What are the total estimated manufacturing costs

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Reference no: EM131137862

1. Jared Inc. is considering replacing its existing photocopier with a new one. The new system offers considerable operational savings. Information about the existing and new systems is as follows:

 

Existing

New

Original cost

$12,000

$15,000

Annual operating expenses

$3,500

$2,500

Accumulated depreciation to date

$7,000

0

Current salvage value

$2,000

$15,000

Remaining life

5 years

5 years

Salvage value in 5 years

$0

$5,000

Annual depreciation expense

$1,000

$3,000

 

 

 

 

 

 

Should Jared Inc. replace the existing photocopier with the new system?

2. Amity Plastic Manufacturing is a small plastic products manufacturer. The company uses machine-hours as the single, plant-wide predetermined cost driver rate to allocate manufacturing support costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for an order for Swift Food Processing Ltd.:

                                                                     Amity              Swift job

Direct materials                                          $40,000                 $1,000

Direct labor                                                $10,000                 $   200

Manufacturing support costs                        $30,000

Machine-hours                                           100,000                      900

What are the total estimated manufacturing costs for the Swift Food job?

3. Steve's Salvage plans to salvage scrap metal and other materials from an old industrial site. The current owners of the site will sell the site to Steve's for $100,000. Steve's intends to extract scrap metal at the site for 24 months. It then will clean up the site, return the land to useable condition, and sell it to a developer. Projected costs are:

 

Fixed

Variable

Initial outlay

Purchase land

$100,000

 

Months 1-24

Metal extraction and processing

$5,000 per month

$110 per ton

Months 1-27

Rent on temporary buildings

$4,000 per month

 

 

Administration

$9,000 per month

 

Months 25-27

Cleanup

$27,000 per month

 

 

Land restoration

$1,048,000 total

 

Assume Steve's Salvage expects to salvage 40,000 tons of metal from the site, and can sell the metal for $190 per ton. If the company wants to earn a profit of $40 per ton, at what price must it sell the land at the end of the project to achieve its target profit per ton? (Ignore the time value of money.)

4. At the beginning of the year, Acme Corporation initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years:

 

2012

2013

2014

Warranty and repair

50,000

40,000

25,000

Reliability engineering

$10,000

$15,000

$25,000

Product acceptance

10,000

9,000

7,000

Quality training

2,000

5,000

8,000

Packaging inspections

3,000

5,000

5,000

Re-inspection

65,000

48,000

29,000

Customer complaints

85,000

62,000

51,000

Rework

25,000

18,000

12,000

Sales revenue $1,250,000 $1,262,500 $1,350,000

Prepare a trend report that shows total cost for each year for each cost of quality category. What conclusion(s) can be drawn from this?

5. Cancun Company is preparing a flexible budget to determine why operating profit fell below the budgeted amount.  Complete the following table and list three possible reasons for the variance between budgeted and actual operating profit.

 

Master Budget

 

Flexible

budget

Actual Results

 

Variance

Sales volume (in units)

20,000

 

18,500

18,500

 

Sales Revenue

$1,050,000

 

 

$972,000

 

Variable costs

500,000

 

 

477,000

 

Contribution margin

550,000

 

 

495,000

 

Capacity-related (fixed) costs

380,000

 

 

385,000

 

Operating profit

$ 170,000

 

 

$110,000

 

Reference no: EM131137862

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