required: 1. Calculate the predetermined conversion cost rates for each cell. 2. Prepare journal entries using backflush accounting. Assume two trigger points, with completion of goods as the second trigger point. 3. Repeat Requirement 2, assuming that the second trigger point is the sale of the goods. 4. Explain why there is no need to have a work-in-process inventory account. 5. Two variants of backflush costing were presented in which each used two trigger points, with the second trigger point differing. Suppose that the only trigger point for recognizing manufacturing costs occurs when the goods are sold. How would the entries be listed here? When would this backflush variant be considered appropriate?A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price would be 11.50). The order would require specialized materials costing 4.00 per unit. Direct labor and variable factory overhead would cost 2.15 per unit. Fixed factory overhead is 1.20 per unit. However, the company has excess capacity, and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing 1,300. Which of the following is relevant to the special order? a. 11.50 b. 1.20 c. 7.35 d. 8.90Mabbut 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?
- Kagle design engineers are in the process of developing a new green product, one that will significantly reduce impact on the environment and yet still provide the desired customer functionality. Currently, two designs are being considered. The manager of Kagle has told the engineers that the cost for the new product cannot exceed 550 per unit (target cost). In the past, the Cost Accounting Department has given estimated costs using a unit-based system. At the request of the Engineering Department, Cost Accounting is providing both unit-and activity-based accounting information (made possible by a recent pilot study producing the activity-based data). Unit-based system: Variable conversion activity rate: 100 per direct labor hour Material usage rate: 20 per part ABC system: Labor usage: 15 per direct labor hour Material usage (direct materials): 20 per part Machining: 75 per machine hour Purchasing activity: 150 per purchase order Setup activity: 3,000 per setup hour Warranty activity: 500 per returned unit (usually requires extensive rework) Customer repair cost: 25 per repair hour (average) Required: 1. Select the lower-cost design using unit-based costing. Are logistical and post-purchase activities considered in this analysis? 2. Select the lower-cost design using ABC analysis. Explain why the analysis differs from the unit-based analysis. 3. What if the post-purchase cost was an environmental contaminant and amounted to 10 per unit for Design A and 40 per unit for Design B? Assume that the environmental cost is borne by society. Now which is the better design?Stahman, Inc., estimates its hidden external failure costs using the Taguchi loss function. Stahlman produces plastic sheets that vary in thickness and grade. For one of its large-volume products, it was determined that k = 30,000 and T = 0.28 inches in diameter. A sample of four units produced the following values: Required: 1. Calculate the average loss per unit. 2. Assuming that 100,000 units were produced, what is the total hidden cost? 3. Assume that the multiplier for Stahmans hidden external failure costs is six. What are the measured external costs? Explain the difference between measured costs and hidden costs.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?
- Pinter Company had the following environmental activities and product information: 1. Environmental activity costs 2. Driver data 3. Other production data Required: 1. Calculate the activity rates that will be used to assign environmental costs to products. 2. Determine the unit environmental and unit costs of each product using ABC. 3. What if the design costs increased to 360,000 and the cost of toxic waste decreased to 750,000? Assume that Solvent Y uses 6,000 out of 12,000 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 14,250 of 15,000 pounds of toxic waste. What is the new environmental cost for Solvent Y?Because of high production-changeover time and costs, a director of manufacturing must convince management that a proposed manufacturing method reduces costs before the new method can be implemented. The current production method operates with a mean cost of $220 per hour. A research study will measure the cost of the new method over a sample production period. Develop the null and alternative hypotheses most appropriate for this study. Comment on the conclusion when H0 cannot be rejected. Comment on the conclusion when H0 can be rejected.Anderson Company has the following departmental manufacturing structure for one of its products: After some study, the production manager of Anderson recommended the following revised cellular manufacturing approach: Required: 1. Calculate the total time it takes to produce a batch of 20 units using Andersons traditional departmental structure. 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. What if the processing times of molding, welding, and assembly are all reduced to six minutes each? What is the production rate now, and how long will it take to produce a batch of 20 units?
- Larsen, Inc., produces two types of electronic parts and has provided the following data: There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plantwide rate? Which product is undercosted? 3. What if the machine hours were used for the plantwide rate? Would this remove the cost distortion of a plantwide rate?Life Force Fitness, Inc., assembles and sells treadmills. Activity-based product information for each treadmill is as follows: All of the activity costs are related to labor. Management must remove 2.00 of activity cost from the product in order to remain competitive. Rework involves disassembling and repairing a unit that fails testing. Not all units require rework, but the average is 0.40 hour per unit. Presently, the testing is done on the completed assembly; but much of the rework has been related to motors, which can be tested independently prior to adding the motor to the treadmill during final assembly. Thus, motor issues can be diagnosed and solved without having to disassemble the complete treadmill. This change will reduce the average rework per unit by one-quarter. a.Determine the new activity cost per unit under the rework improvement scenario. b.If management had the choice of doing the rework improvement in (a) or cutting the moving activity in half by improving the product flow, which decision should be implemented? Why?Jolene Askew, manager of Feagan Company, has committed her company to a strategically sound cost reduction program. Emphasizing life-cycle cost management is a major part of this effort. Jolene is convinced that production costs can be reduced by paying more attention to the relationships between design and manufacturing. Design engineers need to know what causes manufacturing costs. She instructed her controller to develop a manufacturing cost formula for a newly proposed product. Marketing had already projected sales of 25,000 units for the new product. (The life cycle was estimated to be 18 months. The company expected to have 50 percent of the market and priced its product to achieve this goal.) The projected selling price was 20 per unit. The following cost formula was developed: Y=200,000+10X1 where X1=Machinehours(Theproductisexpectedtouseonemachinehourforeveryunitproduced.) Upon seeing the cost formula, Jolene quickly calculated the projected gross profit to be 50,000. This produced a gross profit of 2 per unit, well below the targeted gross profit of 4 per unit. Jolene then sent a memo to the Engineering Department, instructing them to search for a new design that would lower the costs of production by at least 50,000 so that the target profit could be met. Within two days, the Engineering Department proposed a new design that would reduce unit-variable cost from 10 per machine hour to 8 per machine hour (Design Z). The chief engineer, upon reviewing the design, questioned the validity of the controllers cost formula. He suggested a more careful assessment of the proposed designs effect on activities other than machining. Based on this suggestion, the following revised cost formula was developed. This cost formula reflected the cost relationships of the most recent design (Design Z). Y=140,000+8X1+5,000X2+2,000X3 where X1=MachinehoursX2=NumberofbatchesX3=Numberofengineeringchangeorders Based on scheduling and inventory considerations, the product would be produced in batches of 1,000; thus, 25 batches would be needed over the products life cycle. Furthermore, based on past experience, the product would likely generate about 20 engineering change orders. This new insight into the linkage of the product with its underlying activities led to a different design (Design W). This second design also lowered the unit-level cost by 2 per unit but decreased the number of design support requirements from 20 orders to 10 orders. Attention was also given to the setup activity, and the design engineer assigned to the product created a design that reduced setup time and lowered variable setup costs from 5,000 to 3,000 per setup. Furthermore, Design W also creates excess activity capacity for the setup activity, and resource spending for setup activity capacity can be decreased by 40,000, reducing the fixed cost component in the equation by this amount. Design W was recommended and accepted. As prototypes of the design were tested, an additional benefit emerged. Based on test results, the post-purchase costs dropped from an estimated 0.70 per unit sold to 0.40 per unit sold. Using this information, the Marketing Department revised the projected market share upward from 50 percent to 60 percent (with no price decrease). Required: 1. Calculate the expected gross profit per unit for Design Z using the controllers original cost formula. According to this outcome, does Design Z reach the targeted unit profit? Repeat, using the engineers revised cost formula. Explain why Design Z failed to meet the targeted profit. What does this say about the use of unit-based costing for life-cycle cost management? 2. Calculate the expected profit per unit using Design W. Comment on the value of activity information for life-cycle cost management. 3. The benefit of the post-purchase cost reduction of Design W was discovered in testing. What direct benefit did it create for Feagan Company (in dollars)? Reducing post-purchase costs was not a specific design objective. Should it have been? Are there any other design objectives that should have been considered?