Question 2.3 Rose Apothecary manufactures individual shampoos for hotel/motel clientele. The fixed manufacturing overhead costs for 2021 will total $576,000. The company uses good units finished for fixed overhead allocation and anticipates 300,000 units of production. Good units finished average 92 percent of total units produced. During January, 20,000 units were produced. Actual fixed overhead cost per good unit averaged $2.82 in January. Required Determine the fixed overhead rate for 2021. Determine the fixed overhead static-budget variance for January. Determine the fixed overhead production-volume variance for January. Determine the fixed overhead rate variance for January.
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part 3 4
Question 2.3
Rose Apothecary manufactures individual shampoos for hotel/motel clientele. The fixed
Required
- Determine the fixed overhead rate for 2021.
- Determine the fixed overhead static-
budget variance for January. - Determine the fixed overhead production-volume variance for January.
- Determine the fixed overhead rate variance for January.
Step by step
Solved in 2 steps with 1 images
- Factory overhead rate Fabricator Inc., a specialized equipment manufacturer, uses a job order cost system. The overhead is allocated to jobs on the basis of direct labor hours. The overhead rate is now $3,000 per direct labor hour. The design engineer thinks that this is illogical. The design engineer has stated the following: Our accounting system doesn't make any sense to me. It tells me that every labor hour carries an additional burden of $3,000. This means that while direct labor makes up only 5% of our total product cost, it drives all our costs. In addition, these rates give my design engineers incentives to "design out" direct labor by using machine technology. Yet, over the past years as we have had less and less direct labor, the overhead rate keeps going up and up. I won't be surprised if next year the rate is $4,000 per direct labor hour. I'm also concerned because small errors in our estimates of the direct labor content can have a large impact on our estimated costs. Just a 30~minute error in our estimate of assembly time is worth $ 1,500. Small mistakes in our direct labor time estimates really swing our bids around. I think this puts us at a disadvantage when we are going after business. What do you think is a possible solution?Factory overhead rate Fabricator Inc., a specialized equipment manufacturer, uses a job order cost system. The overhead is allocated to jobs on the basis of direct labor hours. The overhead rate is now $3,000 per direct labor hour. The design engineer thinks that this is illogical. The design engineer has stated the following: Our accounting system doesn't make any sense to me. It tells me that every labor hour carries an additional burden of $3,000. This means that while direct labor makes up only 5% of our total product cost, it drives all our costs. In addition, these rates give my design engineers incentives to "design out" direct labor by using machine technology. Yet, over the past years as we have had less and less direct labor, the overhead rate keeps going up and up. I won't be surprised if next year the rate is $4,000 per direct labor hour. I'm also concerned because small errors in our estimates of the direct labor content can have a large impact on our estimated costs. Just a 30~minute error in our estimate of assembly time is worth $ 1,500. Small mistakes in our direct labor time estimates really swing our bids around. I think this puts us at a disadvantage when we are going after business. What did the engineer mean about the large overhead rate being a disadvantage when plating bids and seeking new business?Flow of costs and income statement Ginocera Inc. is a designer, manufacturer, and distributor of custom gourment kitchen knives. A new kitchen knife series called the Kitchen Ninja was released for production in early 20Y8. In January, the company spent 600,000 to develop a late-night advertising infomercial for the new product. During 20Y8, the company spent an additional 1,400,000 promoting the product through these infomercials, and 800,000 in legal costs. The knives were ready for manufacture on January 1, 20Y8. Ginocera uses a job order cost system to accumulate costs associated with the Kitchen Ninja Knife. The unit direct materials cost for the knife is: Hardened steel blanks (used (or knife shaft and blade) 4.00 Wood (for handle) 1.50 Packaging 0.50 The production process is straightforward. First, the hardened steel blanks, which are purchased directly from a raw material supplier, are stamped into a single piece of metal that includes both the blade and the shaft. The stamping machine requires one hour per 250 knives. After the knife shafts are stamped, they are brought to an assembly area where an employee attaches the handle to the shaft and packs the knife into a decorative box. The direct labor cost is 0.50 per unit. The knives are sold to stores. Each store is given promotional materials, such as posters and aisle displays. Promotional materials cost 60 per store. In addition, shipping costs average 0.20 per knife. Total completed production was 1,200,000 units during the Near. Other information is as follows: Number of customers (stores) 60,000 Number of knives sold 1,120,000 Wholesale price (to store) per knife 16 Factory overhead cost is applied to jolts at the rate of 800 per stamping machine hour after the knife blanks are stamped. There were an additional 25,000 stamped knives, handles, and cases in process and waiting to be assembled on December 51, 20Y8. Instructions 1. Prepare an annual income statement for the Kitchen Ninja knife series, including supporting calculations, from the information provided. 2. Determine the balances in the work in process and finished goods inventories for the Kitchen Ninja knife series on December 31, 20Y8.
- Product costing and decision analysis for a service company Blue Star Airline provides passenger airline service, using small jets. The airline connects four major cities: Charlotte, Pittsburgh, Detroit, and San Francisco. The company expects to fly 170,000 miles during a month. The following costs are budgeted for a month: Fuel 2,120,000 Ground personnel 788,500 Crew salaries 850,000 Depreciation 430,000 Total costs 4,188,500 Blue Star management wishes to assign these costs to individual flights in order to gauge the profitability of its service offerings. The following activity bases were identified with the budgeted costs: Airline Cost Activity Base Fuel, crew, and depreciation costs Number of miles flown Ground personnel Number of arrivals and departures at an airport The size of the companys ground operation in each city is determined by the size of the workforce. The following data are available from corporate records for each terminal operation: Terminal City Ground Personnel Cost Number of Arrivals/Departures Charlotte 256,000 320 Pittsburgh 97,500 130 Detroit 129,000 150 San Francisco 306,000 340 Total 788,500 940 Three recent representative flights have been selected for the profitability study. Their characteristics are as follows: Description Miles Flown Number of Passengers Ticket Price per Passenger Flight 101 Charlotte to San Francisco 2,000 80 695,00 Flight 102 Detroit to Charlotte 800 50 441,50 Flight 103 Charlotte to Pittsburgh 400 20 382,00 Instructions 1. Determine the fuel, crew, and depreciation cost per mile flown. 2. Determine the cost per arrival or departure by terminal city. 3. Use the information in (1) and (2) to construct a profitability report for the three flights. Each flight has a single arrival and departure to its origin and destination city pairs.Question 2.3 Rose Apothecary manufactures individual shampoos for hotel/motel clientele. The fixed manufacturing overhead costs for 2021 will total $576,000. The company uses good units finished for fixed overhead allocation and anticipates 300,000 units of production. Good units finished average 92 percent of total units produced. During January, 20,000 units were produced. Actual fixed overhead cost per good unit averaged $2.82 in January. Required Determine the fixed overhead rate for 2021. Determine the fixed overhead static-budget variance for January. Determine the fixed overhead production-volume variance for January. Determine the fixed overhead rate variance for January.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:
- 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…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 Cost Behavior Units per Case Cost per Unit Direct Materials Cost 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 Cost Behavior Time per Case Labor Rate per Hour Direct Labor Cost 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…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?
- Y2 Part 1 Clean−It−Up, Inc., is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine-hours. In 2020, budgeted fixed manufacturing overhead cost was$18,000,000. Budgeted variable manufacturing overhead was $8 per machine-hour. The denominator level was 1,000,000 machine-hours.H6. Broduer Aquatics manufactures swimming pool equipment. Broduer estimates total manufacturing overhead costs next year to be $2,500,000 The company also estimates it will use 50,000 direct labour hours and incur $1,000,000 of direct labour cost next year. In addition, the machines are expected to be run for 30,000 hours. Compute the predetermined manufacturing overhead rate for next year under the following independent situations: 1. Assume that Brodeur uses direct labour hours as its manufacturing overhead allocation base. 2. Assume that Brodeur suses direct labour cost as its manufacturing overhead allocation base. 3. Assume that Brodeur uses machine hours as its manufacturing allocation baseCh. 8 Homework Question 4 Please solve and explain the following: Each visor requires a total of $4.00 in direct materials that includes an adjustable closure that the company purchases from a supplier at a cost of $1.50 each. Shadee wants to have 30 closures on hand on May 1, 20 closures on May 31, and 25 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $1,000 per month, and variable manufacturing overhead is $1.25 per unit produced. Required:1. Determine Shadee's budgeted cost of closures purchased for May and June 2. Determine Shadee's budget manufacturing overhead for May and June
