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Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Ingles, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 16 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40 percent of next month’s sales are in the finished goods inventory. Ingles also purchases sufficient materials to ensure that materials inventory is 60 percent of the following month’s scheduled production. Ingles’s sales budget in units for the next quarter is as follows:
Ingles’s ending inventories in units for July 31 are as follows:
Required:
- 1. Calculate the number of tables to be produced during August.
- 2. Disregarding your response to Requirement 1, assume the required production units for August and September are 2,100 and 1,900, respectively, and the July 31 materials inventory is 4,000 units. Compute the number of table legs to be purchased in August.
- 3. Assume that Ingles Corporation will produce 2,340 units in September. How many employees will be required for the Assembly Department in September? (Fractional employees are acceptable since employees can be hired on a part-time basis. Assume a 40-hour week and a 4-week month.) (CMA adapted)
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Chapter 8 Solutions
Cornerstones of Cost Management (Cornerstones Series)
- Vollmer Manufacturing makes three components for sale to refrigeration companies. The components are processed on two machines: a shaper and a grinder. The times (in minutes) required on each machine are as follows: The shaper is available for 120 hours, and the grinder for 110 hours. No more than 200 units of component 3 can be sold, but up to 1,000 units of each of the other components can be sold. In fact, the company already has orders for 600 units of component 1 that must be satisfied. The profit contributions for components 1, 2, and 3 are 8, 6, and 9, respectively. a. Formulate and solve for the recommended production quantities. b. What are the objective coefficient ranges for the three components? Interpret these ranges for company management. c. What are the right-hand-side ranges? Interpret these ranges for company management. d. If more time could be made available on the grinder, how much would it be worth? e. If more units of component 3 can be sold by reducing the sales price by 4, should the company reduce the price?arrow_forwardCook Company processes and packages frozen seafood. The year just ended was Cook's first year of business and they are preparing financial statements. The immediate issue facing Cook is the treatment of the direct labor costs. Cook set a standard at the beginning of the year that allowed two hours of direct labor for each unit of output. The standard rate for direct labor is $35 per hour. During the year, Cook processed 61,600 units of seafood for the year, of which 4,928 units are in ending finished goods. (There are no work-in-process inventories). Cook used 127,500 hours of labor. Total direct labor costs paid by Cook for the year amounted to $4,047,500. Required: a. What was the direct labor price variance and the direct labor efficiency variance for the year? c. Assume Cook writes off all variances to Cost of Goods Sold. Prepare the entries Cook would make to record and close out the variances. d. Assume Cook prorates all variances to the appropriate accounts. Prepare the entries…arrow_forwardCowboy Ice Cream Company (CIC) produces ice cream bars that it markets through a variety of grocery stores. It makes the ice cream bars in batches of 2,000 units. CIC produced 36,000 ice cream bars during the prior accounting period. The cost of producing the ice cream bars is shown below. Materials cost ($29 per unit x 36,000) Labor cost ($26 per unit x 36,000) Manufacturing supplies ($9 x 36,000) Batch-level costs (18 batches at $6,000 per batch) Product-level costs $1,044,000 936,000 324,000 108,000 300,000 370,000 Facility-level costs Total costs $3,082,000 Cost per unit = $3,082,000 + 36, 000 = $85.61 Required a. OnCue has offered to buy a batch of 500 ice cream bars for $68 each. CIC's normal selling price is $93 per unit. Calculate the relevant cost per unit for the special order. Based on the preceding quantitative data, should CIC accept the special order? b. OnCue offered to buy a batch of 2,000 ice cream bars for $68 per unit, calculate the relevant cost per unit for the…arrow_forward
- Aulman Inc. has a number of divisions, including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $40. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. The Furniture Division can sell all of the dressers it makes to outside companies for $40. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. Required: 1. Which division sets the maximum transfer price? Which division sets the minimum transfer price? The maximum transfer price The minimum transfer price 2. Suppose the company policy is that all transfers take place at full cost. What is the transfer price? 3.…arrow_forwardAulman Inc. has a number of divisions, including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $40. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. The Furniture Division can sell all of the dressers it makes to outside companies for $40. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. Also, assume that the company policy is that all transfer prices are negotiated by the divisions involved. Required: 1. What is the maximum transfer price? Which division sets it? 2. What is the minimum transfer price? Which division sets it? 3. Conceptual Connection: If the…arrow_forwardStefan Ceramics is in the business of selling ceramic vases. It has two departments – molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers. During the month of July, molding department purchased 720 kgs of tungsten carbide at $280 per kg. It started manufacture of 4200 vases and completed and transferred 3200 vases during the month. It has 1000 vases in the process at the end of the month. It incurred direct labor charges of $1900 and other manufacturing costs of $500, which included electricity costs of $900. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 45% complete in respect of conversion costs. Required: What is the cost of tungsten carbide that will be assigned to vases finished and transferred to the finishing…arrow_forward
- Aulman Inc. has a number of divisions including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $60. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. While the Furniture Division has been operating at capacity (50,000 dressers per year) and selling them for $60 each, it expects to produce and sell only 40,000 dressers for $60 each next year. The Furniture Division incurs variable costs of $16 per dresser. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. The company policy is that all transfer prices are negotiated by the divisions involved. Required: 1. What is the maximum…arrow_forwardCooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,400 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plantwide overhead rate to allocate its $7,663,000 of annual manufacturing overhead. Of this amount, $2,150,000 is associated with the Large Bag line, $3,415,000 is associated with the Medium Bag line, and $2,098,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 38,000 machine hours: 13,900 in the Large Bag line, 16,300 in the Medium Bag line, and 7,800 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs. Which product line(s) have been overcosted or undercosted by using the plantwide manufacturing overhead rate? A. Large Bags has been overcosted; Medium and Small have been undercosted. B. Large, Medium, and Small…arrow_forwardAulman Inc. has a number of divisions including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $60. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. While the Furniture Division has been operating at capacity (50,000 dressers per year) and selling them for $60 each, it expects to produce and sell only 40,000 dressers for $60 each next year. The Furniture Division incurs variable costs of $16 per dresser. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. The company policy is that all transfer prices are negotiated by the divisions involved. Required: 1. What is the maximum…arrow_forward
- Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1500 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plant-wide overhead rate to allocate its $7,705,000 of annual manufacturing overhead. Of this amount, $2,260,000 is associated with the Large Bag line, $3,418,000 is associated with the Medium Bag line, and $2,027,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 44,000 machine hours: 14,000 in the Large Bag line, 15,900 in the Medium Bag line, and 14,100 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs. The plant-wide manufacturing overhead rate would be closest toarrow_forwardMontross Lumber processes wood to be shipped to construction companies. In order to keep its products uniform, Montross conducts inspections on 20% of the boards produced. Inspections cost the company $10 per hour and it takes 1 minute to inspect each board. How much would it cost to fill an order for 30,000 boards?arrow_forwardHarmon Household Products, Inc., manufactures a number of consumer items for general household use. One of these products, a chopping board, requires an expensive hardwood. During a recent month, the company manufactured 4,000 chopping boards using 11,000 board feet of hardwood. The hardwood cost the company $18,700. The company’s standards for one chopping board are 2.5 board feet of hardwood, at a cost of $1.80 per board foot. Required: 1. What cost for wood should have been incurred to make 4,000 chopping blocks? How much greater or less is this than the cost that was incurred? 2. Break down the difference computed in (1) above into a materials price variance and a materials quantity variance.arrow_forward
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