Whitestone Company produces two subassemblies, JR-14 and RM-13, used in manufacturing trucks. The company is currently using
Question:
Whitestone Company produces two subassemblies, JR-14 and RM-13, used in manufacturing trucks. The company is currently using an absorption costing system that applies overhead based on direct labor hours. The budget for the current year ending December 31, 20x1, is as follows: |
| WHITESTONE COMPANY Budgeted Statement of Gross Margin for 20x1 | |||||||||
| JR-14 | RM-13 | Total | |||||||
| Sales in units | 5,000 | 5,000 | 10,000 | ||||||
| Sales revenue | $ | 1,700,000 | $ | 2,200,000 | $ | 3,900,000 | |||
| Cost of goods manufactured and sold: | |||||||||
| Beginning finished-goods inventory | $ | 240,000 | $ | 300,000 | $ | 540,000 | |||
| Add: Direct material | 1,000,000 | 1,750,000 | 2,750,000 | ||||||
| Direct labor | 185,185 | 92,593 | 277,778 | ||||||
| Applied manufacturing overhead* | 544,025 | 272,013 | 816,038 | ||||||
| Cost of goods available for sale | $ | 1,969,210 | $ | 2,414,606 | $ | 4,383,816 | |||
| Less: Ending finished-goods inventory | 240,000 | 300,000 | 540,000 | ||||||
| Cost of goods sold | $ | 1,729,210 | $ | 2,114,606 | $ | 3,843,816 | |||
| Gross margin | $ | (29,210 | ) | $ | 85,394 | $ | 56,184 | ||
| *Applied on the basis of direct-labor hours: | |||
| Machining | $ | 424,528 | |
| Assembly | 216,981 | ||
| Material handling | 56,604 | ||
| Inspection | 117,925 | ||
| Total | $ | 816,038 | |
Mark Ward, Whitestone’s president, has been reading about a product-costing method called activity-based costing. Ward is convinced that activity-based costing will cast a new light on future profits. As a result, Brian Walters, Whitestone’s director of cost management, has accumulated cost pool information for this year shown on the following chart. This information is based on a product mix of 5,000 units of JR-14 and 5,000 units of RM-13. |
| Cost Pool Information for 20x1 | |||||
| Cost Pool | Activity | JR-14 | RM-13 | ||
| Direct labor | Direct-labor hours | 10,000 | 5,000 | ||
| Machining | Machine hours | 15,000 | 30,000 | ||
| Assembly | Assembly hours | 6,000 | 5,500 | ||
| Material handling | Number of parts | 5 | 10 | ||
| Inspection | Inspection hours | 5,000 | 7,500 | ||
In addition, the following information is projected for the next calendar year, 20x2. |
| JR-14 | RM-13 | |||
| Beginning inventory, finished goods (in units) | 800 | 600 | ||
| Ending inventory, finished goods (in units) | 700 | 700 | ||
| Sales (in units) | 5,100 | 4,900 | ||
On January 1, 20x2, Whitestone is planning to increase the prices of JR-14 to $355 and RM-13 to $455. Material costs are not expected to increase in 20x2, but direct labor will increase by 8 percent, and all manufacturing overhead costs will increase by 6 percent. Due to the nature of the manufacturing process, the company does not have any beginning or ending work-in-process inventories. |
Whitestone uses a just-in-time inventory system and has materials delivered to the production facility directly from the vendors. The raw-material inventory at both the beginning and the end of the month is immaterial and can be ignored for the purposes of a budgeted income statement. The company uses the first-in, first-out (FIFO) inventory method. |
| Required: | |
| 2. | Using activity-based costing, calculate the total cost for the following activity cost pools: machining, assembly, material handling, and inspection. (For the total costs, round to the nearest dollar.) Then, calculate the pool rate per unit of the appropriate cost driver for each of the four activities. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) |
| Total costs for activity cost pools | Pool rate per unit | ||
| Machining | $ | $ | per machine hour |
| Assembly | $ | $ | per assembly hour |
| Material handling | $ | $ | per part |
| Inspection | $ | $ | per inspection hour |
| 3. | Prepare a table showing for each product line the estimated 20x2 cost for each of the following cost elements: direct material, direct labor, machining, assembly, material handling, and inspection. (Round your answers to the nearest dollar amount. Omit the "$" sign in your response.) |
| JR-14 Estimated 20x2 Product Cost | RM-13 Estimated 20x2 Product Cost | |
| Direct material | $ | $ |
| Direct labor | ||
| Machining | ||
| Assembly | ||
| Material handling | ||
| Inspection | ||
| Total cost | $ | $ |
| 4. | Prepare a budgeted statement showing the gross margin for Whitestone Company for 20x2, using activity-based costing. The statement should show each product and a total for the company. Be sure to include detailed calculations for the cost of goods manufactured and sold. (Round your answers to the nearest dollar amount. Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.) |
| WHITESTONE COMPANY Budgeted Statement of Gross Margin for 20x2 | |||
| JR-14 | RM-13 | Total | |
| Sales revenue | $ | $ | $ |
| Cost of goods manufactured and sold: | |||
| Beginning finished-goods inventory | $ | $ | $ |
| (Click to select)AddLess : Direct material | |||
| Direct labor | |||
| Machining | |||
| Assembly | |||
| Material handling | |||
| Inspection | |||
| Cost of goods available for sale | $ | $ | $ |
| (Click to select)LessAdd : Ending finished-goods inventory | |||
| Cost of goods sold | $ | $ | $ |
| Gross margin | $ | $ | $ |
Expert Answer:
Answers 2 20X1 Cost 20X2 Cost Avtivity Volume of Activity Pool Rate per unit a b a106 c d bc Machini... View the full answer
