cost accounting

Project Description:

comfyfootware inc. manufactures a popular undyed cloth sandal in one style, but two variations—regular and deluxe. the regular sandals have cloth soles and the deluxe sandals have cloth covered wooden soles. comfyfootware is preparing its budget for june 2012, and it has estimated sales based on past experience.
other information for the month of june is as follows:

input prices
direct materials
cloth $3.50 per yard
wood $5.00 per board foot
direct manufacturing labor $10 per direct manufacturing labor-hour

input quantities per unit of output (per pair of sandals)

direct materials
cloth 1.3 yards 1.5 yards
wood 0 2 b.f.
direct manufacturing labor-hours (dmlh) 5 hours 7 hours
setup-hours per batch 2 hours 3 hours

inventory information, direct materials

cloth wood
beginning inventory 610 yards 800 b.f.
target ending inventory 386 yards 295 b.f.
cost of beginning inventory $2,146 $4,040

comfyfootware accounts for direct materials using a fifo cost flow assumption.

sales and inventory information, finished goods
regular deluxe
expected sales in units (pairs of sandals) 2,000 3,000
selling price $80 $130
target ending inventory in units 400 600
beginning inventory in units 250 650
beginning inventory in dollars $15,500 $61,750

comfyfootware uses a fifo cost flow assumption for finished goods inventory.

all the sandals are made in batches of 50 pairs of sandals. comfyfootware incurs manufacturing overhead costs, marketing and general administration, and shipping costs. besides materials and labor, manufacturing costs include setup, processing, and inspection costs. comfyfootware ships 40 pairs of sandals per shipment. comfyfootware uses activity-based costing and has classified all overhead costs for the month of june as shown in the following chart:

cost type denominator activity rate
setup setup-hours $12 per setup-hour
processing direct manufacturing labor-hours $1.20 per dmlh
inspection number of pairs of sandals $0.90 per pair
marketing and general administration sales revenue 8%
shipping number of shipments $10 per shipment

1. prepare each of the following for june:
a. revenues budget
b. production budget in units
c. direct material usage budget and direct material purchases budget in both units and dollars; round to dollars
d. direct manufacturing labor cost budget
e. manufacturing overhead cost budgets for processing and setup activities
f. budgeted unit cost of ending finished goods inventory and ending inventories budget
g. cost of goods sold budget
h. marketing and general administration costs budget

2. comfyfootware’s balance sheet for may 31 is as follows. use it and the following information to prepare a cash budget for comfyfootware for june. round to dollars.
o all sales are on account; 60% are collected in the month of the sale, 38% are collected the following month, and 2% are never collected and written off as bad debts.
o all purchases of materials are on account. comfyfootware pays for 80% of purchases in the month of purchase and 20% in the following month.
o all other costs are paid in the month incurred, including the declaration and payment of a $10,000 cash dividend in june.
o comfyfootware is making monthly interest payments of 0.5% (6% per year) on a $100,000 long-term loan.
o comfyfootware plans to pay the $7,200 of taxes owed as of may 31 in the month of june. income tax expense for june is zero.
o 30% of processing and setup costs, and 10% of marketing and general administration costs are depreciation.

comfyfootware inc.
balance sheet
as of may 31


accounts receivable $216,000
less: allowance for bad debts 10,800 205,200
direct materials 6,186
finished goods 77,250
fixed assets $580,000
less: accumulated depreciation 90,890 489,110
total assets $784,036

liabilities and equity

accounts payable $10,400
taxes payable 7,200
interest payable 500
long-term debt 100,000
common stock 200,000
retained earnings 465,936
total liabilities and equity $784,036

3. prepare a budgeted income statement for june and a budgeted balance sheet for comfyfootware as of june 30.
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Price Type: Negotiable

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