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1. Your company produces boxed cereal. There are three main processes used to make the cereal. The first process preps and shapes the corn into flakes. The second process bakes and seasons the corn flakes. The third process packages the cereal. The cereal sold in 16 oz boxes (1 box is a unit)

 

2. Information on the direct materials is listed in table 1. Consider this information the standard.   Direct labor information given in Table 2. Consider this information the standard. 

 

3. Annual overhead information is given in Table 3. Overhead is allocated based direct labor hours. Estimated annual direct labor hours are 20,000. Calculate a predetermined OH rate (round to two decimal places if needed). Use this rate when you need to apply OH.

 

4. Table 4 gives you the information for the last two months on the overhead cost. Use this information to determine the fixed and variable portions of the cost. (You will need this information to complet Table 5). Machine hours have been determined as the best cost driv er for separating mixed cost into their fixed and variable portions. It takes approximately 10 minutes of total machine time for each cereal box (or 1/6 a machine hour per box of cereal).

 

5. Table 5 is where you will list all your production cost, separated into their fixed and variable components.

 

6 .Cost-Volume-Profit (CVP) Relationships

a.   Selling Price: You sell a box of cereal for $5.70

 

b.  Breakeven point: Calculate the breakeven point. Be sure to include the fixed component of mixed cost in your fixed costs and the variable component in the        variable cost. Show your breakeven in Sales units and in Sales Dollars

c.   Profit Planning: Determine the number of units you must sell to make an annual pre-tax profit using 3 assumptions concerning your net income (profit), both in sales units and sales dollars.

                                   

                                                             i.     Aggressive Profit ($225,000)

 

                                                           ii.     Conservative Profit ($75,000)

 

                                                         iii.     Average Profit ($186,460)

7.Budgeting: 

a.                  Createa sales budget using the information for earning an average profit for the year. You will break the budget down into the four quarters for the year. (Sales tend to be consistent each quarter, you can only sale a whole unit so round-up if necessary) Use table 6 to comple the sales budget.

b.                 Creat a production budget for each quarter of the year (keep it in quarters; you do not need to break it down by month). You desire to keep 10% of next quarter's sales in ending inventory. Sales for Qtr 1 the following year (year 2) are expected to be 30,000 boxes of cereal. There is not any beginning finished goods inventory for quarter one this year. Use table 7 to comple the production budget.

8.Running quarter one -- Weighted-average process costing. Table 8 presents the information for the packaging department. Comple the questions under table 8.

9.Actuals are in for quarter one. You sold 10% less units than you budgeted for (round to a whole unit), but price per unit was $5.80.

a.                  Calculate revenue

b.                 Compute the cost of goods sold (total and per unit) before adjusting for actual OH cost

10.Actual corn usage for quarter one was 146,232 pounds at a price of $0.49 per pound. Actual equivalent units of production (boxes of cereal) compleed through the first process (where the corn is added) was 46,214. Calculate the direct materials variances for the corn (price, usage, and total) and indicate if these variances are favorable or unfavorable.

11.Actual direct labor hours for the quarter were 7,660 at an average rate of $11.00 per hour. For actual production, you expected to use 7,300 direct labor hours. Calculate the direct labor variances (rate, efficiency and total) and indicate if these variances are favorable or unfavorable. 

12.For next quarter, you have been asked to supply a special order of your cereal. The non-profit organization requesting this order would like a custom box (packaging) that will cost $0.50 instead of the normal $0.20 per box. The request is for 800 boxes of cereal. Based on your projections you have the capacity for this order. What is the minimum price per unit and total price you would be willing to accept on this order? (You cannot afford to take this offer at a loss, but you are fine with accepting it at cost).

13.Determine over- or under-applied overhead and close to cost of goods sold. Actual OH cost are given in table 13 (look at #11 for actual DL hours used to apply OH). Determine the new cost of goods sold amount. 

 

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table 1 direct material

·  material(corn), quantity per unit (3lbs), cost (0.50) total per unit (1.50)

·  material(seasoning), quantity per unit (1 ounce), cost (0.05) total per unit (.05)

·  material(package), quantity per unit (1 box), cost (0.20) total per unit (.20)

Total $1.75

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table 2 direct labor

·  Processor (hour/unit) 0.1,   Rate 10.50      Total cost 1.05

·  baker (h/u) .04                    Rate 10.50         totalcost .42

·  packager (h/u) 0.02             rate 10.50         total cost .21

                                                                                   total cost 1.68

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Table 3 yearly overhead cost

·  Indirect material  $9060

·  Indirect labor    $ 60000

·  Machine Maintenance  $5275

·  Electricity 7985

·  Depreciation7200

·  Quality testing 6480

·  total 96000

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Predetermined OH rate: 

table 4 actual overhead cost for the last two months

·  Indirect Material month1=755 month2=755

·  Indirect Labor month1=5000 month2=5000

·  Machine Maintenance month1=338 month2 410

·  Electricity month1=504 mont2630

·  Depreciation month1=600 month2=600

·  Quality testing month1=420 month2 =500

·  machine hrs month1=1200 month2=1500

*10 minutes of machine time per box of cereal (1/6 hour = 1 unit)

Complet any calculations here:

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Table 5: Variable and Fixed Costs

COSTS Description               VARIABLE Cost per unit          FIXED Cost per Year   

DM

DL

INDIRECT MATERIAL

INDIRECT L

MACHINE MAINTENANCE

ELECTRICITY

DEPRECIATION

QUALITY TESTING

If a cost is mixed, put the fixed amount in the fixed column and the variable amount in the variable column.

CVP Calculations

SP PER UNIT=5.70

VC PER UNIT=?

CMU=?

FC=

Table 6 - Sales Budget (Q1, Q2, Q3, Q4)

Q1 Q2 Q3 Q4

SP PER UNIT

EXPECTES SALES UNIT

TOTAL BIDGET SALES

Table 7 - Production Budget (q1,q2,q3,q4)

Q1 Q2 Q3 Q4

UNITS TO BE SOLD

PLUS DISRED ENDING INV

EQUAL TO TOTAL NEEDS

LESS BEGINNING INV

BUGGET PRODUTION

Process Costing - Packaging Department

Direct materials are added 90% at the beginning of the process and the remaining 10% are added when the cereal is 50% complet with the packaging process. Direct labor and overhead are added evenly throughout the process.

Table 8 unit and cost info

Beg WIP = physical unite 4,000 (40% complet), transferred $15000, D.M $720 ,D.L $466.09

Transferred in = phy/un 42013, tran 153867.71

End WIP = 4200(30% COMPLETD)

Added during Qtr 1:

Direct Materials -- $10,678.25

Direct Labor - 860 hrs @ $11.00 per hour

Overhead - OH is applied based on predetermined OH rate and actual DL hours

1. Determine the number of units completed during quarter 1.

2. Compute the equivalent units using the weighted average method

3. Compute the cost per equivalent unit using the weighted average method

4. Compute the cost of goods transferred to finished goods inventory

5. Compute the ending balance in WIP, Packaging

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Table 9 - Actual Results (calculate revenue and COGS

Units sold?           sales price  ?                  Revenue ?

unites sold ?        cost per unit ?                   Cogs?

Table 10 - DM Variances (corn only)

·  price v ?

·  usage v ?

·  total v ?

Calculations:

Table 11 - Direct Labor Variances PRICE V = (AP -SP) X AQ

·  rate V ?

·  efficiency v ?

·  total v ?

Calculations:

#12 Calculations (Minimum price on special order)

Table 13 - Actual OH cost for Quarter 1

·  Indirect Materials $2300

·  ind-Labor $15000

·  machine maintenance $2000

·  electricity $3200

·  deprecation $1800

·  quality $2200

Amount of applied OH:

Amount of actual OH:

Under or Over- Applied Amount:

New COGS amount: 

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HINTS:

?Table 4

To separate out mixed cost use the high-low method. All you need is two points.

Machine hours is the activity

To turn variable cost per machine hour to variable cost per unit, simply divide by 6 (one unit takes 1/6 a machine hour)

Table 5

Cost description is simply the cost name (DM, DL, depreciation, electricity or simply OH if you calculated it in total ).

Do not forget to include DM & DL. The cost per unit is already calculated for you in table 1 & 2 (these are variable cost).

To turn fixed cost calculated per month from table 4 into annual fixed cost simply multiply by 12

Check figure: Total fixed cost $78,540

Table 6

Once you have your annual sales figure, divide by 4 to get a quarterly sales figure

Table 7

Production Budget starts with sale units. The 30,000 given in the problem is for next year, you need that to calculate desired ending inv for Q4 this year

Table 8

The actual table is information only, there is nothing that needs to be filled out here

This is the last process in a three-department process. There will be three cost types: Transferred-in, direct materials, and conversion.

See demo problem 3 from lesson 6 or the demonstration problem in the textbook at the end of the chapter 6.

Check figures:

Materials cost per Eq Unit: $0.25

End Balance WIP Packaging $16,774.80

 Table 9

Remember since packaging is the last process the cost per unit transferred to finish goods is the completed cost per unit. No additional cost will be added.

Table 10 & 11

Remember to look back at the beginning material for more information (Information for actual results is given there.

Use table 1 & 2 for standard information

Final check figure (may be slightly different due to rounding) $109,263.25 (COGS)

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NOTE::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

#7 budgeting is Table 6 and 7. #7 a.) is information on the table 6 sales budget and #7 b.) is information on the Table 7 Production Budget.

7 Part A. the Sales budget. You are taking the information you got on the Average Profit

from #6 (c, iii) and breaking this down into a quarterly amount. ( Divide by 4!)

Sales Budget= Quantity x Price= Revenue. Price is given in #6 A.) Selling price