Yoder Furniture Works
Yoder Furniture Works manufactures a high-quality, wooden rocker-recliner. A key differentiating feature of this rocker-recliner is the ease with which a hand-operated lever raises and lowers the footrest. Yoder left the prototype phase and began commercial production on January 1, 2015. A retired accountant of the founder, Steve Yoder, maintained the accounting records on a temporary basis through January 31, 2015. Now, Yoder is searching for a replacement. Potential candidates are being asked to evaluate the information from the first month of commercial operation as follows:
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Cost information
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Administrative expenses
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$22,000
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Advertising expenses
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11,700
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Cash account balance, January 1, 2015
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0
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Depreciation on production equipment and factory building
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2,000
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Depreciation on administrative offices
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750
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Insurance on production equipment and factory building
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1,700
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Administrative supplies expense
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550
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Property taxes on production equipment and factory building
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425
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Sales commissions
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18,700
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Utilities for production equipment and factory building
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1,650
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Wages paid to production workers
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67,800
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Direct materials inventory, January 1, 2015
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0
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Direct materials inventory, January 31, 2015
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0
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Direct materials purchases during January 2015
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83,400
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Work in process inventory, January 1, 2015
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0
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Work in process inventory, January 31, 2015
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0
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Finished goods inventory, January 1, 2015
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0
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Production and sales information
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Units produced during January 2015
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600
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Units sold during January 2015
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490
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Sales price per unit
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$500
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Based on the above information, answer the following questions:
1. Classify costs as either product costs or period costs using the format shown below. Enter the dollar amount for each cost in the appropriate column and total each classification.
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Item
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Product Costs
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Period Costs
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Direct Materials
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Direct Labor
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Manufacturing Overhead
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2. Classify costs as either variable costs or fixed costs. Assume there are no mixed costs. Enter the dollar amount for each cost in the appropriate column and total each classification. Use the format shown below. Assume that Utilities for production equipment and factory building are a fixed cost
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Item
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Variable Costs
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Fixed Costs
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Total Costs
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3. Prepare a schedule of cost of goods manufactured for the month of January 2015.
4. Determine the per-unit cost of producing a chair.
5. Identify the type of product costing system that is probably using at this time. How did you make this determination?
6. Would you recommend that Yoder use a different product costing system? Why or why not?
7. Determine the per-unit variable cost of a chair.
8. Determine the per-unit contribution margin and the contribution margin percentage.
9. Determine the breakeven point in units and in sales dollars.
10. Prepare flexible budgets for manufacturing costs for activity levels of 700 and 800 chairs per month.