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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BUSN6070


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 incurred 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 incurred during October $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 transferred out 90,000 Required: Compute the following amounts using weighted-average process costing. 1. Cost of goods completed and transferred 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 driver 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 incurred 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 current 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 February 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. b. Using the least-squares regression method, the estimated monthly fixed component of the electrical cost.
Answered Same DayJun 16, 2021

Answer To: Problem – 1 ABC Company had a beginning work-in-process inventory of 30,000 units On June 1. These...

Harshit answered on Jun 18 2021
124 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 transferred
    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 for
    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 transferred 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 transferred
= 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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