Wilson Sandhill is a leading producer of vinyl replacement windows. The company's growth strategy focuses on developing domestic markets in large metropolitan areas. The company operates a single manufacturing plant in Kansas City with an annual capacity of 500,000 windows. Current production is budgeted at 450,000 windows per year, a quantity that has been constant over the past three years. Based on the budget, the accounting department has calculated the following unit costs for the windows: Direct materials Direct labor Manufacturing overhead Selling and administrative Total unit cost (a1) $60.00 Variable overhead per unit 17.00 19.00 The company's budget includes $5,400,000 in fixed overhead and $3,150,000 in fixed selling and administrative expenses. The windows sell for $150.00 each. A 2% distributor's commission is included in the selling and administrative expenses. eTextbook and Media 14.00 $110.00 Calculate variable overhead per unit and variable selling and administrative costs per unit. (Round answers to 2 decimal places, e.g. 15.25.) $ Variable selling and administrative costs per unit $

Wilson Sandhill is a leading producer of vinyl replacement windows. The company's growth strategy focuses on developing domestic markets in large metropolitan areas. The company operates a single manufacturing plant in Kansas City with an annual capacity of 500,000 windows. Current production is budgeted at 450,000 windows per year, a quantity that has been constant over the past three years. Based on the budget, the accounting department has calculated the following unit costs for the windows: Direct materials Direct labor Manufacturing overhead Selling and administrative Total unit cost (a1) $60.00 Variable overhead per unit 17.00 19.00 The company's budget includes $5,400,000 in fixed overhead and $3,150,000 in fixed selling and administrative expenses. The windows sell for $150.00 each. A 2% distributor's commission is included in the selling and administrative expenses. eTextbook and Media 14.00 $110.00 Calculate variable overhead per unit and variable selling and administrative costs per unit. (Round answers to 2 decimal places, e.g. 15.25.) $ Variable selling and administrative costs per unit $

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 4CMA: Krouse Company produces two products, forged putter heads and laminated putter heads, which are sold...

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Novo, Inc., wants to develop an activity flexible budget for the activity of moving materials. Novo uses eight forklifts to move materials from receiving to stores. The forklifts are also used to move materials from stores to the production area. The forklifts are obtained through an operating lease that costs 18,000 per year per forklift. Novo employs 25 forklift operators who receive an average salary of 50,000 per year, including benefits. Each move requires the use of a crate. The crates are used to store the parts and are emptied only when used in production. Crates are disposed of after one cycle (two moves), where a cycle is defined as a move from receiving to stores to production. Each crate costs 1.80. Fuel for a forklift costs 3.60 per gallon. A gallon of gas is used every 20 moves. Forklifts can make three moves per hour and are available for 280 days per year, 24 hours per day (the remaining time is downtime for various reasons). Each operator works 40 hours per week and 50 weeks per year. Required: 1. Prepare a flexible budget for the activity of moving materials, using the number of cycles as the activity driver. 2. Calculate the activity capacity for moving materials. Suppose Novo works at 80 percent of activity capacity and incurs the following costs: Prepare the budget for the 80 percent level and then prepare a performance report for the moving materials activity. 3. Calculate and interpret the volume variance for moving materials. 4. Suppose that a redesign of the plant layout reduces the demand for moving materials to one-third of the original capacity. What would be the budget formula for this new activity level? What is the budgeted cost for this new activity level? Has activity performance improved? How does this activity performance evaluation differ from that described in Requirement 2? Explain.
Optima Company is a high-technology organization that produces a mass-storage system. The design of Optimas system is unique and represents a breakthrough in the industry. The units Optima produces combine positive features of both compact and hard disks. The company is completing its fifth year of operations and is preparing to build its master budget for the coming year (20X1). The budget will detail each quarters activity and the activity for the year in total. The master budget will be based on the following information: a. Fourth-quarter sales for 20X0 are 55,000 units. b. Unit sales by quarter (for 20X1) are projected as follows: The selling price is 400 per unit. All sales are credit sales. Optima collects 85% of all sales within the quarter in which they are realized; the other 15% is collected in the following quarter. There are no bad debts. c. There is no beginning inventory of finished goods. Optima is planning the following ending finished goods inventories for each quarter: d. Each mass-storage unit uses 5 hours of direct labor and three units of direct materials. Laborers are paid 10 per hour, and one unit of direct materials costs 80. e. There are 65,700 units of direct materials in beginning inventory as of January 1, 20X1. At the end of each quarter, Optima plans to have 30% of the direct materials needed for next quarters unit sales. Optima will end the year with the same amount of direct materials found in this years beginning inventory. f. Optima buys direct materials on account. Half of the purchases are paid for in the quarter of acquisition, and the remaining half are paid for in the following quarter. Wages and salaries are paid on the 15th and 30th of each month. g. Fixed overhead totals 1 million each quarter. Of this total, 350,000 represents depreciation. All other fixed expenses are paid for in cash in the quarter incurred. The fixed overhead rate is computed by dividing the years total fixed overhead by the years budgeted production in units. h. Variable overhead is budgeted at 6 per direct labor hour. All variable overhead expenses are paid for in the quarter incurred. i. Fixed selling and administrative expenses total 250,000 per quarter, including 50,000 depreciation. j. Variable selling and administrative expenses are budgeted at 10 per unit sold. All selling and administrative expenses are paid for in the quarter incurred. k. The balance sheet as of December 31, 20X0, is as follows: l. Optima will pay quarterly dividends of 300,000. At the end of the fourth quarter, 2 million of equipment will be purchased. Required: Prepare a master budget for Optima Company for each quarter of 20X1 and for the year in total. The following component budgets must be included: 1. Sales budget 2. Production budget 3. Direct materials purchases budget 4. Direct labor budget 5. Overhead budget 6. Selling and administrative expenses budget 7. Ending finished goods inventory budget 8. Cost of goods sold budget (Note: Assume that there is no change in work-in-process inventories.) 9. Cash budget 10. Pro forma income statement (using absorption costing) (Note: Ignore income taxes.) 11. Pro forma balance sheet (Note: Ignore income taxes.)
Adam Corporation manufactures computer tables and has the following budgeted indirect manufacturing cost information for the next year: If Adam uses the step-down (sequential) method, beginning with the Maintenance Department, to allocate support department costs to production departments, the total overhead (rounded to the nearest dollar) for the Machining Department to allocate to its products would be: a. 407,500. b. 422,750. c. 442,053. d. 445,000.
Krouse Company produces two products, forged putter heads and laminated putter heads, which are sold through specialty golf shops. The company is in the process of developing itsoperating budget for the coming year. Selected data regarding the companys two products areas follows: Manufacturing overhead is applied to units using direct labor hours. Variable manufacturing overhead Ls projected to be 25,000, and fixed manufacturing overhead is expected to be15,000. The estimated cost to produce one unit of the laminated putter head is: a. 42. b. 46. c. 52. d. 62.
Uchdorf Manufacturing just completed a study of its purchasing activity with the objective of improving its efficiency. The driver for the activity is number of purchase orders. The following data pertain to the activity for the most recent year: Activity supply: five purchasing agents capable of processing 2,400 orders per year (12,000 orders) Purchasing agent cost (salary): 45,600 per year Actual usage: 10,600 orders per year Value-added quantity: 7,000 orders per year Required: 1. Calculate the volume variance and explain its significance. 2. Calculate the unused capacity variance and explain its use. 3. What if the actual usage drops to 9,000 orders? What effect will this have on capacity management? What will be the level of spending reduction if the value-added standard is met?
Friendly Bank is attempting to determine the cost behavior of its small business lending operations. One of the major activities is the application activity. Two possible activity drivers have been mentioned: application hours (number of hours to complete the application) and number of applications. The bank controller has accumulated the following data for the setup activity: Required: 1. Estimate a regression equation with application hours as the activity driver and the only independent variable. If the bank forecasts 2,600 application hours for the next month, what will be the budgeted application cost? 2. Estimate a regression equation with number of applications as the activity driver and the only independent variable. If the bank forecasts 80 applications for the next month, what will be the budgeted application cost? 3. Which of the two regression equations do you think does a better job of predicting application costs? Explain. 4. Run a multiple regression to determine the cost equation using both activity drivers. What are the budgeted application costs for 2,600 application hours and 80 applications?
Nozama.com Inc. sells consumer electronics over the Internet. For the next period, the budgeted cost of the sales order processing activity is 250,000 and 50,000 sales orders are estimated to be processed. a. Determine the activity rate of the sales order processing activity. b. Determine the amount of sales order processing cost associated with 30,000 sales orders.
Catalytic Chemical Corporation has a significant level of manufacturing overhead. After preparing their budget for the next year, management expects the following overhead costs (the cost driver for each overhead cost pool is also shown): Activity Total Cost Cost Driver Maintenance $20,000 Machine hours Materials receiving 80,000 Shipments received Machine setups 50,000 # of setups Inspection 30,000 # of inspections The expected activity for the year for various cost drivers is: Direct Labor Hours 40,000 Machine Hours 20,000 Shipments Received 4,000 Setups 200 Quality Inspections 8,000 The company is considering accepting a significant production contract. Estimates for the contract are as follows: Direct materials $100,000 Direct labor (7,500 hours) $150,000 Number of material shipments received 290 Number of inspections 50 Number of setups 35 Number of machine houre 3,000…
Wilson Oriole is a leading producer of vinyl replacement windows. The company's growth strategy focuses on developing domestic markets in large metropolitan areas. The company operates a single manufacturing plant in Kansas City with an annual capacity of 500,000 windows. Current production is budgeted at 450,000 windows per year, a quantity that has been constant over the past three years. Based on the budget, the accounting department has calculated the following unit costs for the windows: Direct materials Direct labor Manufacturing overhead Selling and administrative Total unit cost (a1) (a2) $30.00 17.00 (c1) 20.00 The company's budget includes $5,400,000 in fixed overhead and $3,150,000 in fixed selling and administrative expenses. The windows sell for $150.00 each. A 2% distributor's commission is included in the selling and administrative expenses. 14.00 $81.00 Return to the original data. Monk Builders has just signed a contract with the state government to replace the windows…
Blue Devil Inc. has a significant level of manufacturing overhead. After preparing their budget for the next year, management expects the following overhead costs (the cost driver for each overhead cost pool is also shown): Activity Total Cost Cost Driver Maintenance $20,000 Machine hours Materials receiving 80,000 Shipments received Machine setups 50,000 Number of setups Inspection 40,000 Number of inspections The expected activity for the year for various cost drivers is: Direct Labor Hours 40,000 Machine Hours 20,000 Shipments Received 4,000 Setups 200 Quality Inspections 8,000 The company is considering accepting a significant production contract. Estimates for the contract are as follows: Direct materials $100,000 Direct labor (7,500 hours) $150,000 Number of material shipments received 290 Number of inspections 50 Number of setups 35 Number of machine hour 3,000…
Wilson Blossom is a leading producer of vinyl replacement windows. The company's growth strategy focuses on developing domestic markets in large metropolitan areas. The company operates a single manufacturing plant in Kansas City with an annual capacity of 500,000 windows. Current production is budgeted at 450,000 windows per year, a quantity that has been constant over the past three years. Based on the budget, the accounting department has calculated the following unit costs for the windows: (a1) Direct materials $55.00 Direct labor 19.00 Manufacturing overhead 16.00 Selling and administrative 14.00 Total unit cost $104.00 The company's budget includes $5,400,000 in fixed overhead and $3,150,000 in fixed selling and administrative expenses. The windows sell for $150.00 each. A 2% distributor's commission is included in the selling and administrative expenses. (a2) Your answer is partially correct. Your answer is correct. Calculate variable overhead per unit and variable selling and…
1) Alpha Electric Motors manufactures a single model of all purpose electric motor. Frank Flores, the production manager, has just completed reviewing product cost data for the last year in preparation for the upcoming budget session with top management. Under normal conditions, the company produces 100,000 motors per year and that is considered 100% capacity. Flores is contemplating a look at product costs over a range of potential capacity levels to determine realistic costs per unit for the year. He has arrived at the following budget information: Raw Material Costs per unit $15 Purchased Components per unit 23 Labor Cost per unit (by grade): Grade 1 6. Grade 2 Grade 3 12 Variable Factory Overhead 16 Total Fixed Factory Overhead $300,000 Required: a) Prepare budgets for the Total Costs at 50% & 80% b) From the total budgeted production costs in (a) above, calculate: 1. variable cost per unit, 2. fixed cost per unit, and 3. total unit cost for the four (2) capacity.