Question : 81) Longview Golf Company sells a special putter for $20 each. : 1196283

 

81)

Longview Golf Company sells a special putter for $20 each. In March it sold 28,000 putters while manufacturing 30,000. There was no beginning inventory on March 1. Production information for March was:

 

Direct manufacturing labour per unit15 minutes

Fixed selling and administrative costs $ 40,000

Fixed manufacturing overhead132,000

Direct materials cost per unit 2

Direct manufacturing labour per hour24

Variable manufacturing overhead per unit 4

Variable selling expenses per unit2

 

Required:

 

a.Compute the cost per unit under both absorption and variable costing.

b.Compute the ending inventories under both absorption and variable costing.

c.Compute operating income under both absorption and variable costing. 81)

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82)

Alliance Realty bought a 2,000 acre island for $10,000,000 and divided it into 200 equal size lots. As the lots are sold they are cleared at an average cost of $5,000. Storm drains and driveways are installed at an average cost of $8,000 per site. Sales commissions are 10 percent of selling price. Administrative costs are $850,000 per year. The average selling price was $160,000 per lot during the year when 50 lots were sold.

During the subsequent year, the company bought another 2,000 acre island and developed it exactly the same way. Lot sales in the second year totalled 300 with an average selling price of $160,000. All costs were the same as in the first year.

 

Required:

 

Prepare income statements for both years using both absorption and variable costing methods. 82)

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83)

Johnson and Sons Company was concerned that increased sales did not result in increased profits for 20X2. Both variable unit and total fixed manufacturing costs for 20X1 and 20X2 remained constant at $20 and $2,000,000, respectively.

In 20X1 the company produced 100,000 units and sold 80,000 units at a price of $50 per unit. There was no beginning inventory in 20X1. In 20X2 the company made 70,000 units and sold 90,000 units at a price of $50. Selling and administrative expenses were all fixed at $100,000 each year.

 

Required:

 

a.Prepare income statements for each year using absorption costing.

b.Prepare income statements for each year using variable costing.

c.Explain why the income was different each year using the two methods. Show computations. 83)

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84)

The following data are available for Ruggles Company for the year ended September 30, 2007.

 

 

Sales:24,000 units at $50 each

Expected and actual production:30,000 units

Manufacturing costs incurred:

Variable:$525,000

Fixed:$372,000

Nonmanufacturing costs incurred:

Variable:$144,800

Fixed:$77,400

Beginning inventories: none

 

Required:

a.Determine operating income using the variable-costing approach.

b.Determine operating income using the absorption-costing approach.

c.Explain why operating income is not the same under the two approaches.

 84)

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85)

The new plant manager has lots of ideas for change.

His bonus is tied directly to plant profit, and last month he had the accounting department change from absorption costing to variable costing, as he heard at a meeting that contribution margin was usually higher than gross margin.

This month, he wants to change to throughput costing, in hopes that throughput contribution will be greater than contribution margin.

The relevant data are; Sales $150,000, opening inventory $2,500, variable cost of goods manufactured 24,000, ending inventory -var costing $8,000, var. marketing cost 15,200, and there are no variable cost variances. The above numbers are the same for throughput costing except as follows: direct materials in goods manufactured 13,200, and ending inventory 4,400.

 

Required:

 

a.Calculate the contribution margin and throughput margin

b.Does this appear to be a sensible strategy by the plant manager? 85)

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86)

You are the management accountant for the West coast division of a musical instrument manufacturing company.

There are three manufacturing plants in your division.

Each plant manager was given free rein in terms of production, as long as income for their plant kept on pace.

The manager at plant A has consistently been the leader in profit for the division, but the other two managers are complaining that plant A doesn’t seem to be selling any more product than they are.

The division manager has noticed higher inventory levels at plant A, which the plant manager justifies by saying the higher levels are needed to ensure adequate sales.

The division manager suspects that there could be other reasons, and she has asked you to come up with a new way to evaluate the three plant managers, to see if the increased inventory can somehow be included in the evaluation. 86)

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87)

Stoll Bottling Works manufactures glass bottles. January and February operations were identical in every way except for the planned production. January had a production denominator of 35,000 units. February had a production denominator of 36,000 units.

Fixed manufacturing costs totalled $126,000.

Sales for both months totalled 45,000 units with variable manufacturing costs of $4 per unit. Selling and administrative costs were $0.40 per unit variable and $60,000 fixed. The selling price was $10 per unit.

 

Required:

 

Compute the operating income for both months using absorption costing. 87)

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88)

Megredy Company prepared the following absorption-costing income statement for the year

ended May 31, 2008.

 

Sales (16,000 units)$320,000

Cost of goods sold216,000

Gross margin$104,000

Selling and administrative expenses46,000

Operating income$

58,000

 

Additional information follows:

Selling and administrative expenses include $1.50 of variable cost per unit sold.

There was no beginning inventory, and 17,500 units were produced.

Variable manufacturing costs were $11 per unit.

Actual fixed costs were equal to budgeted fixed costs.

 

Required:

Prepare a variable-costing income statement for the same period.

 88)

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89)

Calvin Enterprises produces a specialty statue item.

The following information has been provided by

management:

 

Actual sales150,000 units

Budgeted production160,000 units

Selling price$34 per unit

 

Direct manufacturing costs $9 per unit

Fixed manufacturing costs$5 per unit

Variable manufacturing costs$4 per unit

Variable administrative costs $2 per unit

 

Required:

a.What is the cost per statue if absorption costing is used?

b.What is the cost per statue if “super-variable costing” is used?

c.What is the total throughput contribution?

 

 89)

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90)

Betts Wrench Company manufactures socket wrenches. For next month the vice-president of production plans on producing 4,400 wrenches per day. The company can produce as many as 5,000 wrenches per day, but are more likely to produce 4,500 per day. The demand for wrenches for the next three years is expected to average 4,250 wrenches per day. Fixed manufacturing costs per month total $336,600. The company works 20 days a month. Fixed manufacturing overhead is charged on a per wrench basis.

 

Required:

 

a.What is the theoretical fixed manufacturing overhead rate per wrench?

b.What is the practical fixed manufacturing overhead rate per wrench?

c.What is the normal fixed manufacturing overhead rate per wrench?

d.What is the master-budget fixed manufacturing overhead rate per wrench? 90)

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