A- Farah Corporation has provided the following production and total cost data for two levels of monthly
Question:
A- Farah Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product which it sells at $132.7 per unit
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Production volume |
| 12,500 | units |
| 14,000 | units |
Direct materials | $ | 713,750 |
| $ | 799,400 |
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Direct labor | $ | 256,250 |
| $ | 287,000 |
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Manufacturing overhead (Mixed) | $ | 1,004,700 |
| $ | 1,027,350 | |
Fixed selling and administrative expenses | $ | 384,050 | $ | 384,050 | ||
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Required: Using high-low method and CVP analysis
1. Compute Farah’s breakeven point in units and dollars. Prove your answer
2. Compute how many units the company needs to sell to earn a profit of $ 600,000.
3. Compute the selling price per unit of the company if BEP (units) is 40,000 units and the variable cost per unit and total fixed cost does not change.
4. Explain the various methods used to estimate the variable component and the fixed component of the mixed cost (Excluding Scattergraph method) and state which method is the most accurate? Why? (20 Marks)
B- You were given the following information related to AAA Company, the exclusive distributor for an automotive product:
Total sales | $198,000 |
Direct labor cost | $23,760 |
Total selling and administrative expense | $29,700 |
Direct labor cost represents 30% of its total conversion cost and 40% of its total prime cost.
The only variable selling and administrative expense is a sales commission of 5% of sales.
The company maintains no beginning or ending inventories and its manufacturing overhead costs are entirely fixed costs.
Required: Calculate the following:
1. The total manufacturing overhead cost.
2. The total direct materials cost.
3. The total manufacturing cost.
4. The total variable selling and administrative cost.
5. The total variable cost.
6. The total fixed cost.
7. The total contribution margin. (7 Marks)
C- “The traditional income statement format arranges the data in a way that allows management to more easily analyze how changes in production and sales will influence operating profit’’ Discuss the accuracy of this statement. (3 marks)
Question 3 (30 marks)
A- The following details relate to AAA Company that produces three products:
Product X | Product Y | Product Z | |
Selling price per unit | 60 | 40 | 30 |
Variable costs per unit | 36 | 30 | 12 |
A particular machine is the bottleneck. On that machine, 3 machine hours are required to produce each unit of Product X, 2 hours is required to produce each unit of Product Y, and 2 hours are required to produce each unit of Product Z.
Required:
Which model should AAA emphasize? Why? (Show your calculations). (7.5 Marks)
B-
XYZ Company manufactures and sell wooden product. It wants to prepare cash budget for the second quarter of the year. The company’s sales budget for the second quarter given below:
| April | May | June | Total |
Budgeted Credit sales | $470,000 | $670,000 | $230,000 | $1,370,000 |
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- Credit sales are collected as follows:
25% in the same month of sale
65% in the month following sale
10% in the second month following sale
- February sales totaled $400,000, and March sales totaled $430,000.
Required:
1 Prepare the cash collection schedule for the second quarter.
2. What is the accounts receivable balance on June 30th? (7.5 marks)
C- ABC Corporation has estimated the following information for first quarter of 2020 for one of its products:
| January | February | March | |
Units to be produced | 128,000 | 140,000 | 152,000 | |
Desired ending inventory of finished goods | 30,000 | 36,000 | 38,000 | |
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The ending inventory at December 2019 was 28,000 units.
Required:
Prepare the Production Budget and the Sales Budget for the first quarter of 2020, assuming selling price per unit is $20. (10 marks)
D- The following information have been taken from a manufacturing company for the year 2020:
Sales revenues | $74,000 |
inventory of raw materials January 1, 2020 | 5,000 |
inventory of raw materials December 31, 2020 | 6,000 |
Purchases of raw materials during 2020 | 12,000 |
inventory of work in progress January 1, 2020 | 8,000 |
inventory of work in progress December 31, 2020 | 7,000 |
inventory of finished goods January 1 2020 | 6,000 |
inventory of finished goods December 31, 2020 | 4,000 |
Sales returns | 1,500 |
cost of goods produced | 56,000 |
Trade discount allowed | 2,500 |
Cash discount allowed | 2,000 |
Salaries Expense | 10,000 |
Required: Calculate cost of goods sold and gross profit for the year ended December 31, 2020.
Fundamental Managerial Accounting Concepts
ISBN: 978-0078025655
7th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor-Yi Tsay, Philip Old