Reference no: EM13503841
Problem 1
Matador Inc. sells computer monitor screens. The direct labor (DL) rate includes wages, benefits and payroll tax. Direct materials cost is $10 per unit. Beginning inventory is 10,000 screens and policy is to carry 50% of the following months projected sales in inventory. Data from the company is below.
Month Jan Feb Mar Apr
Estimated Sales in units 20,000 24,000 16,000 18,000
Sales Price/unit $80 $80 $75 $75
DL hours/unit 4 4 3.5 3.5
DL hourly rate $15 $15 $16 $16
a) Prepare the following budgets for the first quarter. Show your calculations.
1) Production Budget; 2) DL hours required; 3) Direct materials usage budget; 4) Revenue budget.
b) Calculate the total budgeted contribution margin for the first quarter. Show your calculations.
Problem 2
Torrence Company has two support departments (Administration and Janitorial) and three producing departments (Fabricating, Assembly, and Finishing). Costs and activities are as follows:
Administration Janitorial Fabricating Assembly Finishing
Direct costs........................... $50,000 $30,000 $40,000 $50,000 $25,000
Number of employees............ 10 30 40 20
Square feet........................... 2,000 10,000 28,000 15,000
Direct labor hours................. 5,000 6,000 2,000
Administrative services are allocated based on the number of employees; janitorial services are allocated based on square footage. Overhead rates for the three producing departments are based on direct labor hours.
a) Determine the total cost allocation and departmental overhead rate for the producing departments using the direct method. Show your work.
b) Determine the total cost allocation and departmental overhead rate for the producing departments using the step-down method. Show your work.
Problem 3
Comfy Chair Company makes two types of chairs, a lounge chair and a folding beach chair. The company uses a job-order costing system and applies overhead on the basis of direct labor hours. Comfy Chair expects to produce 40,000 lounge chairs and 100,000 beach chairs next year.
Comfy Chair has been considering changing to an activity based costing system. The company has reported the following results from the first-stage cost allocations for a year's production:
Overhead Cost Activities by Product
Activity Assigned Lounge Chairs Beach Chairs
Labor related $300,000 100,000 DLHrs 200,000 DLHrs
Machine related $450,000 30,000 MHrs 60,000 MHrs
Machine setups $730,000 4,000 Setups 1,000 Setups
Order processing $600,000 4,500 Orders 1,500 Orders
General factory $500,000
Direct Labor $2,000,000 DL$ $3,000,000 DL$
Direct Materials $3,200,000 DM$ $1,000,000 DM$
a) Determine the total cost per unit for each product using traditional job-order costing. Show your work.
b) Determine the total cost per unit for each product using activity based costing. Show your work.
c) Comment on the differences between the two.