Create a contribution margin-based income statement

Assignment Help Accounting Basics

Reference no: EM13903994

Able Corporation incurred the following costs.

Beginning direct materials inventory	$16,000
Beginning work-in-process inventory	$7,000
Beginning finished goods inventory	$19,000
Ending direct materials inventory	$16,000
Ending work in process	$14,000
Ending finished goods	$ 26,000
Factory supervisor's salary	$28,000
Depreciation on plant	$12,000
Sales	$800,000
Selling and administrative expenses	$125,000
Plant maintenance	$6,000
Plant utilities	$11,000
Direct material purchases	$215,000
Direct labor	$240,000

Calculate the following.

Direct materials used
Cost of goods manufactured
Cost of goods sold
Operating income

Problem 2:

Below is information from Job Card 506 for the Bearing Manufacturing Company.

Date started: June 15, 2015
Date Completed: July 24, 2015

Date	Direct Materials	Direct Labor	Applied Factory Overhead
6/15/2015	$ 5,000
6/25/2015		$1,200	$600
6/27/2015	$2,300
7/6/2015		$ 1,540	$770
7/15/2015	$2,600
7/24/2015		$760	$380

Job 506 was sold on credit on July 24, 2015, for 180% of its cost.

Factory OH was applied on the basis of DL.

Required:

Prepare the journal entries to record the costs incurred for Job 506 in 2015 for direct materials, direct labor, and factory overhead.
Prepare the journal entry to record the completion of Job 506.
What is the predetermined factory overhead rate for Bearing Manufacturing?
Prepare the journal entries to record the sale of Job 506.

Problem 3:

Kali Manufacturing Inc. began the year with the following.

	Units
Beginning work-in-process	20,000	20% complete
Transferred to finished goods	60,000
Ending inventory	10,000	70% complete
Materials added at the beginning of the process

Required

Calculate the equivalent units for

a. material costs under the weighted average process cost method;

b. conversion costs under the weighted average process cost method;

c. material costs under the FIFO process cost method; and

d. conversion costs under the FIFO process cost method.

Problem 4

Glass Company manufactures a product through a continuous single-step process. All materials are added at the beginning of processing. Production and cost data for the company for the current month are as follows.

Production Data	Units
In process, beginning of month (20% converted)	2,000
Started during current month	8,000
Completed and transferred to finished goods	5,500
In process, end of month (60% converted)	4,500
Manufacturing Costs
Work in process, beginning	$21,450 ($15,000 Materials, $6,450 Conversion)
Costs added to WIP during the period:
Materials	$54,000
Direct labor cost	$105,000
Factory overhead cost	$36,150

Required Prepare a cost of production report for current month. Use Weighted Average process costing.

Problem 5:

Alliance Company manufactures two products (brushes and combs). The overhead costs have been divided into four cost pools that use the following activity drivers.

	# of Setups	# of Orders	Machine Hours	Packing Orders
Brushes	30	35	2,000	100
Combs	10	65	6,000	150
Cost per Pool	$20,000	$10,000	$280,000	$60,000

Required

Compute the allocation rates for each of the activity drivers listed.
Allocate the overhead costs to Products S and T using activity-based costing.
Compute the overhead rate using machine hours under the functional-based costing system.
Allocate the overhead costs to Products S and T using the functional-based costing system overhead rate calculated in part (c).

Problem 6:

A company's sales volume averages 4,000 units per year.
Recently, its main competitor reduced the price of its product to $48.
The company expects sales to drop dramatically unless it matches the competitor's price.

In addition, the current profit per unit must be maintained.
Information about the product (for production of 4,000) is as follows.

	Standard Quantity	Actual Quantity	Actual Cost
Materials (pounds)	5,800	6,000	$60,000
Labor (hours)	1,800	2,000	$20,000
Setups (hours)	0	225	$8,000
Material handling (moves)	0	400	$5,000
Warranties (number repaired)	0	300	$15,000

Required

Calculate the target cost for maintaining current market share and profitability.
Calculate the non-value-added cost per unit.
If non-value-added costs can be reduced to zero, can the target cost be achieved?

Problem 7:

The Peace Company has the following functional (traditional) income statement for the prior month.

Sales	($50 * 100,000 units)		$5,000,000
Cost of goods sold
	Direct materials	$1,200,000
	Direct labor	$950,000
	Variable factory overhead	$600,000
	Fixed factory overhead	$850,000	$3,600,000
Gross profit			$1,400,000
Selling and administrative expense
	Variable	$250,000
	Fixed	$120,000	$370,000
Operating income			$1,030,000
There were no beginning and ending inventories.

Required:

Calculate the contribution margin per unit.
Calculate the contribution margin ratio.
What is the break-even point in units?
What is the amount of sales in dollars needed to obtain a before-tax profit of $40,000?

Problem 8:

Suzy Manufacturing has estimated monthly sales of 18,000 units for $48 per unit. Variable costs include manufacturing costs of $27 and distribution costs of $9 per unit. Fixed costs are $60,000 per month.

Required

Determine each of the following values.

Unit contribution margin
Monthly break-even unit sales volume
Before-tax monthly profit
Monthly margin of safety in units

Create a contribution margin-based income statement.

Problem 9:

The Peace Company has the following functional (traditional) income statement for the prior month.

Sales	($50 * 100,000 units)		$5,000,000
Cost of goods sold
	Direct materials	$1,200,000
	Direct labor	$950,000
	Variable factory overhead	$600,000
	Fixed factory overhead	$850,000	$3,600,000
Gross profit			$1,400,000
Selling and administrative expense
	Variable	$250,000
	Fixed	$120,000	$370,000
Operating income			$1,030,000
There were no beginning and ending inventories.

Required:

Calculate the contribution margin per unit.
Calculate the contribution margin ratio.
What is the break-even point in units?
What is the amount of sales in dollars needed to obtain a before-tax profit of $40,000?

Problem 10:

Required

Determine each of the following values.

Unit contribution margin
Monthly break-even unit sales volume
Before-tax monthly profit
Monthly margin of safety in units

Create a contribution margin-based income statement.

Reference no: EM13903994

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