Code 4

Task 1

1. Cost of goods manufactured schedule

Deuchs Co.
Cost of goods manufactured schedule
For the month ended September 30 2020
Work in process, Sep 1 $ 6,500
Direct materials
Raw materials inventory, Sep 1 $ 10,000
Raw materials purchases 65,000
Total raw materials available for use 75,000
Less: Raw materials inventory, Sep 30 11,000
Direct materials used $ 64,000
Direct labor 50,000
Manufacturing overhead
Indirect labor 6,500
Factory insurance 4,000
Machinery depreciation 20,000
Machinery repairs 2,000
Factory utilities 3,000
Total manufacturing overhead 35,500
Total manufacturing costs 149,500
Total cost of work in process 156,000
Less: Work in process, Sep 30 7,000
Cost of goods manufactured $149,000

2. Cost of goods manufactured schedule after changing

Deuchs Co.
Cost of goods manufactured schedule
For the month ended September 30 2020
Work in process, Sep 1 $ 6,500
Direct materials
Raw materials inventory, Sep 1 $ 10,000
Raw materials purchases 65,000
Total raw materials available for use 75,000
Less: Raw materials inventory, Sep 30 11,000
Direct materials used $ 64,000
Direct labor (50,000 x 50%) 25,000
 Manufacturing overhead
Indirect labor (6,500 x 50%) 3,250
Factory insurance 7,000
Machinery depreciation (20,000 x 2) 40,000
Machinery repairs (2,000 + 700) 2,700
Factory utilities 2,000
Total manufacturing overhead 54,950
Total manufacturing costs 143,950
Total cost of work in process 150,450
Less: Work in process, Sep 30 7,000
Cost of goods manufactured $143,450
Deuchs should make this purchase as cost of goods manufactured after buying new machine is
lower.

Task 2

(a). Equivalent units

Units completed and transferred out = Beginning WIP + Started into production – Ending WIP

= 2,000 + 38,000 – 3,000 = 37,000 (units)

Materials Conversion
Units transferred out 37,000 37,000
Work in process, Ending
3,000 x 20% 600
3,000 x 100% 3,000
Total equivalent units 40,000 37,600

(b). Unit cost

Total and Unit Material Cost

Work in process, Beginning

Direct material costs $3,160

Cost added to production during March

Direct material costs 56,840

Total Material Cost $60,000

$60,000
Unit Material Cost = 40,000
= $1.5
Total and Unit Conversion Cost

Work in process, Beginning

Conversion costs $4,685

Cost added to production during March

Labor 83,000

Manufacturing Overhead 100,315

Total Conversion Costs 183,315

Total Conversion Cost $188,000

$188,000
Unit Conversion Cost = = $5
37,600

Total Manufacturing cost per unit = $1.5 + $5 = $6.5

Cost Reconciliation Schedule

Cost accounted for

Transferred out (37,000 x $6.5) $240,500

Work in process, Ending

Materials (3,000 x $1.5) $ 4,500

Conversion (600 x $5) 3,000 7,500

Total Cost $248,000

Code 7

Task 1

1. Cost of Job No. Y11 and Cost of Job No. Y12

Job No. Y11

Overhead Cost in Manufacturing: 90% of Direct Labor Cost = 90% x $3,000 = $2,700
Total Job No. Y11 Cost = Materials + Direct Labor + Manufacturing Overhead = $3,000 + $3,000 +
$2,700 = $8,700

Job No. Y12

Overhead Cost in Manufacturing: 80% of Direct Labor Cost = 90% x $3,300 = $2,970

Total Job No. Y12 Cost = Materials + Direct Labor + Manufacturing Overhead = $2,900 + $3,300 +
$2,970 = $9,170

2. Balance of WIP November 30

Total WIP Cost = Initial WIP Balance + Job No. Y11 Cost + Job No. Y12 Cost = $7,000 + $8,700 +
$9,170 = $24,870

3. Actual overhead = $10,500

Total Direct Labor Cost x Overhead Rate = ($3,000 + $3,300) x 90% = $5,670
Actual Manufacturing Overhead Costs - Overhead Applied = $10,500 - $5,670 = $4,830
As a result, overhead was $4,830 underapplied.

Task 2

(a). Equivalent units

Units completed and transferred out = Beginning WIP + Started into production – Ending WIP

= 2,000 + 38,000 – 3,000 = 37,000 (units)

Materials Conversion
Units transferred out 37,000 37,000
Work in process, Ending
3,000 x 20% 600
3,000 x 100% 3,000
Total equivalent units 40,000 37,600

(b). Unit cost

Total and Unit Material Cost

Work in process, Beginning

Direct material costs $3,160

Cost added to production during March

 Direct material costs 56,840

Total Material Cost $60,000

$60,000
Unit Material Cost = 40,000
= $1.5

Total and Unit Conversion Cost

Work in process, Beginning

Conversion costs $4,685

Cost added to production during March

Labor 83,000

Manufacturing Overhead 100,315

Total Conversion Costs 183,315

Total Conversion Cost $188,000

$188,000
Unit Conversion Cost = 37,600
= $5

Total Manufacturing cost per unit = $1.5 + $5 = $6.5

Cost Reconciliation Schedule

Cost accounted for

Transferred out (37,000 x $6.5) $240,500

Work in process, Ending

Materials (3,000 x $1.5) $ 4,500

Conversion (600 x $5) 3,000 7,500

Total Cost $248,000

 Code 1

Task 1

1. Break-even point in units

𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡
𝐵𝑟𝑒𝑎𝑘 − 𝑒𝑣𝑒𝑛 𝑝𝑜𝑖𝑛𝑡 𝑖𝑛 𝑢𝑛𝑖𝑡𝑠 =
𝑈𝑛𝑖𝑡 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛

Unit contribution margin = Unit Selling price – Unit variable cost

𝑆𝑎𝑙𝑒𝑠 $800,000
Unit selling price = 𝑈𝑛𝑖𝑡𝑠 𝑠𝑜𝑙𝑑 = 80,000
= $10

𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 $240,000

Unit variable cost = = = $3
𝑈𝑛𝑖𝑡𝑠 𝑠𝑜𝑙𝑑 80,000

Unit contribution margin = $10 - $3 = $7

𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 $300,000
 𝐵𝑟𝑒𝑎𝑘 − 𝑒𝑣𝑒𝑛 𝑝𝑜𝑖𝑛𝑡 𝑖𝑛 𝑢𝑛𝑖𝑡𝑠 = 𝑈𝑛𝑖𝑡 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛 = $7
= 42,858 (𝑢𝑛𝑖𝑡𝑠)
2. Sales in units

𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 + 𝑇𝑎𝑟𝑔𝑒𝑡 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 $300,000 + $250,000

𝑆𝑎𝑙𝑒𝑠 𝑖𝑛 𝑢𝑛𝑖𝑡𝑠 = = = 78,572 (𝑢𝑛𝑖𝑡𝑠)
𝑈𝑛𝑖𝑡 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛 $7

3. Expected net income

New units sold = 80,000 x (1+20%) = 96,000 (units)

New sales = 96,000 x $10 = $960,000

New variable cost = $240,000 x (1 + 20%) = $288,000

 Net income = Sales – Variable costs – Fixed costs = $960,000 - $288,000 - $300,000 =
$372,000
4. Accept the option?

New fixed costs = $300,000 + $50,000 = $350,000

New unit variable cost = $3 - $1 = $2

New variable cost = $2 x 70,000 = $140,000

New sales = $10 x 70,000 = $700,000

 Net income = Sales – Variable costs – Fixed costs = $700,000 - $140,000 - $350,000 =
$210,000
 Shouldn’t accept because net income after changing is lower than before ($210,000 <
$260,000)
 Code 2

Task 1

1. Overhead rate

Materials handling
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑐𝑜𝑠𝑡 $30,000
Overhead Rate = 𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑟𝑒𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛𝑠 = 70+80
= $200 𝑝𝑒𝑟 𝑟𝑒𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛

Machine setups
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑐𝑜𝑠𝑡 $77,000
Overhead Rate = 𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠𝑒𝑡𝑢𝑝𝑠 = 50+60
= $700 𝑝𝑒𝑟 𝑠𝑒𝑡𝑢𝑝

Quality inspections
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑐𝑜𝑠𝑡 $10,000
Overhead Rate = 𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑖𝑛𝑠𝑝𝑒𝑐𝑡𝑖𝑜𝑛𝑠 = 10+10
= $500 𝑝𝑒𝑟 𝑖𝑛𝑠𝑝𝑒𝑐𝑡𝑖𝑜𝑛

Association certification
𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑐𝑜𝑠𝑡 $7,000
Overhead Rate = 𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑟𝑒𝑡𝑎𝑖𝑙 𝑜𝑟𝑑𝑒𝑟𝑠
= 800+600 = $5 𝑝𝑒𝑟 𝑟𝑒𝑡𝑎𝑖𝑙 𝑜𝑟𝑑𝑒𝑟

2. Allocation

Handsoap

Activity Cost Pools Expected use of cost Activity – Based Cost Assigned / Cost
drivers by product overhead rate Allocated
Materials handling 70 $200 𝑝𝑒𝑟 𝑟𝑒𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛 $ 14,000
Machine setups 50 $700 𝑝𝑒𝑟 𝑠𝑒𝑡𝑢𝑝 35,000
Quality inspections 10 $500 𝑝𝑒𝑟 𝑖𝑛𝑠𝑝𝑒𝑐𝑡𝑖𝑜𝑛 5,000
Association 800 $5 𝑝𝑒𝑟 𝑟𝑒𝑡𝑎𝑖𝑙 𝑜𝑟𝑑𝑒𝑟 4,000
certification
Total cost allocated 58,000
Unit cost / Cost per ($58,000 / 8,000)
unit $7.25

Sanitizer

Activity Cost Pools Expected use of cost Activity – Based Cost Assigned / Cost
drivers by product overhead rate Allocated
Materials handling 80 $200 𝑝𝑒𝑟 𝑟𝑒𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛 $ 16,000
 Machine setups 60 $700 𝑝𝑒𝑟 𝑠𝑒𝑡𝑢𝑝 42,000
Quality inspections 10 $500 𝑝𝑒𝑟 𝑖𝑛𝑠𝑝𝑒𝑐𝑡𝑖𝑜𝑛 5,000
Association 600 $5 𝑝𝑒𝑟 𝑟𝑒𝑡𝑎𝑖𝑙 𝑜𝑟𝑑𝑒𝑟 3,000
certification
Total cost allocated 66,000
Unit cost / Cost per ($66,000 / 6,000)
unit $11

3. Overhead applied

Overhead before = $30,000 + $77,000 + $10,000 + $7,000 = $127,000

Material handling

Overhead applied = Overhead rate x Number of requisitions = $200 x (70+80) = $30,000

Machine setups

Overhead applied = Overhead rate x Number of setups = $700 x (50+60) = $77,000

Quality inspections

Overhead applied = Overhead rate x Number of inspections = ($500 - $80) x (10 + 10) = $8,400

Association certification

Overhead applied = Overhead rate x retail orders = ($5 + $1) x (800 + 600) = $8,400

 Total overhead cost after = $30,000 + $77,000 + $8,400 + $8,400 = $123,800

Yes, the Director should accept the offer as total overhead cost after is lower than before ($123,800
< $127,000)