The Chromosome Manufacturing Company produces two products, X and Y. The company president, Jean Mutation, is concerned about the fierce competition in the market for product X. She notes that competitors are selling X for a price well below Chromosome's price of $14.20. At the same time, she notes that competitors are pricing product Y significantly higher than Chromosome's price of $15.50.
Ms. Mutation has obtained the following data for a recent time period:
Product X
Product Y
Number of Units
16,500
5,200
Direct Material Costs per Unit
$3.95
$4.12
Direct Labor Costs per Unit
$2.48
$2.98
Direct Labor Hours
9,500
3,800
Number of Set-Ups
65
29
Machine Hours
2,300
2,200
Inspection Hours
90
115
Purchase Orders
10
30
Ms. Mutation has learned that overhead costs are assigned to products on the basis of direct labor hours. The overhead costs for this time period consisted of the following items:
Question #1: Using Direct labor Hours to allocate overhead costs determine the gross margin per unit for Product X.
Question 2: Using ABC for overhead allocation, determine the gross margin per unit for Product Y.
Question 3: Consider the following information for the Bordon Company for August: For fiscal 2019 the standard direct material cost for Borden's product is $50 per unit (12.5kg at $4 per kg). In August, 2019 the actual amount paid for 45,600kg of material purchased and used was $173,280 and the direct material quantity variance was $15,900 unfavorable.
What was the actual production in August 2019?
Question 4: Continuing with the Bordon Company. What was the material price variance for the month of August?
Question 5:
Rome Metals Cost Breakdown
Per Unit
Direct materials
$8
Direct labo
$45
Variable overhead
$9
Fixed overhead
$14
Shipping Cost
$2
Total Per Unit
$78
Rome Metals a US based firm located in Rome, Georgia makes metal
ackets used in the construction of warehouse shelving. The firm has a practical capacity of 42,000 units and for the past several years has produced at a constant volume of 35,000 units/year. Rome Brackets are priced at $92/unit. The manufacturing costs incu
ed to make a
acket at the 35,000-unit level is shown above. Note that the $2/unit shipping cost is included in the manufacturing costs
eakdown. An order for 10,000 has been received from a new customer - Fedex Logistics Services - but at a required price of only $78/unit. Fedex has agreed to pick up the order from the Rome facility itself saving Rome Metals the shipping fee. Due to capital constraints Rome Metals cannot adjust its practical capacity nor does the firm have any potential outsourcing partners. Assuming no loss of existing customer goodwill, should Rome Metals accept the offer from Fedex Logistics Services.
Question 6: A list of account balances for Saint Lyonn Pastries follow:
Revenue and Expenses
January 1 inventories
Purchases of raw materials
$171,000
Raw materials
$38,000
Direct labo
$205,000
Work in process
$41,000
Indirect labo
$35,000
Finished Goods
$105,000
Factory Rent
$84,500
Depreciation Expense - Factory Equipment
$25,000
Insurance - factory
$18,000
December 31 inventories
Salesperson's salaries
$92,000
Raw materials
$47,000
Maintenance - Factory Equipment
$14,000
Work in process
$25,000
Administrative Office Wages
$76,000
Finished goods
$93,000
Miscellaneous Expenses - Factory
$28,000
Miscellaneous Expenses- Office
$45,000
Raw Material Purchase Returns
$6,200
Net Sales Revenues
$950,000
CEO Salary
$100,000
Utilities Expense - Factory
$32,000
Administrative Office Rent
$34,000
To answer questions 6 and 7 you will need to prepare an income statement. To get the problems co
ect you will need to determine the Cost of Goods Manufactured and the Cost of Goods Sold. What is the Cost of Goods Sold?
Question 7: Continuing with Saint Lyonn Pastries, what are the Cost of Goods Manufactured for the fiscal year?
Question 8: Continuing with Saint Lyonn Pastries what is the Net Income for the fiscal year?
Question 9: Oxford Street Apparel produces and sells two lines of business suits; the European and the Legacy. The following monthly data is provided in the table below.
In addition, the firm's budgeted net income is $55,000 per month. Calculate the firm's fixed cost.
European
Legacy
Estimated unit sales per month
500
1000
Selling price
$200
$175
Variable manufacturing costs
$110
$100
Variable selling and administrative costs
$10
$10