This is an independent effort. Do your own work! The ACE tutors and the SI may not assist you on these review problems prior to 5:45 PM on October 10.

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1 Page 1 of 7 ACG 4361 Fall 2018 Exam #3 Review Problems This is an independent effort. Do your own work! The ACE tutors and the SI may not assist you on these review problems prior to 5:45 PM on October 10. DUE DATE: October 8 Problems 2, 4, 5, 6 and 8; October 10 All remaining problems DIRECTIONS: Print a hard copy of these review problems. Complete the problems, showing all calculations. If you have not completed the work in advance, you will run into two issues.1) You will not get much out of the concepts we go over these problems, and 2) you will only earn participation points if you have the correct answers. Problem 1. Water Tite produces several models of garden hoses. An outside supplier has offered to produce the retractors used for the hoses for $2.98 each. Water Tite needs 6,700 retractors annually and has provided the following unit costs for each retractor: Direct materials $1.17 Variable overhead $0.73 Direct labor 0.88 Fixed overhead (86% unavoidable) 1.50 If Water Tite accepts the proposal, it can quit leasing a retractor producing machine that costs $1,809 annually. A. In good form using proper line item labels, prepare a single column incremental analysis to determine the financial effect of the decision at hand. Enter the clicker answer as a negative or positive number, respectively. $ Calculations: B. Calculate the relevant cost per garden hose. C. How much is the maximum cost that Water Tite should be willing to pay for the garden hoses given only quantitative considerations? D. List the qualitative considerations in the order of importance.

2 Page 2 of 7 Problem 2. WaySaw produces water pitchers. The pitchers pass through 3 processes forming, assembly, and packaging. In the assembly department, employees add materials when the pitchers are 28% complete, and conversion costs are added evenly throughout the process. Production data for the assembly department for July follows: % Complete - conversion costs - ending WIP 20% Conversion costs in beginning WIP $5,892 % Complete - conversion costs beg. WIP 75% Cost of direct materials in beg. WIP 2,150 Units started during July 4,650 Conversion costs added during July 2,460 Units in work in process, July Transferred-in costs in beginning WIP 1,870 Units completed transferred out during July 4,520 Direct material cost added during July 4,178 Transferred-in costs added during July 1,600 A. In good form, prepare the physical units and equivalent units sections of the production cost report using weighted average process costing for the assembly department. If you provide more calculations/ information than required, your answer will be incorrect. B. How much is the cost per equivalent unit of units transferred out? Display with 5 decimals. C. Prepare the journal entry in good form that will occur at July 31 as a result of the production cost report.

3 Page 3 of 7 Problem 3. Hanoran makes and sells door flappers, which it regularly sells for $10.20 each to retailers. The following unit cost data are based on a normal production of 4,950 flappers produced and sold each year. Direct materials $2.70 Selling and admin costs (40% variable) $1.30 Direct labor 1.38 Factory overhead (65% variable) 2.20 The company s capacity is 5,100 flappers. It just received an order from a new customer who wants to buy 380 flappers each with the customer s logo imprinted. The logo imprint will cost $0.56 per flapper plus $551 to rent a machine that imprints the logos. The customer has offered to pay $11.00 per flapper. If the order is accepted, the variable selling and admin costs are expected to decline by $0.12 per flapper. A. Show the calculation of Hanoran s opportunity cost of each flapper in the special order. Display as 3 decimals. B. Show the calculation of the minimum price to charge for each flapper in the special order. Display as 3 decimals. C. Prepare an incremental analysis in good form.

4 Page 4 of 7 Problem 4. Soggy Cereal uses FIFO process costing with 3 processing departments mixing, baking, and packaging. The company provided the following cost and equivalent unit information from its baking department s May production cost report: Transferred In Direct Materials Conversion Costs Beginning inventory $ 980 $ 452 $ 1,400 Costs added during period 3, ,582 Costs to be accounted for $4,568 $2,612 $3,982 Transferred In Direct Materials Conversion Costs Beginning inventory Units completed and trans. out 2,680 2,680 2,680 Ending inventory Units accounted for 3,120 3,010 3,076 A. Assuming materials are added all at one in the baking department, at what percentage complete are units in the ending inventory? Beginning inventory? B. Show the calculations of the costs to be assigned to the units transferred into the packaging department during May. If you provide more than required, your answer will be wrong. Problem 5. GoPac began the year with 188 tickers. The company uses throughput costing. The following amounts were based on the production of 4,800 and sales of 4,640 stools during July: Sales price per unit $8.50 Variable operating costs per unit $ 0.14 Variable factory overhead cost per unit 0.55 Total fixed selling costs 1,624 Direct labor cost per unit 0.92 Total fixed manufacturing costs 6,672 Direct material cost per unit 2.12 Total fixed general and administrative costs 1,856 A. Determine the amount to be reported as finished goods inventory at July 31, B. How much is throughput margin for July? C. How much is contribution margin for July? D. How much is gross margin for July?

5 Page 5 of 7 Problem 6. Very Good produces tumblers for which the company uses weighted average process costing. The tumblers go through three processes--mixing, molding, and drying. In the drying department, materials are added when the tumblers are 40% complete, and conversion costs are added evenly throughout the process. The finishing department had the following equivalent units during June: Transferred-in Direct Materials Conversion Costs Units completed and transferred out 6,100 5,100 6,100 Units in ending work in process ,900 5,500 6,452 Production and other cost information for the drying department follows for June: Costs in beginning inventory conversion $1,140 Conversion costs added during June $9,540 Costs in beginning inventory direct materials 1,560 Direct material costs added during June 5,590 Costs in beginning inventory transferred in 1,885 Transferred-in costs added during June 8,120 A. Show the calculation of the cost of the incomplete inventory for the drying department as of June 30. In interim calculations, use 5 decimals for amounts that do not round perfectly to 2 decimals. B. Post all respective amounts to the t-account below. Write the account balance in the proper location in the t-account and circle it. Show calculations for each amount that you post that is not directly provided in the problem data or previously calculated above both debits and credits. WIP - Drying C. Prepare the journal entry as a result of the production cost report as of June 30.

6 Page 6 of 7 Problem 7. Pen Picker sells two styles of pens Gel and Ball Point. The company expects its sales mix to remain steady throughout the year. Operating information for May follows: Basic Ball Point Totals Number of units 2,600 2,000 4,600 Sales $12,480 $15,600 $28,080 Fixed costs 3,796 4,240 8,036 Variable costs 7,020 7,400 14,420 Operating income $1,664 $3,960 $5,624 Each gel pen requires ounces of ink base, and each ball point pen requires ounces of ink base. Due to a trucking strike, only 220 ounces of ink base will be available during June. Each pound of ink base costs $3.36. The company can sell its entire production each month but must produce at least 980 of each to stay competitive. A. Determine the pen of which you should produce the most units in order to maximize profit. Support with relevant calculations. B. Briefly state why the product you chose in part A is the correct choice. C. How many of each should be produced?

7 Page 7 of 7 Problem 8. Fabrico produces comfy seat cushions using the same production process for both deluxe and basic cushions. The company uses operation costing and assigns conversion costs as a single pool based on direct labor hours. The following information is budgeted for July: Unit Selling Price Seat Sold Seats Produced Direct Materials Cost Beginning seats (Units) Direct Labor Cost Allocated Overhead Costs Assigned Operating Costs Basic $8.20 2,400 2,810 $3, $15.50/hour Variable $3,934 $1,200 Deluxe ,610 3,650 7, ,400 $15.50/hour Fixed 4,745 1,083 Total 6,010 6,060 $11, $35,650 $8,679 $2,283 A. Show the calculation of the allocation rate that Fabrico will use to cost its deluxe seats in July. Express with 5 decimal places. B. Show the calculation of the inventoriable cost of deluxe seats to be reported on Fabrico s balance sheet at July 31. C. Show the calculation of the product cost to be reported on Fabrico s income statement for the month of July.