Reference no: EM132475701

Managerial Accounting Questions -

Question 1 - Comptel International is a manufacturer of the MX7500 cell phone. The following are its sales in units for the first quarter and its anticipated sales in units for the coming quarter. The distributor price is $300 per unit.

	Units
September (actual)	90,000
October (actual)	90,000
November (actual)	100,000
December (actual)	98,000
January	100,000
February	90,000
March	110,000
April	125,000
May	150,000
June	165,000
July	155,000
August	140,000

Comptel likes to keep 10% of the following month's sales in units in inventory. In addition, the most expensive part for the cell phone is the touchscreen. Because that part is essential and has stock-out issues, Comptel requires 25% of the following month's production requirements to be held in ending inventory. Each touchscreen costs $9.00. Inventory of touchscreens as at December 31 of the previous year was 24,750 units.

Comptel's customers have historically paid their account balances as follows: 15% of total sales pay cash, 20% pay in the month of purchase, 16% pay in the month following purchase, 19% pay in the second month after purchase, and 28% pay in the third month after purchase. The 2% balance remains as bad debts. The customers that paid in cash receive a 1% discount.

Required -

a) Develop the production budget for the MX7500 for the first quarter (January to March) and the second quarter (April to June).

b) Develop the purchase budget for the touchscreen for the first quarter (January to March) by each month and total quarter and second quarter (April to June) by each month and total quarter.

c) Develop the cash receipts section of the cash budget for the first quarter (January to March) by each month and total quarter and second quarter (January to March) by each month and total quarter.

d) If the accounts receivable balance at December 31 is $42,620,100, what is the accounts receivable balance (not the balance net of the allowance for doubtful accounts) at the end of June?

Question 2 - Nguyen Nibbles Inc. manufactures a line of rice crackers. Nguyen's management accountant has been doing a full analysis of the costs and activities. The information obtained from this analysis is as follows:

Activity	Cost driver	Budgeted cost of activity	Budgeted levels of cost drivers
Ordering	Number of purchase orders	$75,000	15,000 purchase orders
Machine setup	Number of batches	$134,633	4,000 batches
Materials movement	Number of batches	$10,637	4,000 batches
Machine maintenance	Machine hours	$24,600	7,500 hours
Packaging and shipping	Number of packages	$103,125	3,750,000 packages

For the coming year (20X7), Nguyen predicts that sales of crackers will be 3,645,000 packages at $0.90 per package evenly throughout the year. The company keeps 5% of sales in finished goods inventory for the following month. Opening inventory for finished goods was 14,500 packages at a cost of $0.28 each. Nguyen uses first in, first out (FIFO) for producing the process cost report for inventory valuation. The opening inventory for direct materials is $15,200. Purchases for the year are budgeted at $304,000 with an estimated ending inventory of $15,620. Direct labour for the year is expected to be $311,500 for all production. Sales costs are 6% of sales. Administrative costs are estimated at $562,000. There was no work-in-process inventory, whether opening or ending. The activities' predicted use is as follows:

Activity	Cost driver
Ordering	13,500 purchase orders
Machine setup	3,646 batches
Materials movement	3,646 batches
Machine maintenance	7,000 hours
Packaging	3,646,000 packages

Required -

a) Develop the production budget for the coming year. Production is always based on batches of 1,000. To answer this question, please calculate the required production in units and then calculate the production in units rounded to batches of 1,000.

b) Develop the schedule of cost of goods manufactured and the budgeted income statement. Ignore any under or over-applied overhead.

Question 3 - XYZ Company has designed a new and improved widget. Pricing will be determined on a cost-plus basis, and the company standard will be to charge cost plus 35%. XYZ has organized its systems into four departments: Stores, which involves the management of all the raw materials inventories; Production, which manufactures the product; Packaging, which prepares the product for shipment; and Warehousing, in which the final product is stored until an order is received. Estimates of the costs from each department for the new product are as follows:

Stores (raw materials):

- Materials - $85.00

- Direct labour - 0.5 hours at $14.50 per hour

- Machine hours - 0.02 hours

- Variable overhead - materials cost × 21%

Production:

- Materials - $5.70

- Direct labour - 0.25 hours at $16.00 per hour

- Machine hours - 0.22 hours

- Variable overhead - machine hours × $4.70

Packaging:

- Materials - $0.25

- Direct labour - 0.1 hours at $15.50 per hour

- Machine hours - 0.1 hours

- Variable overhead - labour hours × $1.20 per hour

Warehousing:

- Materials - $0

- Direct labour - 0.24 hours at $16.00 per hour

- Machine hours - 0.05 hours

- Variable overhead - labour hours × $0.80 per hour

The fixed cost structure for each department is as follows:

Department	Cost driver	Fixed manufacturing overhead	Practical capacity	Average activity level	Planned activity level
Stores	Materials costs	$575,420	$3,400,000	$3,000,000	$3,200,000
Production	Machine hours	$366,080	88,000	79,200	83,600
Packaging	Labour hours	$203,840	14,000	12,600	13,020
Warehousing	Labour hours	$488,240	33,600	30,240	31,580

XYZ currently calculates manufacturing costs as all variable costs plus an allocation of total plant fixed manufacturing overhead based on an hourly rate for direct labour hours. The current total labour hours worked in the plant are 135,000.

Required -

a) Calculate the product price based on the current policy.

b) Calculate the product price using a fixed manufacturing overhead rate by department calculated using the average department activity.

c) Calculate the product price if the fixed manufacturing overhead rate is calculated by department based on planned activity level.

Question 4 - Benoit Wines uses a standard costing system and has established the following standards for the prime costs for its Merlot by the litre:

	Standard quantity	Standard price	Standard cost
Direct materials	1.75 kg of grapes	$2.31/kg	$4.05
Direct labour	0.25 direct labour hours	$16.00	$4.00

During August, Benoit purchased 430,000 kilograms of direct materials at a total cost of $967,500 from a new supplier. The total factory wages for August were $1,080,000, 90% of which was for direct labour. Benoit manufactured 245,000 litres of Merlot during August using 67,500 hours of direct labour and 428,760 kilograms of direct materials.

Required -

a) Calculate the direct materials purchase price and direct materials quantity variances for August.

b) Calculate the direct labour rate and efficiency variance for August.

c) Comment on the above variances from the perspective of the purchasing manager and the production manager.