Use the following information to answer questions 1 and 2:
Alabaster Co. had sales of $500,000 for April and $1,000,000 for May. Selling price per unit remained at $5 for each month. The company started April with no beginning inventory and then produced 200,000 units in April and 100,000 units in May. Variable manufacturing cost per unit decreased from $1.10 in April to $1.00 in May. This was due to a change in labour rates. Direct materials costs remained constant at $0.45 per unit. Fixed manufacturing costs remained the same for both months at $450,000. There are no non-manufacturing costs. The company uses the first-in, first-out (FIFO) method for costing inventory.
Question 1). What is the variable cost operating income for May?
Question 2). What is the throughput costing operating income for May?
Question 3). Kunchai Corp. manufactures a cleaning product called Gemini. Expected sales for Gemini (in litres) for the November to January quarter are as follows:
November December January
|
Budgeted sales of Gemini (litres)
|
62,500
|
67,500
|
55,000
|
November beginning inventory of Gemini is 3,125 litres and the company keeps an ending inventory equal to 5% of next month's sales.
The following information relates to Gemini's two main ingredients, Alpha and Beta:
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|
Units required
|
|
|
|
|
to make 1 litre
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|
|
|
|
of Gemini
|
Cost per unit
|
Opening inventory
|
|
Alpha
|
4
|
$4.00
|
1,020
|
|
Beta
|
12
|
$8.20
|
3,080
|
To maintain smooth operations, the company uses just-in-time inventory management and keeps just 0.2% of next month's production requirements on hand in ending inventory.
How much should Kunchai's controller budget for the cost of raw materials purchases of Alpha and Beta for November?
Question 4). Goldstein Inc.'s budget committee has agreed on the following budgeted income for the second quarter of next year.
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|
April
|
|
May
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|
June
|
|
Sales
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$ 20,000
|
|
$
|
40,000
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning inventory
|
22,000
|
|
|
24,000
|
|
88,000
|
|
Purchases
|
10,000
|
|
|
75,000
|
|
24,000
|
|
Ending inventory
|
(24,000)
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|
(88,000)
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|
(72,000)
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|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
8,000
|
|
|
11,000
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
12,000
|
|
|
29,000
|
|
60,000
|
|
Depreciation expense
|
(2,000)
|
|
(2,000)
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|
(2,000)
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|
Rent expense
|
(16,000)
|
|
(16,000)
|
|
(16,000)
|
|
Variable selling expense
|
(4,000)
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|
(8,000)
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|
(20,000)
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|
|
|
|
|
|
|
|
|
|
|
Operating income
|
$ (10,000)
|
$
|
3,000
|
$
|
22,000
|
|
|
|
|
|
|
|
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Goldstein's accounting department collects 50% of sales in cash. The other 50% are credit card sales, with 50% of these sales collected in the month of sale and the remaining 50% collected the month following sale. The credit card company pays Goldstein 95% of the amount owing and keeps 5% as a service charge.
Purchases are paid in the month following purchase. March purchases were $25,000. Purchases are incurred evenly throughout the month. Rent is paid fully in the month incurred and 75% of variable selling expenses is paid for in the month of the expense; the balance is paid in the following month. March variable sales expenses were $5,000.
How much cash will be disbursed in June for purchases and general expenses?
Question 5). Hughes Aerospace Components Ltd. manufactures metal components for aircraft. The company's main process is stamping sheet metal into parts that are used for the body of the aircraft. The company's process consists of two departments: Stamping and Finishing. Hughes uses a normal costing system, and has collected the following budgeted data for fixed manufacturing overhead:
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|
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Fixed
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|
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Average
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Planned
|
|
|
manufacturing
|
|
Practical
|
activity
|
activity
|
|
Department
|
overhead
|
Cost driver
|
capacity
|
level
|
level
|
|
Stamping
|
$
|
1,680,000
|
Machine hours
|
14,000
|
9,400
|
11,200
|
|
Finishing
|
$
|
630,000
|
Labour hours
|
11,000
|
6,500
|
9,500
|
The company's research and development department has just designed a lightweight component using new technology. Due to lack of competition, the marketing department has decided to price the component based on the total manufacturing cost plus a markup of 40%.
The following is a list of variable costs by department related to the new component:
Stamping:
Direct materials $6.75 per component
Direct labour $28.00 per hour and 0.8 hours per component
Variable overhead $35.00 per machine hour and 0.25 machine hours per component
Finishing:
Direct materials $3.75 per component
Direct labour $32.00 per hour and 1.1 direct labour hours
Variable overhead $22.00 per direct labour hour
What is the price per component if Hughes allocates fixed manufacturing costs based on 19,000 direct labour hours (rounded to the nearest cent)?
Question 6). Nasser Co. currently uses a historical cost system to prepare internal performance reports. In August the company sold 400,000 units at a price of $6.50 per unit. There were 150,000 units in beginning inventory in August. Normal volume is 500,000 units and budgeted fixed costs are $450,000. Variable manufacturing cost per unit in August was $1.00 and production for the month was 425,000 units. Actual and budgeted fixed overhead costs were the same for the month. Management uses a standard costing system. No variable cost variances existed for the month and there were no non-manufacturing costs for August.
What is the fixed overhead volume variance for the month?
Question 7). Davida Co. planned to sell 40,000 units of its only product for the year. Its target cost is $10.40 per unit, based on a desired return of 16% on the $1,600,000 invested to design and manufacture the product. The actual cost was $11.25 per unit and the actual selling price during the year was $15.75 per unit. The sales volume variance was 0.
What is the sales price variance?
Use the following information to answer questions 8 and 9:
Popular Toys Inc. sells toys that are in the top 10% of market demand. The two bestselling toys are the Personal Robot and the Smart Bear. The past year's budget and actual sales and market data for these two products are shown below:
|
Expected (budget) data
|
Personal Robot
|
Smart Bear
|
|
|
|
|
Expected total industry sales in units
|
600,000
|
480,000
|
|
Expected company sales in units
|
38,500
|
45,600
|
|
Expected selling price per unit
|
$130
|
$100
|
|
Expected variable cost per unit
|
$75
|
$60
|
|
Actual data
|
|
|
|
Industry sales in units
|
580,000
|
410,000
|
|
Company sales in units
|
36,500
|
42,600
|
|
Selling price per unit
|
$125
|
$90
|
|
Variable cost per unit
|
$80
|
$65
|
Question 8). Which of the following is the sum of the sales mix variances for both products?
Question 9).Which of the following is the market share variance for both products?
Question 10). Grains Galore Cereal Co. produces a cereal called Toasty Fruits, which is a mix of cranberries, raisins and rice flakes. It has set the following standards to produce
50 kilograms of cereal:
|
Ingredient
|
Kilograms
|
Cost per kilogram
|
Total cost
|
|
Rice flakes
|
30
|
|
$
|
2.00
|
$
|
60.00
|
|
Raisins
|
18
|
|
$
|
2.50
|
|
45.00
|
|
Cranberries
|
|
12
|
|
$
|
30.00
|
|
360.00
|
|
|
60
|
|
|
|
$
|
465.00
|
|
|
|
|
|
|
|
|
|
|
At the end of the month, the operations manager reported the following details relating to the production of 2,600 kilograms of Toasty Fruits cereal:
|
Ingredient
|
Kilograms
|
Cost per kilogram
|
Total cost
|
|
Rice flakes
|
1,820
|
|
$
|
1.85
|
$
|
3,367.00
|
|
Raisins
|
910
|
|
$
|
2.60
|
|
2,366.00
|
|
Cranberries
|
|
770
|
|
$
|
33.50
|
|
25,795.00
|
|
|
3,500
|
|
|
|
$
|
31,528.00
|
|
|
|
|
|
|
|
|
|
All prices remained the same for the period and Grains Galore operates on a just-in-time inventory basis with negligible beginning and ending inventories.
What were the mix and yield variances for the month?