Reference no: EM132076922

Managerial Accounting Assignment -

Required: Complete ALL questions.

Question 1 - Campbell Company is a metal and wood cutting manufacturer, selling products to the home construction market. Consider the following data for the year December 31, 2013:

	$
Sandpaper	2,000
Materials - Handling Costs	70,000
Lubricants and Coolants	5,000
Miscellaneous Indirect Manufacturing labour	40,000
Direct Manufacturing Labour	300,000
Direct Materials, January  1 2013	40,000
Finished Goods, January 1 2013	100,000
Finished Goods, December 31 2013	150,000
Work-in-Progress, January 1 2013	10,000
Work-in-Progress, December 31 2013	14,000
Plant-leasing Costs	54,000
Depreciation - Plant Equipment	36,000
Property Taxes on Plant Equipment	4,000
Fire Insurance on Plant Equipment	3,000
Direct Materials Purchased	460,000
Direct Materials, December 31 2013	50,000
Revenue	1,360,000
Marketing Promotions	60,000
Marketing Salaries	100,000
Shipping Costs	70,000
Customer-Service Costs	100,000

Required:

1. Prepare a schedule of cost of goods manufactured and an income statement for December 31, 2013. For all manufacturing costs, indicate by V or F whether each is basically a variable cost or fixed cost. For example: Direct labour (V).

2. Suppose Campbell produced 750,000 units. What is the production cost per unit?

3. Suppose that both the direct materials and plant-leasing costs are tied to the production of 900,000 units. What is the unit cost for the direct materials assigned to each unit produced? What is the unit cost of the plant-leasing cost?

Question 2 - Pearce Information Processing Company provides word processing services for its clients. Pearce uses state-of-the-art equipment and employs five data entry clerks who each average 160 hours of work a month. The following table sets out information developed by the budget officer.

	Actual - 2010		Forecast - 2011
	November	December	January	February	March
	$	$	$	$	$
Client Billings (Sales)	25,000	35,000	25,000	20,000	40,000
Selling and Administrative Expenses	12,000	13,000	12,000	11,000	12,500
Operating Supplies Purchases	2,500	3,500	2,500	2,500	4,000
Processing Overhead	3,200	3,500	2,500	2,500	3,500

The company has a bank loan of $12,000 at a 12 per cent annual interest rate. Interest is paid monthly, and $2,000 of the principle of the loan is due February 28, 2011. No capital expenditures are anticipated for the first quarter of the coming year. Income taxes of $4,550 for calendar 2010 are due and payable on March 15, 2011. The company's five employees earn $8.50an hour, and all payroll-related labour benefit costs are included in processing overhead. For the items included in the table, assume the following conditions:

Client Billings	60% are cash sales collected during the month of sale
	30% are collected in the first month following the sale
	10% are collected in the second month following the sale
Operating Supplies	Paid for in the month purchased
Selling and Administrative Expenses and Processing Overhead	Paid in the month following the cost's incurrence

The cash balance on December 31, 2010 is expected to be $13,840.

Required: Prepare a monthly cash budget for Pearce Information Processing Company for the three-month period ending March 31, 2011.

Question 3 - Vale Manufacturing started business on 1 April 2003, and incurred the following costs during its first three years.

Year ending 31 March	2004	2005	2006
	$	$	$
Direct materials	60,000	49,900	52,200
Direct labour	48,000	44,000	45,000
Variable overheads	24,000	30,000	40,000
Fixed costs	40,000	40,600	41,300
Sales during the first three years were all at $20 per unit
Production each year (units)	16,000	14,000	14,000
Sales each year (units)	14,000	14,000	15,000

Required:

A. Prepare a statement showing the gross profit for each of the three years if the company used:

• The marginal costing approach to valuing inventory;
• The absorption costing approach to valuing inventory.

B. Advise the company of the advantage and disadvantages of using each method.

Case Study 1

M. K. Gallant is president of Kranbrack Corporation, a company whose stock is traded on a national exchange. In a meeting with investment analysts at the beginning of the year, Gallant had predicted that the company's earnings would grow by 20% this year. Unfortunately, sales have been less than expected for the year, and Gallant concluded within two weeks of the end of the fiscal year that it would be impossible to ultimately report an increase in earnings as large as predicted unless some drastic action was taken. Accordingly, Gallant had ordered that whenever possible, expenditures should be postponed to the new year - including cancelling or postponing orders with suppliers, delaying planned maintenance and training, and cutting back on end-of-year advertising and travel. Additionally, Gallant ordered the company's controller to carefully scrutinize all costs that are currently classifies as period costs and reclassify as many as possible as product costs. The company is expected to have substantial inventories of work in process and finished goods at the end of the year.

1. Why would reclassifying period costs as product costs increase this period's reported earnings?

2. Do you believe Gallant' actions are ethical? Why or why not?