Please use the attached excel spread sheet and documet to answer the questions in bold.

Anonymous
timer Asked: Jul 1st, 2018
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Question description



Fancy Millwork has a factory that produces custom kitchen cabinets. It has multiple product lines.

Materials and labor for the cabinets are determined by each job. To simplify the assignment, we will assume the following average costs.

The company estimates that it will have 32,000 direct labor hours in total for the kitchen cabinets.

The materials include $2,000 for the wood and other materials on a per job basis. It requires 40 hours of labor on average for a custom kitchen. The hourly rate is $10. The sales price will be set at a markup of 80%.

It assumes 800 units are sold on average per year. A breakdown of estimated yearly costs related to the kitchen cabinets follows. Please note that the amounts are per year unless identified otherwise: Salaries- office & administrative

$ 400,000

Salaries for factory supervisors and janitors

$ 200,000

Office Rent

$ 90,000

Factory Rent

$ 80,000

Office Utilities and Misc office expenses(based on units sold)

$ 20,000

SalesTravel(based on units sold)

$ 24,000

Insurance - office

$ 14,000

Depreciation - office equipment

$ 45,000

Depreciation for factory equipment

$ 70,000

Advertising

$ 15,000

Sales commissions(based on units sold)

$ 50,000

Factory Property taxes

$ 10,000

Maintenance for factory equipment

$ 80,000

Midterm Exam: Excel problem(25pts) Please input the numbers for the problem on this sheet and include all detailed calculations on the next sheet. If the number is wrong and you do not include enough detailed calculations, no partial credit will be given. No credit will be given for just answers. Pleaase use basic formulas for full credit. Menswear for Life manufactures two types of suits—Hand made and Machine made—and applies manufacturing overhead to all units using direct labor hours. Production information follows. Hand Made Machine Made Anticipated volume (units) 31,000 58,000 Direct-material cost per unit $ 75 $ 45 Direct-labor cost per unit $15 per hour Hand made = 4 hours per suit; total hours for HM 124,000 Machine made = 2 hours per suit; total hours for MM 116,000 The controller, who is studying the use of activity-based costing, has determined that the firm’s overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activities’ three respective cost drivers, follow. Setups Machine hours Outgoing shipments Hand Made 176 62,400 150 Machine Made 136 87,750 200 total 312 150,150 350 The firm’s total overhead of $23,423,400 is subdivided as follows: manufacturing setups, $5,110,560; machine processing, $14,054,040; and product shipping, $4,258,800. Current sales price is the following based on using DL hours for MOH. $ 650.00 $ 290.00 Required: 1. Compute the per unit manufacturing cost of Hand Made and Machine Made by using the company’s current overhead costing procedures using Direct labor hours for applied MOH.(8pts) hand made manufacturing cost per unit: $525.39 machine made manufacturing cost per unit:$270.20 2. Compute the per unit manufacturing cost of Hand Made and Machine Made by using activity-based costing.(12pts) Hand made manufacturing cost per unit = 475.28 Machinemade manufacturing cost per unit= 296.98 3. Which method should the company use and why? List at least 3 reasons why. (3pts) the ABC method will provide more useful measures of each product's cost 4. If the company decides to use ABC, should the company change the sale price for each suit? What should it be based on? (2pts) 1 Total facturing overhead 23,423,400 Hand made total hour 124,000 + Machine made total hours 116000 = total direct labor costs 240000 overhead rate = 23423400/240000= 97.5975 Hand made: overhead rate* hand made machine hours= manufacturing overhead (97.5975*124000=12102090) manufacturing overhead/ number of units = unit cost (12102090/31000=$390.39) machine made: overhead rate*machine made hours= manufacturing overhead (97.5975*116000=11321310) manufacturing overhead/number of units= unit cost= (11321310/58000=$195.195) hand made: direct materials + direct labor + unit cost= manufacturing cost per unit (75+60+390.39=$525.39) machine made: direct materials + direct labor +unit cost= manufacturing cost per unit (45+30+195.195=$270.20) 2 Manufacturing set up= estimated cost/ total costs (5110560/312=16380) machine processing= estimated cost/total hours= (14054040/150150=93.6) Product shipping= estimade cost/total shipments= 4258800/350=12168) hand made: manufacturing set up*handmade driver= (16380*176=2882880) hand made: maching processing*handmade driver= (93.6*62300=5840640) hand made: product shipping*handmade driver= (12168*150=1825200) Total hand made overhead = 2882880+5840640+1825200= 10548720 total overhead/number of units= cost per unit (10548720/31000= 340.28) Hand made manufacturing cost per unit = direct materials+ direct labor + manufacturing overhead (75+60+340.28= 475.28) machine made: manufacturing set up*machinemade driver= (16380*139=2227680) machine made: maching processing* machinemade driver= (93.6*87750=8213400) machine made: product shipping*machinemade driver= (12168*200=2433600) Total machine made overhead = 2227680+8213400+2433600=12874680 total overhead/number of units= cost per unit (2433600/58000= 221.98 Machinemade manufacturing cost per unit= direct materials + direct labor+ manufacturing overhead (45+30+221.98=296.98)
Manning School of Business Accounting Information for Management Decisions (Acct.6010) Group Excel Project #1- summer 2018 Fancy Millwork has a factory that produces custom kitchen cabinets. It has multiple product lines. Materials and labor for the cabinets are determined by each job. To simplify the assignment, we will assume the following average costs. The company estimates that it will have 32,000 direct labor hours in total for the kitchen cabinets. The materials include $2,000 for the wood and other materials on a per job basis. It requires 40 hours of labor on average for a custom kitchen. The hourly rate is $10. The sales price will be set at a markup of 80%. It assumes 800 units are sold on average per year. A breakdown of estimated yearly costs related to the kitchen cabinets follows. Please note that the amounts are per year unless identified otherwise: Salaries- office & administrative Salaries for factory supervisors and janitors Office Rent Factory Rent Office Utilities and Misc office expenses(based on units sold) SalesTravel(based on units sold) Insurance - office Depreciation - office equipment Depreciation for factory equipment Advertising Sales commissions(based on units sold) Factory Property taxes Maintenance for factory equipment $ 400,000 $ 200,000 $ 90,000 $ 80,000 $ 20,000 $ 24,000 $ 14,000 $ 45,000 $ 70,000 $ 15,000 $ 50,000 $ 10,000 $ 80,000 QUESTIONS: 1. Please identify the following classifications for all costs above: variable and fixed costs; product and period costs. I would recommend that you show a schedule for each area on a yearly basis. For the variable costs, also, show them on a per unit (800 units) How does a company identify each type of cost? Can a cost classification be changed over time? If yes, explain how and give an least one example. If no, explain why? 2. Determine the average cost of manufacturing one custom kitchen assuming the units given. Assume the MOH costs are allocated based on the direct labor hours per unit. Please show all calculations and round to the nearest dollar. I would recommend that you calculate the MOH per kitchen first. You should calculate an Overhead rate. Discuss other options (at least 2) for the activity base and the importance of the MOH allocation. Do multiple product lines impact the MOH allocation? What happens if MOH is not allocated correctly to a product? 3. Prepare a Job Order Cost sheet for the following custom kitchen: Materials $5,500 and 60 hours of labor. What is the customer price? What other factors would impact the sales price for this type of company? Can a company rely on setting price based on just a % on cost? 4. What is the Contribution Margin (CM) in total and per unit dollars, and CM% for the sale of 800 kitchen cabinets? Explain the importance of CM and how it can be used by companies to predict future income. Create some examples in excel with numbers to show how it can be used. 5. Prepare a traditional Income Statement assuming a volume of 800 units. For the cost of goods sold, please use the per unit cost you calculated in #2 multiplied by number of units sold. You do not have to prepare any additional schedules. I would use a similar format to exhibit 16-8 on page 737 or from your lecture notes. I recommend that you list out all operating expenses given above. Do not use just Selling and General/Administrative Expenses for your categories. Points will be lost by not listing out all period costs. You can ignore interest and income tax expense. 6. Prepare three Cost Volume Profit(CVP) Income Statements using the following yearly volumes: 200, 800 and 1,400. Link this schedule to question #1 for VC and FC calculated. Keep in mind how variable and fixed costs behave. The traditional income statement from #5 should be about the same net income as the 800 units for the CVP format. (use exhibit 20-12 page 893 as your example – please note that it is missing a title and your numbers are for a year. I also will send out an example in chat slides) a) Calculate Break-even in units and sales $ for the company b) Calculate units and sales $ if the company wants a profit of $2,000,000. c) Margin of safety for 800 units. Discuss the importance of these calculations to a company. Fully discuss the differences(at least 3) between the traditional vs CVP format. Give examples supported by numbers in excel of how you would use these calculations as the CFO of the company. 7. If the following changes were to be made, calculate a new CVP Income Statement: Direct Material costs decrease by 10%; fixed costs increase by 30% and sales price would increase by 5%. Assume you are selling the 800 units. Should the company consider these changes? Why or why not? This question is not just based on the new net income. Please review the full income statement for changes. What if the sales volume changes? Does this change your answer? I would recommend using volumes higher and lower to see how the changes impact your answer. Include CVP income statements in excel that are needed to support your answer. Discuss real examples of cost increases for fixed costs (at least 2) and decreases for direct materials (at least 2) that could be implemented for this business. Can the company increase price? What other areas might be impacted due to the price increase? You are the CFO of this business what is important to consider? Give 2 industry specific details that can impact this discussion. Do some research for this industry. It is always important to understand the industry that you are in as some industries have different factors that impact sales and profitability. Additional information for another product line Assume another product line is also being considered – bookshelves. Only use this information for the questions listed directly below.  Higher skilled workers would be required which will result in paying them $15 per hour.  Additional MOH costs for the year will be $150,000. These costs will be in addition to the costs already being incurred. These costs are due to the additional product line and also related to the current product lines for additional production abilities. The two lines will share all MOH costs. 1. Should the company consider using ABC? Discuss why or why not? Areas to include in the discussion but not limited to the following: impact on product cost, implications of not using the right allocation and its impact on price if any, etc…. 2. How specifically would ABC help allocate MOH costs? •The structure of the paper should include an opening paragraph about the company in a word document. 3pts will be deducted for not including an opening paragraph. •The discussion questions should be answered in the order listed (questions are in italics). However, do not number the questions. Instead, the discussion should flow from one topic to the next and include as a minimum the questions identified.  Please use a memo format for the paper and address it to the Board of Directors. • The calculations should be included as schedules in excel which are numbered and referenced to each discussion. A discussion without referring to the numbers will not be considered complete. Do not discuss/explain your calculations. Answer the questions related to your calculations. All schedules should be included in excel and use formulas with professional formatting. A person who is reading the excel schedules should not have any questions on what is being calculated. Not using formulas will result in a minimum 1 grade reduction. I recommend linking the schedules though this is not required. •You should be thinking about all of the concepts that you have learned from this course and their importance to a business owner or investor. I should finish reading your paper and see the concepts and some industry knowledge demonstrated through the discussion and the analysis. •Finally, the closing paragraph(s) should summarize the paper. 3pts will be deducted for not including a closing paragraph. •Plan to devote time to writing and reviewing the paper. Groups can have significant grade reductions for papers that are not well written (spelling, grammar etc..) I would recommend that the paper be no more than 7 pages doubles spaced with reasonable margins. If you need additional pages, please make sure that it enhances your paper.
Question 1 Cost Name Salaries-Office and Administrative Salaries for Factory Supervisors and Janitors Office Rent Factory Rent Office Utilities and Misc Office Sales Travels Insurance-Office Depreciation-Office Equipment Depreciation-Factory Equipment Advertising Sales Commissions Factory Property Taxes Maintenance for Factory Equipment Direct Materials Direct Labor $ Amount 400,000.00 200,000.00 90,000.00 80,000.00 20,000.00 24,000.00 14,000.00 45,000.00 70,000.00 15,000.00 50,000.00 10,000.00 80,000.00 1,600,000.00 8,000.00 Fixed Cost Schedule Salaries-Office and Administrative Salaries for Factory Supervisors and Janitors Office Rent Factory Rent Insurance-Office Depreciation-Office Equipment Depreciation-Factory Equipment Advertising Factory Property Taxes Maintenance For Factory Equipment Total Fixed Costs Annual Amount $ 400,000.00 200,000.00 90,000.00 80,000.00 14,000.00 45,000.00 70,000.00 15,000.00 10,000.00 80,000.00 $ 1,004,000.00 Variable Cost Schedule Office Utilities and Misc Office Sales Travel Sales Commissions Direct Materials Direct Labor Total Variable Costs Annual Amount $ 20,000.00 24,000.00 50,000.00 1,600,000.00 8,000.00 $ 1,702,000.00 Period Cost Schedule Annual Amount Fixed/Variable Fixed Fixed Fixed Fixed Variable Variable Fixed Fixed Fixed Fixed Variable Fixed Fixed Variable Variable Salaries-Office and Administrative Office Rent Office Utilities and Misc Office Sales Travel Insurance-Office Depreciation-Office Equipment Advertising Sales Commissions Total Period Costs $ Product Cost Schedule Salaries for Factory Supervisors and Janitors Factory Rent Depreciation-Factory Equipment Factory Property Taxes Direct Materials Direct Labor Maintenance for Factory Equipment Total Product Costs Annual Amount $ 200,000.00 80,000.00 70,000.00 10,000.00 1,600,000.00 8,000.00 80,000.00 $ 2,048,000.00 Variable Cost Schedule Office Utilities and Misc Office Sales Travel Sales Commissions Direct Materials Direct Labor Total Variable Costs Annual Amount Per Unit Cost $ 20,000.00 $ 25.00 24,000.00 30.00 50,000.00 62.50 1,600,000.00 2,000.00 8,000.00 10.00 $ 1,702,000.00 $ 2,127.50 $ 400,000.00 90,000.00 20,000.00 24,000.00 14,000.00 45,000.00 15,000.00 50,000.00 658,000.00 Question 2 Manufacturing Overhead Cost Salaries for Factory Supervisors and Janitors Factory Rent Depreciation-Factory Equipment Factory Property Taxes Maintenance for Factory Equipment Direct Materials Direct Labor Total Manufacturing Overhead Total Direct Labor Hours MOH per D/L Hours Amount $ 200,000.00 80,000.00 70,000.00 10,000.00 80,000.00 1,600,000.00 8,000.00 $ 2,048,000.00 32,000.00 64,000.00 Direct Materials Direct Labor Manufacturing Overhead Product/Manufacturing Cost/Unit 2,000.00 400.00 2,560,000.00 5,600.00 Average cost of manufacturing one custom kitchen unit 5,600.00 Question 3 Job Order Cost Sheet Materials Labor MOH Product/Manufacturing Cost/Unit Mark-Up 80% on Cost $ 5,500.00 600.00 3,840,000.00 3,846,100.00 $ 6,922,980.00 Question 4 Total Variable Per Unit Materials Labor Variable Cost per Unit Fixed Cost Per Unit Total Fixed Cost Total Numbers of Direct Labor Hours Fixed Cost per Labor Hour Labor Hours per Unit Fixed Cost per Unit $ 2,000.00 400.00 2,127.50 $ 1,004,000.00 32,000.00 31.38 40.00 1,255.00 $ Total Cost Per Unit Total Cost Mark-Up 80% Selling Price $ $ Contribution Margin No. of Units Sales Material Labor 5,782.50 4,626.00 10,408.50 Per Unit $ Total 800 10,408.50 $ 8,326,800.00 2,000.00 1,600,000.00 400.00 320,000.00 Variable Cost Contribution Margin $ CM % 2,127.50 1,702,000.00 5,881.00 $ 4,704,800.00 57% Question 5 Traditional Income Statement Sales Revenue COGS Gross Margin Operating Expenses Salaries-Office and Administrative Office Rent Office Utilities and Misc Office Sales Travel Insurance-Office Depreciation-Office Equipment Advertising Sales Commissions Operating Income $ 8,326,800.00 4,480,000.00 $ 3,846,800.00 $ 400,000.00 90,000.00 20,000.00 24,000.00 14,000.00 45,000.00 15,000.00 50,000.00 608,000.00 $ 4,454,800.00 Question 6 CVP Statement Sales Revenue Variable Manufacturing Costs: Direct Materials at 2000 Direct Labor Sub-Total Gross Margin Variable Office Overhead Office Utilities and Misc Office at 25 Variable Selling Overhead Sales Travel at 30 Sales Commission at 62.5 Sub-Total Contribution at 5881 $ Units 400 800 4,163,400.00 $ 8,326,800.00 800,000.00 1,600,000.00 160,000.00 320,000.00 $ 960,000.00 $ 1,920,000.00 $ 3,203,400.00 $ 6,406,800.00 10,000.00 $ 20,000.00 12,000.00 24,000.00 25,000.00 50,000.00 47,000.00 $ 94,000.00 2,352,400.00 4,704,800.00 Fixed Costs: Salaries-Office and Administrative Salaries for Factory Supervisors and Janitors Office Rent Factory Rent Insurance-Office Depreciation-Office Equipment Depreciation-Factory Equipment Advertising Factory Property Taxes Maintenance For Factory Equipment Total Fixed Costs Net Operating Income 400,000.00 400,000.00 200,000.00 200,000.00 90,000.00 90,000.00 80,000.00 80,000.00 14,000.00 14,000.00 45,000.00 45,000.00 70,000.00 70,000.00 15,000.00 15,000.00 10,000.00 10,000.00 80,000.00 80,000.00 $ 1,004,000.00 $ 1,004,000.00 $ 2,152,400.00 $ 5,308,800.00 Break-Even in Units Break-Even in Sales 170.72 $ 1,776,931.47 Profit per Unit Profit per Sales 1,004,340.08 $ 4,543,704.13 Margin of Safety $ 629.28 $ Units 800 8,743,140.00 Question 7 New CVP Statement Sales Revenue Variable Manufacturing Costs: Direct Materials at 2000 Direct Labor Sub-Total Gross Margin Variable Office Overhead Office Utilities and Misc Office at 25 Variable Selling Overhead Sales Travel at 30 Sales Commission at 62.5 Sub-Total Contribution at 2127.5 Fixed Costs: 1,440,000.00 4,704,800.00 $ 6,144,800.00 2,598,340.00 20,000.00 $ 24,000.00 50,000.00 94,000.00 1,702,000.00 Salaries-Office and Administrative Salaries for Factory Supervisors and Janitors Office Rent Factory Rent Insurance-Office Depreciation-Office Equipment Depreciation-Factory Equipment Advertising Factory Property Taxes Maintenance For Factory Equipment Total Fixed Costs Net Operating Income 400,000.00 200,000.00 90,000.00 80,000.00 14,000.00 45,000.00 70,000.00 15,000.00 10,000.00 80,000.00 $ 1,028,000.00 $ 1,476,340.00 Period/Product Period Product Period Product Period Period Period Period Product Period Period Product Product Product Product $ 1200 12,490,200.00 $ $ 2,400,000.00 480,000.00 2,880,000.00 9,610,200.00 30,000.00 $ 36,000.00 75,000.00 141,000.00 7,057,200.00 $ $ 400,000.00 200,000.00 90,000.00 80,000.00 14,000.00 45,000.00 70,000.00 15,000.00 10,000.00 80,000.00 1,004,000.00 8,465,200.00

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Report: Cost Accounting

Cost Accounting
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Report: Cost Accounting

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Running Head: COST ACCOUNTING

Cost Accounting
[Student’s Name]
Affiliated Institution

COST ACCOUNTING

2
Cost Accounting
Identification of costs

A company classifies costs according to its cost objective for various purposes. Cost
objective is the action carried out by an organization where a different calculation allows the
separate measure of cost. Each classification has its objective. For this reason, a cost can be
included in more than one classification depending on the objective. Examples of cost objective
include; costs for controlling purposes, cost of decision making and stock valuation costs. Fixed
and Variable costs fall under cost for decision making sense.
Cost classification can be changed over time because some costs ...

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