HOMEWORK 2 (Total Possible Points: 100)
You MUST show your work!
Problem 1: Master Budget(20 points total)
Omega,
Inc. has developed the following sales forecast for the first six months of the
coming year
|
Month |
Sales |
|
January |
30,000 |
|
February |
50,000 |
|
March |
70,000 |
|
April |
80,000 |
|
May |
60,000 |
|
June |
50,000 |
The
beginning inventory on January 1 is 8,000 units. The desired ending inventory for the coming
year is to be 25 percent of next month’s sales.
Each unit
requires 6 units of material A at $8 per unit and 3 units of material B at $2
per unit. There are 15,000 units of A
and 4,500 units of B on hand January 1 and the desired ending inventory for
these will be 30 percent of next month’s needs for the coming year.
a.Prepare
production budgets for February, March and April. (10 points)
b.Prepare purchase
budgets for materials A and B in units and dollars for the same months. (10 points)
Problem 2: Direct Cost
Variance Analysis(30 points total)
Ken Co. uses standard
costing for accounting. Following is the
standards for production of its only product:
Direct material:
18 pounds at $25 per pound
Direct labor:
6 hours at $18 per hour.
During March company records showed the following:
Material purchased: 16,000
pounds at a cost of 352,000
Material used: 15,000
pounds
Direct labor hours: 4,700
hrs at a cost of $21.00 per hrs
Units produced: 800
units
a. Compute the
direct labor efficiency and price variances. (10 points)
b.Compute the
direct material efficiency and price variances.(10 points)
c. Explain how a
favorable direct material price variance may be related to an unfavorable
direct material efficiency variance. (10
points)
Problem 3: OH Cost Variance
Analysis(30 points total)
Jake Company, which manufactures electrical
switches, uses a standard cost system and carries all inventories at standard.
The standard manufacturing overhead costs per switch are based on direct labor
hours and are shown below:
Variable overhead (5 hours @ $12 per direct
manufacturing labor hour) $ 60
Fixed overhead (5 hours @ $15* per direct
manufacturing labor hour) 75
Total overhead per switch $135
*Based on capacity of 200,000 direct manufacturing
labor hours per month.
The following information is available for the month
of November:
·
46,000
switches were produced although 40,000 switches were scheduled to be produced.
·
225,000
direct manufacturing labor hours were worked at a total cost of $5,625,000.
·
Variable
manufacturing overhead costs were $2,750,000.
·
Fixed
manufacturing overhead costs were $3,050,000.
a.
Find the variable overhead
spending and efficiency variances for November.(10 points)
b.
The fixed overhead budget
variance for November.(10 points)
c.
Find the fixed overhead
production-volume variance for November.(10
points)
Problem 4: Absorption vs. Variable
Costing(20
points total)
A manufacturing company that produces a single product has provided
the following data concerning its most recent month of operations:
|
Selling price |
$160 |
|
|
Units in beginning inventory |
0 |
|
|
Units produced |
6,800 |
|
|
Units sold |
6,500 |
|
|
Variable costs per unit: |
||
|
Direct materials |
$51 |
|
|
Direct labor |
$40 |
|
|
Variable manufacturing overhead |
$7 |
|
|
Variable selling and administrative |
$12 |
|
|
Fixed costs: |
||
|
Fixed manufacturing overhead |
$88,400 |
|
|
Fixed selling and administrative |
$81,300 |
a.
Prepare the Income Statement
using Absorption Costing (10 points)
b.
Prepare the Income Statement
using Variable Costing (10 points)
