McDreamy is in an industry sector which is recovering from the recent recession. The directors of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
McDreamy is in an industry sector which is recovering from the recent recession. The directors of the company hope next year to be operating at 85% of capacity, although currently the company is operating at only 65% of capacity. 65% of capacity represents output of 10,000 units of the single product which is produced and sold. One hundred direct workers are employed on production for 200,000 hours in the current year. The flexed budgets for the current year are as follows. Capacity level 55% 65% 75% 2$ 1,153,800 2,019,150 846,200 1,000,000 1,750,000 650,000 200,000 120,000 3,720,000 Direct materials Direct wages Production overhead Selling and distribution overhead Administration overhead Total costs 1,480,850 596,170 192,310 120,000 3,235,530 703,830 207,690 120,000 4,204,470 Profit in any year is budgeted to be 16%,% of sales. The following percentage increases in costs are expected for next year. Increase % Direct materials 6.0 3.0 Direct wages Variable production overhead Variable selling and distribution overhead Fixed production overhead Fixed selling and distribution overhead 7.0 7.0 10.0 7.5 10.0 Administration overhead Required (a) Prepare for next year a flexible budget statement on the assumption that the company operates at 85% of capacity; your statement should show both contribution and profit. (12 marks) (b) State three problems which may arise from the change in capacity level. (3 marks) (c) Explain what is meant by the principle of controllability. (5 marks) McDreamy is in an industry sector which is recovering from the recent recession. The directors of the company hope next year to be operating at 85% of capacity, although currently the company is operating at only 65% of capacity. 65% of capacity represents output of 10,000 units of the single product which is produced and sold. One hundred direct workers are employed on production for 200,000 hours in the current year. The flexed budgets for the current year are as follows. Capacity level 55% 65% 75% 2$ 1,153,800 2,019,150 846,200 1,000,000 1,750,000 650,000 200,000 120,000 3,720,000 Direct materials Direct wages Production overhead Selling and distribution overhead Administration overhead Total costs 1,480,850 596,170 192,310 120,000 3,235,530 703,830 207,690 120,000 4,204,470 Profit in any year is budgeted to be 16%,% of sales. The following percentage increases in costs are expected for next year. Increase % Direct materials 6.0 3.0 Direct wages Variable production overhead Variable selling and distribution overhead Fixed production overhead Fixed selling and distribution overhead 7.0 7.0 10.0 7.5 10.0 Administration overhead Required (a) Prepare for next year a flexible budget statement on the assumption that the company operates at 85% of capacity; your statement should show both contribution and profit. (12 marks) (b) State three problems which may arise from the change in capacity level. (3 marks) (c) Explain what is meant by the principle of controllability. (5 marks)
Expert Answer:
Answer rating: 100% (QA)
Answer A B Three Problems in capacity level 1A company with a lot of excess capacity can lose sizabl... View the full answer
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0131495388
12th edition
Authors: Charles T. Horngren, Srikant M. Datar, George Foster
Posted Date:
Students also viewed these accounting questions
-
Jimmys income and expenses for the current year are as follows: Expenses $ Membership of Shoe Designers Association 650 Purchase of materials for use in the classes. 10,500 On 15 June 2018 Jimmy...
-
What is the coefficient of O2 ? 5 O 10 11 O 4 FeS2 + 02 --> - Fe2O3 + SO2 -
-
Current Assets 2000 2001 Cash 200 1 000 Accounts receivable 1 600 1 000 Inventory 2 200 2 600 TOTAL CURRENT ASSETS 4 000 4 600 Gross Fixed Assets 12 000 12 400 Less Accum Depreciation 6 000
-
An arm ABC lying in a horizontal plane and supported at A (see figure) is made of two identical solid steel bars AB and BC welded together at a right angle. Each bar is 20 in. long. Knowing that the...
-
The north pole of a compass is attracted to the north magnetic pole of Earth, yet like poles repel. Can you resolve this apparent dilemma?
-
Figure shows, in cross section, two long straight wires held against a plastic cylinder of radius 20.0 cm. Wire 1 carries current i1 = 60.0 mA out of the page and is fixed in place a 2 carries...
-
What is the implication of the statement "the books are not in balance"? What corrective action should be taken?
-
Prepare the 2015 statement of cash flows for Smolira Golf Corp. Some recent financial statements for Smolira Golf Corp. follow. SMOLIRA GOLF CORP 2014 and 2015 Balance Sheets Assets Liabilities and...
-
Requirements Devon Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to Devon Manufacturing's operations: (Click the icon to view the...
-
On January 1, 2018, Schmidt Industries purchased a new paint sprayer for $400,000. The salvage value after 5 years is estimated to be $100,000. The sprayer is depreciated by straight line...
-
When presenting to executive management, I used to get very nervous about how they perceived my communication and thought the whole process was rather intimidating. I soon realized that most...
-
use http://www.principlesofeconometrics.com/stata/beer.dta 2. Describe the dataset: What can you tell me about the data? How could we use this data? Who would care about this data? 3. Choose 2...
-
Starlight.com Starlight.com manufactures bottled wine for retail chains. John Tsang, the controller, believes that the company's standard-costing system is ineffective. An independent consultant...
-
Anton's Fresh Fish and Produce is a wholesale distributor that operates in central Florida. An analysis of two of the company's customers, Seaside Spa and Sigma Assisted Living, reveals the data that...
-
Non-liquidating distributions can be dividends, return of capital, or capital gain income to a shareholder. What type of distribution would be capital gain?
-
1) As we keep on consuming more quantity of a commodity, how does that greater consumption of a good affects total utility and marginal utility? Answer should include the impact on BOTH total and...
-
Last weekend I baked a loaf of bread in an oven preheated to425F. Initially, the internal temperature of the loaf was 82F.Twenty minutes later, the loaf's internal temperature was 144F.From the time...
-
PC Contractors, Inc., was an excavating business in Kansas City, Missouri. Union Bank made loans to PC, subject to a perfected security interest in its equipment and other assets, including...
-
Ian Black law and Gwen Benson are sales representatives for EMI, which installs and maintains music systems in office buildings, elevators, and other public areas. Sales representatives receive a...
-
What are three roles that management accountants perform?
-
Villeagas Wholesalers sells furniture items to four department store chains (customers). Mr. Villeagas commented, "We apply ABC to determine product-line profitability. The same ideas apply to...
-
Figure P4.2 shows the velocity of a block of wood as a function of time. The block is sliding over a horizontal surface. Describe the physical processes that led to this graph. Data from Figure P4.2...
-
The velocity-versus-time graph in Figure P4.3 shows the motion of two different objects sliding across a horizontal surface. Could the change in the \(x\) component of velocity with time be...
-
Consider the two velocity-versus-time graphs shown in Figure P4.4. Are the motions represented by these curves best described as similar or as different? Is the effect of friction on the motion...
Study smarter with the SolutionInn App