Analysis on Activity Based and Volume Based Costing Systems

Analysis on Activity Based and Volume Based Costing Systems in $19 Only

You have just been hired as an accountant for the PCB (Printed Circuit Board) Department of LifeSung Corporation. LifeSung is a highly diversified organisation headquartered in Taiwan, with interests in healthcare, electronics, construction, insurance and shipbuilding. The PCB Department is part of the Electronics Division of LifeSung and produces circuit boards mainly for use in alarm systems. However, there are other circuit boards that are produced for other electronic devices, but these make up a small percentage of total sales.

Three of the circuit boards produced by the PCB Department make up the bulk of the department’s sales: The first, Advanced Circuitry, has been the mainstay of the department for several years. The market for this board is very competitive and price sensitive. The second, Boosted Circuitry, was a new board introduced two years ago. It is a medium range circuit board that had slightly more advanced features. This board has been used in alarm systems that could be partly modified by customers to suit their requirements. The third circuit board, Customised Circuitry, is a top-of-the-range circuit board that allowed full configuration of the alarm system by customers. This board incorporates the latest technology and the price matches the capabilities of the circuit board.

Bathworks Produces Hair and Bath Products

Bathworks Produces Hair and Bath Products in $14 only

P6-2 Bathworks produces hair and bath products. Bathworks’ owner would like to have an estimate of the company’s net income in the coming year.

Required
Project Bathworks’s net income next year by completing the operating budgets and budgeted income statement that follows. Assume that the selling price will remain constant.

1. Sales budget:

Bathworks

Sales Budget

For the year Ended December 31

Quarter
1 2 3 4 Year
Sales in units 4,000 3,000 5,000 5,000 17,000
SELLING price per unit X$5 X? X? X? X?
Total sales $24,000 ? ? ? ?

2. Production budget:

ACC 310 Entire Course

ACC 310 Entire Course in $27 only (Instant Download)

ACC 310 Entire Course / Cost Accounting I

Following files are available with the answer:

  1. ACC 310 Week 1 DQ 1 Information for Decision Making and Cost Concepts and Behavior
  2. ACC 310 Week 1 DQ 2 Fundamentals of Cost-Volume-Profit Analysis
  3. ACC 310 Week 1 Assignment CVP Analysis and Price Changes
  4. ACC 310 Week 2 Assignment Special Orders
  5. ACC 310 Week 2 DQ 1 Fundamentals of Cost Accounting for Decision Making
  6. ACC 310 Week 2 DQ 2 Fundamentals of Product and Service Costing
  7. ACC 310 Week 3 Assignment Choosing an Activity- Based Costing System
  8. ACC 310 Week 3 DQ 1 Job and Process Costing
  9. ACC 310 Week 3 DQ 2 Activity Based Costing
  10. ACC 310 Week 4 Assignment Prepare Budgeted Financial Statements
  11. ACC 310 Week 4 DQ 1 Cost Management and Joint Allocation
  12. ACC 310 Week 4 DQ 2 Management Control Systems and Budgeting
  13. ACC 310 Week 5 Assignment Ethics and Standard Costs
  14. ACC 310 Week 5 Assignment Final Paper
  15. ACC 310 Week 5 DQ 1 Performance Measurement and Transfer Pricing
  16. ACC 310 Week 5 DQ 2 Fundamentals of Variance Analysis

Sample Answer of  Week 1 DQ 1 Information for Decision Making and Cost Concepts and Behavior:

1-18

Beige Computers operates retail stores in both downtown (City) and suburban (Mall) locations. The company has two responsibility centers: the City Division, which contains stores in downtown locations, and the Mall Division, which contains stores in suburban locations. Beige’s CEO is concerned about the profitability of the City Division, which has been operating at a loss for the last several years. The most recent income statement follows. The CEO has asked for your advice on shutting down the City Division’s operations. If the City Division is eliminated, corporate administration is not expected to change, nor are any other changes expected in the operations or costs of the Mall Division.

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Cost Accounting Problem 3-21 – Savallas Company

Cost Accounting Problem 3-21 – Savallas Company in $8 only

Savallas Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:

Computer-hours 85,000
Fixed manufacturing overhead cost $ 1,275,000
Variable manufacturing overhead per computer-hour $ 3.00

Cost Accounting Questions Assignment

Cost Accounting Questions Assignment

First two questions use this:

Company produced 2100 units

Standard:

Material 2lbs per unit at 5.80 per lb

Labor 3 direct labor hours per unit at 10 per hour

Actual:

Material 4250lbs purchased and used at 5.65 per lb

Labor 6,600 direct labor hours at 9.75 per hours

1. What is the labor rate variance

A. 1650U

B. 1650F

C. 1575U

D. 1575F

2. What is the labor efficiency variance?

Master Budget of Earrings Unlimited

Master Budget of Earrings Unlimited US$ 20 only (Instant Download)

You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping

malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash.

Since you are well trained in budgeting, you have decided to prepare comprehensive budgets for the upcoming second quarter in order to show management the benefits that can be gained from an integrated budgeting program. To this end, you have worked with accounting and other areas to gather the information assembled below.

The company sells many styles of earrings, but all are sold for the same price—$10 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):

  January (actual)

20,000

  June (budget)

50,000

  February (actual)

26,000

  July (budget)

30,000

  March (actual)

40,000

  August (budget)

28,000

  April (budget)

65,000

  September (budget)

25,000

  May (budget)

100,000

The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.

Suppliers are paid $4 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.

Evaluating a Company’s Budget Procedures of Springfield Corporation

Budgeting

Evaluating a Company’s Budget Procedures of Springfield Corporation        in $9 only (Instant Download)

Source: Managerial Accounting by Garrison  11E  Chapter 9: Profit Planning

Springfield Corporation operates on a calendar-year basis.  It begins the annual budgeting process in late August, when the president establishes targets for the total dollar sales and the net income before taxes for the next year. The sales target is given to the Marketing Department, where the marketing manager formulates a sales budget by product line in both units and dollars.  From this budget, sales quotas by product line in units and dollars are established for each of the corporation’s sales districts. The marketing manager also estimates the cost of the marketing activities required to support the target sales volume and prepares a tentative marketing expense budget. The executive vice president uses the sales and profit targets, the sales budget by product line, and the tentative marketing expense budget to determine the dollar amount that can be devoted to manufacturing and corporate expenses, and then forwards to the Production Department the product-line sales budget in units and the total dollar amount that can be devoted to manufacturing. The production manager meets with the factory managers to develop a manufacturing plan that will produce the required units when needed within the cost constraints set by the executive vice president.

The budgeting process usually comes to a halt at this point because the Production Department does not consider the financial resources allocated to be adequate. When this standstill occurs, the vice president of finance, the executive vice president, the marketing manager, and the production manager meet to determine the final budgets for each of the areas.  This normally results in a modest increase in the total amount available for manufacturing costs, while the marketing expense and corporate office expense budgets are cut.  The total sales and net income figures proposed by the president are seldom changed.  Although the participants are seldom pleased with the compromise, these budgets are final.  Each executive then develops a new detailed budget for the operations in his or her area.

None of the areas has achieved its budget in recent years.  Sales often run below the target.  When budgeted sales are not achieved, each area is expected to cut costs so that the president’s profit target can still be met.  However, the profit target is seldom met because costs are not cut enough.  In fact, costs often run above the original budget in all functional areas.

The president is disturbed that Springfield has not been able to meet the sales and profit targets.  He hired a consultant with considerable experience with companies in Springfield’s industry.  The consultant reviewed the budgets for the past four years.  He concluded that the product-line sales budgets were reasonable and that the cost and expense budgets were adequate for the budgeted sales and production levels.

1. Discuss how the budgeting process as employed by Springfield contributes to the failure to achieve the president’s sales and profit targets.

Sample Answer:

The budgeting process as employed by Springfield contributes to the failure to achieve the president’s sales and profit targets. The root cause of failure lies in the budgeting of the Marketing Department where targets (sales quotas and budget is distributed at the same time. The marketing expense budget is bound to fail because the allotment of budget does not automatically lead to sales and profit targets. Further, the sales and profit targets cannot be used to set manufacturing and corporate expenses…..

2. How would you change the cost measurements?

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Springfield Express: Various Break-Even Point Calculation

English: Passenger train for Wisbech

Springfield Express is a luxury passenger carrier in Texas. All seats are first class, and the following data are available:

Number of seats per passenger train car 90
Average load factor (percentage of seats filled)        70%
Average full passenger fare     $160
Average variable cost per passenger     $70
Fixed operating cost per month  $3,150,000
What is the break-even point in passengers and revenues per month?
What is the break-even point in number of passenger train cars per month?
If Springfield Express raises its average passenger fare to $ 190, it is estimated that the average load factor will decrease to 60 percent. What will be the monthly break-even point in number of passenger cars?
(Refer to original data.) Fuel cost is a significant variable cost to any railway. If crude oil increases by $ 20 per barrel, it is estimated that variable cost per passenger will rise to $ 90. What will be the new break-even point in passengers and in number of passenger train cars?
Springfield Express has experienced an increase in variable cost per passenger to $ 85 and an increase in total fixed cost to $ 3,600,000. The company has decided to raise the average fare to $ 205. If the tax rate is 30 percent, how many passengers per month are needed to generate an after-tax profit of $ 750,000?

Top Switch Inc.:Calculate cost in the Raw Materials, Work in Process, and Finished Goods Inventory

SMU School of Accountancy

Top Switch Inc.:Calculate cost in the Raw Materials, Work in Process, and Finished Goods Inventory in US$ 8 only                         (Instant Download)

Top Switch Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout the state of Tennessee affected Top Switch’s facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed.

Before the unfortunate incident, recovery specialists cleaned the buildings. The company controller is very nervous and anxious to recover whatever records he can to support the insurance claim for the destroyed inventory. After consulting with the cost accountant, they decide to retrieve the previous year’s annual report for the beginning inventory numbers. In addition, they also agreed that they need first quarter cost data.

The cost accountant was working on the first quarter results before the storm hit, and to his surprise, the report was still in his desk drawer. After reviewing the data , the information shows the following information: Material purchases were $ 325,000; Direct Labor was $ 220,000. Further discussions between the controller and the cost accountant revealed that sales were $ 1,350,000 and the gross margin was 30% of sales. The cost accountant also discovered, while sifting through the information, that cost of goods available for sale was $ 1,020,000 at cost. While assessing the damage, the controller determined that the prime costs were $ 545,000 up to the time of the damage and that manufacturing overhead is 65% of conversion cost. The cost accountant is not sure about all of this, but he decides to see what he can do with the information.

Managerial Accounting: Objective Type Questions

Willard Manufacturing Company building, St. Al...

Managerial Accounting: Objective Type Questions in $2.50
1.Stevens Manufacturing Company reported the following year-end information: beginning work in process inventory, $180,000; cost of goods manufactured, $516,000; beginning finished goods inventory, $252,000; ending work in process inventory, $220,000; and ending finished goods inventory, $264,000. Stevens Manufacturing Company’s cost of goods sold for the year isa. $504,000.b. $528,000.c. $476,000.d. $252,000.2. Nolte Manufacturing Company reported the following year-end information:Beginning work in process inventory             $360,000Beginning raw materials inventory                  $100,000Ending work in process inventory                   $300,000Ending raw materials inventory                       $160,000Raw materials purchased                                $320,000Direct labor                                                     $300,000

Manufacturing overhead                                 $200,000

Question on Elimination Entry etc

Historical financial statement

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At the end of the year 2003, a parent sold equipment to a wholly owned subsidiary for $32,000. The equipment cost the parent $100,000 and, at the date of the inter company sale, had accumulated depreciation of $60,000 and a four-year remaining life. Both the subsidiary and the parent use straight line depreciation and assume no salvage value. The subsidiary plans to depreciate the asset over the equipment’s remaining four-year life.

Required:

A) Prepare the elimination entry or entries required on the consolidation work papers used to prepare a complete set of financial statements for the years 2003 and 2004.

B) Compute the amounts that would appear in the year 2005 consolidated balance sheet for the equipment and related accumulated depreciation.

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Computation of Consolidated Net Income and Retained Earnings

Computation of Consolidated Net Income and Retained Earnings in $3 Only

  1. On January 1, 2002, Park Corporation purchased 70 percent of the common stock of North Corporation for $1,100,000. At that date, north had $1,150,000 of common stock outstanding and retained earnings of $370,000. Equipment with a remaining life of 5 years had a book value of $560,000 and a fair value of $600,000. North’s remaining assets had book values equal to their fair values. The income and dividend figures for both Park and North are as follows:

Park’s income as shown does not include any income from its investment in North. Park’s retained earnings balance at the date of acquisition was $1,402,000.

Required:

A) Compute consolidated net income for 2003.

B) Compute consolidated retained earnings as of December 31, 2003.

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Groovy Music Company: Accept Special Order or Not

Groovy Music Company: Accept Special Order or Not

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Groovy Music Company: Accept Special Order or Not in $4.50 Only

Groovy Music Company produces compact discs of background music for restaurants and other retail shops. Its disc recording machines are capable of producing 50 discs per hour. The unit-related cost of producing the discs is $3.00. The discs sell for $12.00 each. Food Mood Music Co. has asked the company to produce 10,000 copies of a disc for $9.00. Groovy Music estimates that for this special order the unit-related cost of producing the disc will be $5.00 and that, due to the unique nature of the recording, its machines will only be able to produce 20 discs per hour. Groovy Music has a total of 5,000 machine hours of capacity. In addition, to accept the special order, Groovy Music will have to purchase an additional special-purpose machine that will cost $6,000.

Required:
1) Assume that demand for Groovy Music’s compact discs is 200,000 units and that the special order has to be either taken in full or rejected. Prepare an analysis that indicates whether or not the special order should be accepted.

2) Assume that Groovy Music is currently selling 230,000 compact discs to its regular customers and that the special order has to be either taken in full or rejected. Prepare a financial analysis that indicates whether or not the special order should be accepted.
3) Assume that demand for Groovy Music’s compact discs is 230,000 units and that the special order has to be either taken in full or rejected. Groovy Music’s wants the Food Mood Music job but doesn’t want to decrease its earnings. Prepare a financial analysis that indicates the price that Groovy Music must receive in order to break even on the special order.

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