Problem 1:

DATA

ABC, Inc. is a manufacturing business and has the following costs and expenses:

Required: Use the information in the DATA field above using cell referencing to answer the following requirements.

1. Calculate the unit cost for variable costing.

2. Calculate the unit cost for absorption costing.

3. Prepare an absorption-costing income statement.

4. Prepare a variable-costing income statement.

5. Reconcile the differences in income that you calculated

6. Calculate the breakeven point in units.

7. Calculate the breakeven point in sales dollars.

8. Calculate the safety margin.

9. What does the margin of safety mean?

10. Calculate the operating leverage .

11. What if sales volume increases by 6% how much will income increase in percentage terms? Make sure you have read over the DOL discussion and understand the multiplier impact of changes in sales volume that occurs based on DOL.

12. What if the direct labor cost per unit increases from $11 a unit to $12, what will be the new breakeven in units? Explain why it changed.

You should only have to change the direct labor in the data area and actually all your answers should be updated. Please put the direct labor cost back to the original number once you have answered the question?

Problem 2

Music Company manufactures musical instruments. The company uses a normal costing system, in which manufacturing overhead is applied on the basis of direct-labor hours. The company's budget for the current year included the following:

Budgeted Total Manufacturing overhead $420,000
Budgeted Total Direct Labor hours 20,000

Selected accounts for June 1 are as follows:
Raw materials inventory $14,000
Manufacturing Supplies Inventory 600
Work in process inventory(Job A which is made up of incomplete cornets) 8,000
Finished goods inventory(Jobs B, C, and D which are made up of Finished Tubas) 22,000

During June, the firm started work on the following 2 jobs and did not do anymore work on Job A for June.
Job number 1, consisting of 74 saxophones
Job number 2, consisting of 113 trumpets

Below is what transpired in the month of June

1. Purchased on account $6,200 of rolled brass sheet metal, which totaled 1,000 square feet of rolled brass sheet metal.

2. Purchased on account $5,400 of brass tubing, which totaled 400 pounds of brass tubing.

3. The following requisitions were submitted during the month:

Material requisition number 14: 270 square feet of brass sheet metal of $5.50 per square foot requisitioned for Job 1
Material requisition number 15: 1,050 pounds of brass tubing, at $9 per pound requisitioned for job 2
Material requisition number 16: 11 gallons of valve lubricant, at $12 per gallon requisitioned for general factory use

4. Labor time sheets for June:

Direct labor for Job 1: 840 hours $21 per hour
Direct labor for Job 2: 940 hours $21 per hour
Indirect labor: $4,500 for General factory cleanup
Indirect Labor: $9,000 Factory supervisor salaries

5. Depreciation of the factory building and equipment during June amounted to $14,000.

6. Rent paid in cash for warehouse space used for production during June was $1,400.

7. Utility costs incurred during June amounted to $2,600.

8. Property tax paid on factory, $2,4500. factory $2,450

9. The insurance cost covering factory operations for the month was $2,9500, was $2,950.

10. The costs of salaries and fringe benefits for sales and administrative personnel paid in cash during June amounted to $3,600.

11. Depreciation on administrative office equipment and space amounted to $4,600.

12. Other selling and administrative expenses paid in cash during June amounted to $160.

13. Job 1 was completed during the month.

14. Half of the saxophones from Job 1 were sold on account during the month for $762 per Saxophone.

Required:

a. Calculate the company's predetermined overhead rate for the year:

b. Complete the job cost sheet for the two jobs worked on in June:

c. Compute the actual manufacturing overhead for June.

d. What is amount of over or underapplied overhead for June? Is it over or underapplied?

e. What is the ending raw materials inventory for June?

f. What is ending work in process inventory for June?

g. What is ending finished goods inventory for June?

h. Prepare a cost of goods manufactured statement for the month like the one in exhibit 3-8 page 100.

i. Prepare a cost of goods sold statement for the month like the one in exhibit 3-9 page 101.

j. Prepare an income statement for the month assuming a tax rate of 25% like the one in exhibit 3-10 page 101.

Problem 3

The following information was available about receiving costs for the first 8 months of the year:

1. Determine the variable cost per receiving order using the High-Low method.
2. Determine the fixed cost using the High-Low method.
3. Give the cost equation using the High-Low method.
4. Determine the receiving costs using the High-Low method if the company expects 1,370 receiving orders.

Problem 4

You have just been hired as a consultant to a local hospital and have decided to use your new MBA skills to make a recommendation to management on what should be the cost driver(s) for estimating the monthly overhead cost for the operating rooms in the hospital.

There are multiple operating rooms being used.

Required:

1. Prepare 3 scattergraphs and 3 simple regression analyses***** to estimate the overhead costs using each of the cost drivers above. Make sure you show(insert) the equation of the line and R-squared on each of your scattergraphs. The output for your simple regression table should be on a separate sheet and you should type out the equation of the line below the table output.

I have prepared the operating room hours scattergraph and regression for you, therefore, you actually only have to do 2. You may want to redo this scattergraph and regression analysis just to make sure you understand the process.

If you have done your scattergraph and simple regression correctly the equation of the line and the R-squared should match the respective output.

To make a scattergraph with data from nonadjacent columns highlight the X data (i.e. independent variable-cost driver) first and then hold down the control (ctrl) key and highlight the Y data (i.e. the dependent variable-cost).

2. Prepare a multiple regression table using all three of the activities as the independent variable. Using the output from the multiple regression, give the equation of the line to estimate factory cost in terms of the 3 cost drivers below the table output.

Also, make sure you identify which cost driver relates to X1, X2, and X3--I have done the first one for you.(excel reads left to right) Identify the 2 other X variables(I have identified the X1 variable for you, which will be the first column highlighted):

X1 Operating room hours
X2
X3

3. Assuming the following level of cost-driver volume for the month, what is the estimated cost using simple regression for each of the cost drivers and using multiple regression. You need to use cell references and the output from the regression tables to estimate the costs.

4. Using the simple and multiple regression analyses above, what would you recommend to estimate the cost of the overhead? Why?