Reference no: EM131812957
Exercise 1. The XYZ Company has budgeted sales of 900,000 units in 2012. Its target ending inventory is 80,000 units and its beginning inventory is 100,000 units.
Each unit of XYZ's product requires 4 pounds of material to produce. Its target ending inventory for material is 60,000 pounds and its beginning inventory for materials is 50,000 pounds.
a) Compute the number of units to be produced.
b) Compute the budgeted number of pounds of materials to be purchased.
Exercise 2. The Thomas Company makes all its sales on credit. It expects to collect cash from receivables according to the following schedule:
- 70% collected in the month of sale.
- 15% in the month after sale.
- 10% in the second month after sale.
- 4% in the third month after sale
Budgeted sales are as follows:
- January $70,000
- February $90,000
- March $100,000
- April $120,000
- May $100,000
- June $90,000
What are the budgeted cash collections for April?
Exercise 3. A company purchases and processes 15,000 gallons of raw material at a cost of $30,000. From this process, it produces 600 pounds of JP1 and 900 pounds of JP2. JP1 can be sold for $21 per pound or processed further into 6,000 units of FP1 at a total cost of $12,750. FP1 has a selling price of $4 per unit. JP2 can be sold for $26 per pound or processed further into 10,200 units of FP2 at a total cost of $26,250. FP2 has a selling price of $5 per unit. Assume that the company sells only FP1 and FP2. In other words, it further processes both joint products. Also, assume there is no beginning or ending inventory.
a) Allocate the joint costs to JP1 and JP2 using the physical measure method (based on pounds), sales value at split off method, the NRV method, and the constant gross margin percentage NRV method.
b) Is it a good idea for the firm to further process the joint products?
Exercise 4. The ABC Company has two operating divisions and two support divisions. The following table presents the amount of hours of service provided by the two support divisions:
|
OP 1
|
OP 2
|
SUP 1
|
SUP 2
|
|
SUP 1
|
1,000
|
2,000
|
0
|
1,000
|
|
SUP2
|
3,000
|
1,500
|
500
|
0
|
The costs for the four departments appear below:
|
Department
|
Costs
|
|
OP 1
|
$250,000
|
|
OP 2
|
$300,000
|
|
SUP 1
|
$150,000
|
|
SUP 2
|
$60,000
|
a) Allocate the support department costs to the operating departments using the direct method.
b) Allocate the support department costs to the operating departments using the step-down method, starting with Support Department 1.
c) State the equations one would use to allocate the support department costs to the operating departments using the reciprocal method. (You do not need to solve the equations)