Reference no: EM131820057

Assignment

Question 1

Methods of Estimating Costs: Account Analysis

The accounting records for Portland Products report the following manufacturing costs for the past year:

Direct materials        $315,000
Direct labor              262,500
Variable overhead     231,000

Production was 150,000 units. Fixed manufacturing overhead was $270,000.

For the coming year, costs are expected to increase as follows: direct materials costs by 20 percent, excluding any effect of volume changes; direct labor by 4 percent; and fixed manufacturing overhead by 10 percent. Variable manufacturing overhead per unit is expected to remain the same.

Required

a. Prepare a cost estimate for a volume level of 120,000 units of product this year.
b. Determine the costs per unit for last year and for this year.

Question 2

Cost Data for Managerial Purposes

B-You is a consulting firm that works with managers to improve their interpersonal skills. Recently, a representative of a high-tech research firm approached B-You's owner with an offer to contract for one year with B-You to improve the interpersonal skills of a newly hired manager. B-You reported the following costs and revenues during the past year.

If B-You decides to take the contract to help the manager, it will hire a full-time consultant at $85,000. Equipment lease will increase by 5 percent. Supplies will increase by an estimated 10 percent and other costs by 15 percent. The existing building has space for the new consultant. No new offices will be necessary for this work.

Required

a. What are the differential costs that would be incurred as a result of taking the contract?
b. If the contract will pay $90,000, should B-You accept it?
c. What considerations, other than costs, do you think are necessary before making this decision?

Question 3

Components of Full Costs

Larcker Manufacturing's cost accountant has provided you with the following information for January operations:

Direct materials                                              $21 per unit
Fixed manufacturing overhead costs                 $135,000
Sales price                                                     $79 per unit
Variable manufacturing overhead                      $12 per unit
Direct labor                                                    $24 per unit
Fixed marketing and administrative costs          $117,000
Units produced and sold                                 30,000
Variable marketing and administrative costs      $5 per unit

Required

Determine each of the following:

a. Variable cost.
b. Variable manufacturing cost.
c. Full absorption cost.
d. Full cost.