Friday 14 December 2012

Whitman Corporation, a merchandising company, reported sales of 12,100 units for May at a selling

Whitman Corporation, a merchandising company, reported sales of 12,100 units for May at a selling price of $714 per unit. The cost of goods sold (all variable) was $448 per unit and the variable selling expense was $63 per unit. The total fixed selling expense was $163,800. The variable administrative expense was $28 per unit and the total fixed administrative expense was $376,100.

Required:
a. Prepare a contribution format income statement for May. (Input all amounts as positive values. Omit the "$" sign in your response.)

Whitman Corporation
Income Statement
  Sales   $  
  Variable expenses:    
       Cost of goods sold $    
       Variable selling expense    
       Variable administrative expense    
 

  Contribution margin    
  Fixed expenses:    
       Fixed selling expense    
       Fixed administrative expense    
   
  Net operating income (loss)   $  
   



b. Prepare a traditional format income statement for May. (Input all amounts as positive values. Omit the "$" sign in your response.)

                                        
Whitman Corporation
Income Statement
  Sales   $  
  Cost of goods sold    
 

  Gross margin    
  Operating expenses:    
       Selling expense $    
       Administrative expense    
   
  Net operating income (loss)   $  
   




Explanation: a.
Sales (12,100 units × $714 per unit) = $8,639,400
Cost of goods sold (12,100 units × $448 per unit) = $5,420,800
Variable selling expense (12,100 units × $63 per unit) = $762,300
Variable administrative expense (12,100 units × $28 per unit) = $338,800

b.
Sales (12,100 units × $714 per unit) = $8,639,400
Cost of goods sold (12,100 units × $448 per unit) = $5,420,800
Selling expense ((12,100 units × $63 per unit) + $163,800) = $926,100
Administrative expense ((12,100 units × $28 per unit) + $376,100) = $714,900

Corio Corporation reports that at an activity level of 4,800 units, its total variable cost is $328,224 and its total fixed cost is $128,919.

Corio Corporation reports that at an activity level of 4,800 units, its total variable cost is $328,224 and its total fixed cost is $128,919.
 
Required:

For the activity level of 4,900 units, compute: (a) the total variable cost; (b) the total fixed cost; (c) the total cost; (d) the average variable cost per unit; (e) the average fixed cost per unit; and (f) the average total cost per unit. Assume that this activity level is within the relevant range. (Round your "Average cost" to 2 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

       
(a) Total variable cost $    
(b) Total fixed cost $    
(c) Total cost $    
(d) Average variable cost   per unit  
(e) Average fixed cost   per unit  
(f) Average total cost   per unit  



Explanation: Variable cost = $328,224 ÷ 4,800 units = $68.38 per unit

     
  Activity level $ 4,900   
  Total cost:    
  Variable cost (a) [4,900 units × $68.38 per unit]   335,062   
  Fixed cost (b)   128,919   
 

  Total (c) $ 463,981   
 



  Cost per unit:    
  Variable cost (d)   68.38   
  Fixed cost (e) [$128,919 ÷ 4,900 units]   26.31   
 

  Total (f)   94.69   
 

In July, one of the processing departments at Wrightsel Corporation had beginning work in process inventory of $33,000 and ending work in process inventory of $23,000. During the month, $233,000 of costs were added to production and the cost of units transferred out from the department was $243,000.

In July, one of the processing departments at Wrightsel Corporation had beginning work in process inventory of $33,000 and ending work in process inventory of $23,000. During the month, $233,000 of costs were added to production and the cost of units transferred out from the department was $243,000.

Required:
Construct a cost reconciliation report for the department for the month of July. (Omit the "$" sign in your response.)
               
Cost Reconciliation
  Costs to be accounted for:
    Cost of beginning work in process inventory $  
    Costs added to production during the month  

      Total cost to be accounted for $  


  Costs accounted for as follows:
    Cost of ending work in process inventory $  
    Cost of units transferred out  

      Total cost accounted for $  

Yoke Corporation has provided the following data from its activity-based costing accounting system:

Yoke Corporation has provided the following data from its activity-based costing accounting system:

     
  Supervisory wages $ 86,200  
  Factory Utilities $ 296,000  


Distribution of Resource Consumption across Activity Cost Pools:

   Activity Cost Pools   Batch
set-ups
  Unit
Processing
  Other   Total
  Supervisory wages 62 % 37 % 1 % 100 %
  Factory Utilities 32 % 64 % 4 % 100 %  


The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.

Required:
a.
Determine the total amount of supervisory wages and factory utilities costs that would be allocated to the unit Processing activity cost pool. (Omit the "$" sign in your response.)

  Total amount $  

b.
Determine the total amount of supervisory wages and factory utilities costs that would be allocated to the Other cost pool. (Omit the "$" sign in your response.)

  Total amount $  


Explanation:

Hugle Corporation's activity-based costing system has three activity cost pools-Machining, Setting Up, and Other. The company's overhead costs have already been allocated to these cost pools as follows:

Hugle Corporation's activity-based costing system has three activity cost pools-Machining, Setting Up, and Other. The company's overhead costs have already been allocated to these cost pools as follows:

     
  Machining $ 72,798   
  Setting up $ 119,978   
  Other $ 23,900   


Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. The following table shows the machine-hours and number of batches associated with each of the company's two products:

  MHs Batches
  Product E8 2,580    1,330   
  Product V8 8,450    1,180   
 

  Total 11,030    2,510   
 





Additional data concerning the company's products appears below:

  Product E8 Product V8
  Sales (total) $ 273,000   $ 273,000  
  Direct materials (total) $ 88,300   $ 83,500  
  Direct labor (total) $ 99,400   $ 66,300  


Required:
a.
Calculate activity rates for each activity cost pool using activity-based costing. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

                 Activity Rate
  Machining $   per MH
  Setting up $   per batch


b.
Determine the amount of overhead cost that would be assigned to each product using activity-based costing. (Omit the "$" sign in your response.)

        Product E8       Product V8
  Machining $   $  
  Setting up    
 

  Total $   $  
 





c.
Determine the product margins for each product using activity-based costing. (Omit the "$" sign in your response.)

          Product Margin
  Product E8 $  
  Product V8 $  



Explanation: a.
Computation of activity rates:

Activity Cost Pools Total Cost Total Activity Activity Rate
  Machining $ 72,798     11,030  MHs $ 6.60  per MH
  Setting up $ 119,978     2,510  batches $ 47.80  per batch


b.
Assign overhead costs to products:
Overhead cost for Product E8:

  Activity Rate Activity ABC Cost
  Machining $ 6.60  per MH 2,580  MHs $ 17,028  
  Setting up $ 47.80  per batch 1,330  batches   63,574  
           

  Total           $ 80,602  
           





Overhead cost for Product V8:

  Activity Rate Activity ABC Cost
  Machining $ 6.60  per MH 8,450  MHs $ 55,770  
  Setting up $ 47.80  per batch 1,180  batches   56,404  
           

  Total           $ 112,174  
           





c.
Determine product margins:

  Product E8 Product V8
  Sales     $ 273,000     $ 273,000  
  Direct materials $ 88,300       $ 83,500      
  Direct labor   99,400         66,300      
  Machining   17,028         55,770      
  Setting up   63,574     268,302   56,404     261,974  
 







  Product margin     $ 4,698     $ 11,026  
 













Blockmon Hospital bases its budgets on patient-visits. The hospital's static planning budget for November appears below:

Blockmon Hospital bases its budgets on patient-visits. The hospital's static planning budget for November appears below:

     
  Budgeted number of patients-visits   8,300  
  Budgeted variable costs:    
  Supplies (@ $8.39 per patient-visit) $ 69,637  
  Laundry (@ $7.89 per patient-visit)   65,487  
  Budgeted fixed costs:    
  Wages and salaries   97,800  
  Occupancy costs   80,180  
 

  Total cost $ 313,104  
 





Required:
Complete the flexible budget for 8,800 patient-visits per month. (Omit the "$" sign in your response.)

  Cost Formula
(per patient-visit)
Flexible Budget Based on 8,800 Patient-Visits
  Variable costs:    
  Supplies $ 8.39         $    
  Laundry 7.89            
  Fixed costs:    
  Wages and salaries      
  Occupancy costs      
   
  Total cost   $    
   


Filkins Clinic bases its budgets on the activity measure patient-visits. During February, the clinic

Filkins Clinic bases its budgets on the activity measure patient-visits. During February, the clinic planned for 4,400 patient-visits, but the actual level of activity was 4,600 patient-visits. The clinic has provided the following data concerning the formulas it uses in its budgeting:

  Fixed element
per month
Variable element
per patient-visit
  Revenue   $ 32.60          
  Personnel expenses $ 31,900         $ 10.00          
  Medical Supplies $ 1,900         $ 6.00          
  Occupancy expenses $ 6,900         $ 2.00          
  Administrative expenses $ 5,900         $ 0.20          


Required:
Complete the report showing the clinic's activity variances for February. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)

Filkins Clinic
Activity Variances
For the Month Ended February 28
  Revenue $     F  
 
 
  Expenses:    
       Personnel expenses     U  
       Medical Supplies     U  
       Occupancy expenses     U  
       Administrative expenses     U  
 
 
  Total expense     U  
 
 
  Net operating income $     F  
 

 



Explanation:
Filkins Clinic
Activity Variances
For the Month Ended February 28
  Planning Budget  Flexible  Budget Activity Variances
  Patient-visits (q)   4,400       4,600         
  Revenue ($32.60q) $ 143,440     $ 149,960    $ 6,520     F  
 





 
  Expenses:              
    Personnel expenses ($31,900 + $10.00q)   75,900       77,900      2,000     U  
    Medical Supplies ($1,900 + $6.00q)   28,300       29,500      1,200     U  
    Occupancy expenses ($6,900 + $2.00q)   15,700       16,100      400     U  
    Administrative expenses ($5,900 + $0.20q)   6,780       6,820      40     U
 





  
  Total expense   126,680       130,320      3,640     U  
 





 
  Net operating income $ 16,760     $ 19,640    $ 2,880     F