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1. Kennedy Company reports the following costs and expenses in May. Factory utilities Depreciation on factory equipment Depreciation on delivery trucks Indirect factory labor Indirect materials Direct materials used Factory manager's salary

$ 13,500 12,650 3,800 48,900 70,800 157,600 8,000

Direct labor Sales salaries Property taxes on factory building Repairs to office equipment Factory repairs Advertising Office supplies used

$79,100 48,400 2,500 1,300 2,000 23,000 2,640

Instructions From the information, determine the total amount of: (a) Manufacturing overhead. (b) Product costs. (c) Period costs. Ans: N/A, SO: 3, 4, Bloom: AP, Difficulty: Hard, Min: 12, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

Solution 166

(10–12 min.)

(a)

Factory utilities........................................................................ Depreciation on factory equipment......................................... Indirect factory labor............................................................... Indirect materials.................................................................... Factory manager's salary........................................................ Property taxes on factory building........................................... Factory repairs........................................................................ Manufacturing overhead.........................................................

$ 13,500 12,650 48,900 70,800 8,000 2,500 2,000 $158,350

(b)

Direct materials....................................................................... Direct labor............................................................................. Manufacturing overhead......................................................... Product costs..........................................................................

$157,600 79,100 158,350 $395,050

Solution 166 (Cont.) (c) Depreciation on delivery trucks................................................ Sales salaries........................................................................... Repairs to office equipment...................................................... Advertising............................................................................... Office supplies used................................................................. Period costs.............................................................................

$ 3,800 48,400 1,300 23,000 2,640 $ 79,140

2. Presented below are incomplete 2021 manufacturing cost data for Tardy Corporation. Direct Labor

Manufacturin g Overhead

Total Manufacturin g Costs

Work in Process (1/1)

Work in Process (12/31)

Cost of Goods Manufacture d

$38,000

$80,000

$48,000

?

$53,000

$90,000

$292,000

$116,00 0

$121,000

$290,000

$96,00 0 $98,00 0 ?

?

$149,00 0 $53,000

$120,00 0 ?

Direct Materials Used

(a ) (b ) (c )

Instructions Determine the missing amounts.

$403,00 0

$311,000 $515,000

Solution 170 (6 min.) Direct Materials Used

Direct Labor

Work in Process (12/31)

$166,000

$120,000

$96,000

$190,000

$90,000

$292,000

$117,000

$98,000

$311,000

$121,000

$290,000

$403,000 $178,000

$515,000

Total Manufacturing Costs

$48,000

(a $38,000 $80,000 ) (b $149,000 $53,000 ) (c) $53,000 $116,000

Cost of Goods Manufactured

Work in Process (1/1)

Manufacturing Overhead

3. Determine the missing amounts. Unit Selling Price 1. $300 2. $600 3. E

Unit Variable Costs $180 C F

Contribution Margin Per Unit A $210 $300

Contribution Margin Ratio B D 30%

Ans: N/A, SO: 4, Bloom: AN, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Quantitative Methods

Solution 178 A. B. C. D. E. F.

(10 min.)

$300 – $180 = $120 $120 ÷ $300 = 40% $600 – $210 = $390 $210 ÷ $600 = 35% $300 ÷ 30% = $1,000 If 30% = CM ratio, then 70% = variable cost percentage $1,000 × 70% = $700 4. The income statement for Nyland Company for 2021 appears below.

NYLAND COMPANY Income Statement For the Year Ended December 31, 2021 ——————————————————————————————————————— ——— Sales (40,000 units).................................................................................... $1,000,000 Variable expenses....................................................................................... 700,000 Contribution margin..................................................................................... 300,000 Fixed expenses........................................................................................... 345,000 Net income (loss)........................................................................................ $ (45,000) Instructions Answer the following independent questions and show computations using the contribution margin technique to support your answers: 1. What was the company's break-even point in sales dollars in 2021? 2. How many additional units would the company have had to sell in 2022 in order to earn net income of $45,000?

3. If the company is able to reduce variable costs by $2.50 per unit in 2022 and other costs and unit revenues remain unchanged, how many units will the company have to sell in order to earn a net income of $45,000? Ans: N/A, SO: 5,6,7, Bloom: AN, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Quantitative Methods

Solution 183

(15–20 min.)

$345,000 30%

1.

= $1,150,000

$345,000 + $45,000 30%

2.

$1,300,000 $25

= $1,300,000 Total sales needed.

= 52,000 total units to be sold

40,000 actual units sold 12,000 additional units to be sold Note: Required sales in units can be obtained directly by dividing fixed costs plus profit by contribution margin per unit: ($345,000 + $45,000) ÷ ($25 – $17.50) = 52,000 units 3.

2012

Variable cost per unit = $17.50 Variable cost reduction = 2.50 2013 Variable cost per unit $15.00

($700,000 ÷ 40,000 units)

Expected contribution margin $10 ($25 – $15) $345,000 + $45,000 $10

= 39,000 units

5. Delgado Manufacturing Company manufactures two products, (1) Regular and (2) Deluxe. The budgeted units to be produced are as follows: Units of Product 2021 Regular Deluxe Total July 10,000 15,000 25,000 August 6,000 10,000 16,000 September 9,000 14,000 23,000 October 8,000 12,000 20,000 It takes 3 pounds of direct materials to produce the Regular product and 5 pounds of direct materials to produce the Deluxe product. It is the company's policy to maintain an inventory of direct materials on hand at the end of each month equal to 30% of the next month's production needs for the Regular product and 20% of the next month's production needs for the Deluxe product. Direct materials inventory on hand at June 30 were 9,000 pounds for the Regular product and 15,000 pounds for the Deluxe product. The cost per pound of materials is $5 Regular and $7 Deluxe.

Instructions Prepare separate direct materials budgets for each product for the third quarter of 2021. Ans: N/A, SO: 3, Bloom: AP, Difficulty: Medium, Min: 25, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation

Solution 171

(25–30 min.) DELGADO MANUFACTURING COMPANY Direct Materials Budget—Regular For the Quarter Ended September 30, 2021

July Total Units to be produced 10,000 Direct materials per unit × 3 Total pounds needed for production 30,000 Add: Desired ending direct materials (pounds) 5,400 Total materials required 35,400 Less: Beginning direct materials (pounds) 9,000 Direct materials purchases 26,400 Cost per pound × $5 Total cost of direct materials purchases $132,000 $366,000 *30% × (8,000 × 3)

August 6,000 × 3 18,000 8,100 26,100 5,400 20,700 × $5 $103,500

September 9,000 × 3 27,000 7,200* 34,200 8,100 26,100 × $5 $130,500

Solution Ex. 171 (Cont.) DELGADO MANUFACTURING COMPANY Direct Materials Budget—Deluxe For the Quarter Ended September 30, 2021 July August Total Units to be produced 15,000 10,000 Direct materials per unit × 5 × 5 Total pounds needed for production 75,000 50,000 Add: Desired ending direct materials (pounds) 10,000 14,000 Total materials required 85,000 64,000 Less: Beginning direct materials (pounds) 15,000 10,000 Direct materials purchases 70,000 54,000 Cost per pound × $7 × $7 Total cost of direct materials purchases $490,000 $378,000 $1,344,000 *20% × (12,000 × 5)

September 14,000 × 5 70,000 12,000* 82,000 14,000 68,000 × $7 $476,000...