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Problem – 1 ABC Company had a beginning work-in-process inventory of 30,000 units On June 1. These units contained $120,000 of direct materials and $272,000 of conversion cost. The following data...

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Problem – 1
ABC Company had a beginning work-in-process inventory of 30,000 units On June 1. These units contained $120,000 of direct materials and $272,000 of conversion cost. The following data relate to activity during June:
    Production completed (units)
    70,000
    Ending work-in-process, 60% complete (units)
    20,000
    Direct materials used
    $258,000
    Conversion cost
    $695,600
ABC uses a weighted-average process-costing system. All materials are added at the start of manufacturing; in contrast, conversion cost is incu
ed evenly throughout production.
Required:
A. Compute the total equivalent units for direct material and conversion cost.
B. Compute the cost per equivalent unit of direct material and conversion cost.
C. Determine the cost of complete production.
Problem – 2
ABC Pizza, a manufacturer of frozen pizzas, has the following data:
    Work-in-Process, October 1
    10,000 units*
    Direct material
    $5,500
    Conversion
    17,000
    Cost incu
ed during Octobe
    $110,000
    Conversion
    171,600
    *complete as to direct material; 40% complete as to conversion
The equivalent units of activity for October are:
    Direct material (weighted-average method)
    110,000
    Conversion (weighted-average method)
    92,000
    Completed and transfe
ed out
    90,000
Required:
Compute the following amounts using weighted-average process costing.
1. Cost of goods completed and transfe
ed out during October.
2. Cost of the October 31 work-in-process inventory.
Problem – 3
ABC corporation manufactures cooling system components. The company has gathered the following information about two of its customers: Evans Equipment and Rogers Refrigeration.
    
    Evans Equipment
    Rogers Refrigeration
    Sales Revenue
    $215,000
    $154,000
    Cost of goods sold
    95,000
    68,000
    General selling costs
    30,000
    21,500
    General administrative costs
    21,000
    15,050
Cost-driver data used by the firm and traceable to Evans and Rogers are:
    Customer activity
    Cost drive
    Pool rate
    Sales activity
    Sales visits
    $900
    Order taking
    Sales orders
    250
    Special handling
    Units handled
    30
    Special shipping
    Shipments
    600
    
    
    
    Customer activity
    Evans Equipment
    Rogers Refrigeration
    Sales activity
    8 visits
    5 visits
    Order taking
    17 orders
    22 orders
    Special handling
    600 units
    550 units
    Special shipping
    19 shipments
    30 shipments
Required:
A. Perform a customer profitability analysis for ABC. Compute the gross margin and operating income on transactions related to Evans Equipment and Rogers Refrigeration.
B. Compute gross margin as a percentage of sales revenue. Then compute (1) general selling and administrative costs as a percentage of gross margin and (2) total customer-related costs (i.e., costs that arise from sales visits, order taking, and special handling and shipping) as a percentage of gross margin.
C. On the basis of your calculations, which of the two customers is “more costly” to deal with? Briefly explain.
Problem – 4
ABC Medical clinic offers a number of specialized medical services. A review of data for the year just ended revealed variable costs of $32 per patient day; annual fixed costs of $48,000, which are incu
ed evenly throughout the year; and semi variable costs that displayed the following behavior at the “peak” and “valley” of activity:
        January (2,400 patient day): $258,400
        August (2,900 patient day): $278,900
Required:
A. Calculate the total cost for an upcoming month (2,800 patient days) if cu
ent cost behavior patterns continue. ABC uses the high-low method to analyze cost behavior.
B. There is a high probability that ABC’s volume will increase in forthcoming months as patients take advantage f new scientific advances. Can the data and methodology used in part (a) for predicting the costs of 2,800 patient days be employed to estimate the costs for, say, 3,800 patient days? Why or why not?
Problem – 5
ABC corporation reports the following data for the first six months of the year:
        
    Month
    Machine Hours
    Electrical Cost
    January
    400
    $40
    Fe
uary
    300
    $30
    March
    400
    $50
    April
    300
    $40
    May
    200
    $30
    June
    200
    $20
a. Using the least-squares regression method, the estimated variable electrical cost per machine hour.
. Using the least-squares regression method, the estimated monthly fixed component of the electrical cost.
Answered Same Day Jun 16, 2021

Solution

Harshit answered on Jun 18 2021
129 Votes
COST ACCOUNTING
QUESTION 1
(a) Calculation of total equivalent units for ABC Company:
    Particulars
    Physical Units
    Material
    Conversion Cost
    No. of units produced and transfe
ed
    70000
    70000
    70000
    Closing WIP
    20000
    
    
    Material (100%)
    
    20000
    
    Conversion (60%)
    
    
    12000
    Equivalent Units Of Production
    90,000
    90,000
    82,000
(b) Calculation of cost per equivalent unit of production-ABC Company
    Particulars
    Material ($)
    Conversion Cost ($)
    Opening WIP
    120,000
    272,000
    Cost Added in June
    258,000
    695,600
    Total Cost to be accounted fo
    378,000
    967,600
    Equivalent Units Of Production
    90,000
    82,000
    Cost per equivalent unit
    $ 4.2
    $ 11.80
(c ) The cost of complete production = Cost per equivalent unit* No. of units produced
= 4.2 * 70 000 + 11.80 * 70,000
=294,000+826,000 = $ 1,120,000
QUESTION 2
Cost per equivalent unit of material = (5,500 + 110,000) / 110,000 = 1.05
Cost per equivalent unit of conversion = (17,000 + 171,600) / 92,000 = 2.05
Calculation of the following:
1) Cost of goods completed and transfe
ed out during October
= (1.05 + 2.05) * 90,000 = $279,000
Cost of ending work in process inventory
= Total Cost - Cost of goods completed and transfe
ed
= 304,100 – 279,000
Cost of Ending work in process = 25,100
**Note
Total Cost = 5,500+110,000+17,000+171,600 = 304,100
QUESTION 3
(a) Preparation of customer profitability analysis:
Calculation of customer related costs:
     
    Cost Drivers
     
     
     
    Details
    E
    M
    Pool Rate
    E
    M
    
    Equipment
    Equipment
    ($)
    Equipment
    Refrigeration
    
    (A)
    (B)
    (C)
    (A*C)
    (B*C)
    Sales Activity
    8
    5
    900
     7,200
     4,500
    Order Taking
    17
    22
    250
     4,250
     5,500
    Special handling
    600
    550
    30
     18,000
     16,500
    Special Shipping
    19
    30
    600
     11,400
     18,000
    Total
     
     
     
     ...
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