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Q. 01). P1-31A E-commerce cost-benefit analysis (Learning Objective 5) Sun Gas wants to move its sales order system to the Web. Under the proposed system, gas stations and other merchants will use a...

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Q. 01). P1-31A E-commerce cost-benefit analysis (Learning Objective 5)
Sun Gas wants to move its sales order system to the Web. Under the proposed system, gas stations and other merchants will use a Web browser and, after typing in a password for the Sun Gas Web page, will be able to check the availability and current price of various products and place an order, Currently, customer service representatives take dealers’ orders over the phone: they record the information on a paper form, then manually enter it into the firm’s computer system.
CFO Carrie Smith believes that dealers will not adopt the new Web System unless Sun Gas provides financial assistance to help them purchase or upgrade their PCs. Smith estimates this one-time at $750,000. Sun Gas will also have to invest $150,000 in upgrading its own computer hardware. The cost of the software and the consulting fee for installing eh system will be $230,000. The Web System will enable Sun Gas to eliminate 25 clerical positions. Smith estimates’ that the new system’s lower labor costs will have saved the company $1,357,000.
Requirement
  • Use a cost-benefit analysis to recommend to Smith whether Sun Gas should proceed with the Web-based ordering system. Give your reasons, showing supporting calculations.
Q. 02). E2-21A Classify and calculate a manufacturer’s costs (Learning Objectives 3 & 4)
An airline manufacturer incurred the following costs last months (in thousands of dollars) :
a. Air plane seats $ 250
b. Depreciation on administrative offices 60
c. Assembly worker’s wages 600
d. Plant utilities 120
e. Production supervisors salaries 100
f. Jet engines 1,000
g. Machine Lubricants 15
h. Depreciation on forklifts 50
i. Property tan on corporate marketing office 25
j. Cost of warranty repairs 225
k. Factory janitor’s wages 30
l. Cost of designing new plant layout 175
m. Machine operators health insurance 40
TOTAL $2,690

Requirements
  1. If the cost object is an airplane, classify each cost as one of the following: direct material (DM), direct labor, (DL), indirect labor (IL), indirect materials (IM), other manufacturing overhead (other MOH), or period cost. (Hint: Set up a column for each type of cost). What is the total for each type of cost?
  2. Calculate total manufacturing overhead costs.
  3. Calculate total inventoriable product costs.
  4. Calculate total prime costs.
  5. Calculated total conversation costs.
  6. Calculate total period costs.
Q. 03. E2-25A Compute cost of goods manufactured and cost of goods sold (Learning Objective 5)
Compute the cost of goods manufactured and cost of goods sold for Strike Marine Company for the most recent year using the amounts described below. Assume that raw materials inventory contains only direct materials.
Beginning of Year End of Year End of Year
Raw materials inventory $25,000 $28,000 Insurance on plant $ 9,000
Work in process inventory 50,000 35,000 Depreciation-plant building and equipment 13,000
Finished goods inventory 18,000 25,000 Repairs and maintenance plant 4,000
Purchase of direct materials 78,000 Marketing expenses 77,000
Direct Labor 82,000 General and administrative expenses 29,000
Indirect labor 15,000

Q. 04. E2-34B Classify costs along the value chain for a manufacturer (Leaning Objectives 2 & 3)
Suppose the cell phone manufacturer Plum Electronics provides the following information for its costs last month (in hundreds of thousands):
Salaries of telephone salespeople $ 4 Transmitters $ 58
Depreciation on plant and equipment 55 Rearrange production process to accommodate new robot 1
Exterior case for phone 8 Assembly - line workers’ wages 9
Salaries of scientists who developed new model 11 Technical customer-support hotline 3
Delivery expense to customers via UPS 5 1-800 (toll-free)line for customer orders

Requirements
  1. Classify each of these costs according to its place in the value chain (Hint : You should have at least one cost in each value chain function)
Production
R & D Design of Products or Processes Direct Materials Direct Labor Manufacturing Overhead Marketing Distribution Customer Service
  1. Compute the total costs for each value chain category
  2. How much are the total inventoriable product costs?
  3. How much are the total prime costs?
  4. How much are the total conversion costs?
Q. 5. E3-28A Record journal entries (Learning Objectives 2, 3,5 & 6)
The following transactions were incurred by Dutch Fabricators during January, the first month of its fiscal year.
Requirements
  1. Record the proper journal entry for each transaction.
  1. $190, 000 of materials were purchased on account.
  2. $ 174,000 of materials was used in production: of this amount, $152, 000 was used on specific jobs.
  3. Manufacturing labor and salaries for the month totaled $ 225,000. A total of $ 190,000 of manufacturing labor and salaries was traced to specific jobs, while the remainder was indirect labor used in the factory.
  4. The company recorded $20,000 of depreciation on the plant and plant equipment. The company also received a plant utility bill for $ 10,000
  5. $81,000 of manufacturing overhead was allocated to specific jobs.
  1. By the end of January, was manufacturing overhead over allocated or under allocated? By how much?
Q.6 S4-19 Quality initiative decision (Learning Objective 5)
Wharfedale manufactures high-quality speakers. Suppose Wharfedale is considering spending the following amounts on a new quality program:
Additional 20 minutes of testing for each speaker $ 600,000
Negotiation with and training suppliers to obtain higher-quality materials and on-time delivery 300,000
Redesigning the speakers to make them easier to manufacture 1,400,000
Wharfedale expects this quality program to save costs as follows:
Reduced warranty repair costs $ 200,000
Avoid inspection of raw materials 400,000
Rework avoided because of fewer defective units 650, 000

It also expects this program to avoid lost profits from the followings:
Lost sales due to disappointed customers $ 850,000
Lost production time due to rework 300,000
  1. Classify each of these costs into one of four categories of quality costs (prevention, appraisal, internal failure, external failure)
  2. Should Whardale implement the quality program? Give your reasons.
005_brhybjo-zk4c20xe.docx
Answered Same Day Dec 23, 2021

Solution

Robert answered on Dec 23 2021
123 Votes
SOLUTION 1:
Calculation of Net Benefit from Web-based Ordering System:
Particulars Amount
Savings in Labor Costs $ 1,357,000.00
Less: Costs to be incu
ed
Purchase or Up gradation of Pcs $ 750,000.00
Up gradation of own computer
hardware $ 150,000.00
Software Cost & Consulting fees $ 230,000.00
Total Costs $ 1,130,000.00
Net Benefit $ 227,000.00
Sun Gas should proceed with Web-based Ordering system because it results in net benefit of
$227,000.
SOLUTION 2:
Type of Costs DM DL IL IM
Other
MOH
Period
Costs
Air plane seats
$
250.00
Depreciation on administrative
offices
$
60.00
Assembly worker’s wages
$
600.00
Plant utilities

$
120.00
Production supervisors salaries

$
100.00
Jet engines
$
1,000.00
Machine Lu
icants

$
15.00
Depreciation on forklifts

$
50.00
Property tax on corporate Office

$
25.00
Cost of wa
anty repairs

$
225.00
Factory janitor’s wages

$
30.00
Cost of designing new plant layout

$
175.00
Machine operators health insurance
$
40.00
Total
$
1,250.00
$
640.00
$
130.00
$
15.00
$
170.00
$
485.00
Total Manufacturing Overhead Costs:
Particulars Amount
Indirect Material $ 15.00
Indirect Labor $ 130.00
Other Manufacturing Overheads $ 170.00
Total Manufacturing Overhead Costs $ 315.00
Total Inventor able Product Costs:
Particulars Amount
Direct Material $ 1,250.00
Direct Labor $ 640.00
Manufacturing Overheads Costs $ 315.00
Total Inventor able Product Costs $ 2,205.00
Total Prime Costs:
Particulars Amount
Direct Material $ 1,250.00
Direct Labor $ 640.00
Total Prime Costs $ 1,890.00
Total Conversion Costs:
Particulars Amount
Direct Labor $ 640.00
Manufacturing Overheads $ 315.00
Total Conversion Costs $ 955.00
Period Costs $ 485.00
SOLUTION 3:
Strike Marine Company
Schedule of Cost of Goods Manufactured

Particulars Amount
Beginning Work in Process Inventory $ 50,000.00
Add: Direct materials used:
Beginning materials inventory $ 25,000.00
Purchases of materials $ 78,000.00
Available for use $ 103,000.00
Ending materials inventory $ (28,000.00)
Direct materials used $ 75,000.00
Direct labor $ 82,000.00
Manufacturing overhead:
Indirect labor $ 15,000.00
Insurance on plant $ 9,000.00
Depreciation - plant, building & equipment $ 13,000.00
Repairs and maintenance - plant $ 4,000.00 $ 41,000.00
Total manufacturing costs incu
ed during the
year
$ 198,000.00
Total manufacturing costs to account for $ 248,000.00
Less: Ending work in process inventory $ (35,000.00)
Cost of goods manufactured $ 213,000.00
Strike Marine Company
Schedule of Cost of Goods Sold

Particulars Amount
Beginning finished goods inventory $ 18,000.00
Cost of goods manufactured* $ 213,000.00
Cost of goods available for sale $ 231,000.00
Ending finished goods inventory $ (25,000.00)
Cost of goods sold $ 206,000.00
*From schedule of cost of goods manufactured.
SOLUTION 4:
Production
Type of Costs
R &
D
Design of
Products
or
Processes
Direct
Materials
Direct
Labor
Manufacturing
Overhead
Marketing Distribution
Customer
Service
Salaries of Telephone Sale $ 4.00
Depreciation on P&E
$
55.00
Exterior for phone
$
8.00
Salaries of Scientists
$11.00
Delivery expense $ 5.00
Transmitters
$
58.00
Rea
ange production
$
1.00
Assembly line workers'...
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