managerial accounting - ws4 connect homework graded

Score: 39 out of 39 points (100%)

1.award:

6 out of

6 points

Sierra Company incurs the following costs to produce and sell a single product.

Variable costs per unit: Direct materials $9 Direct labor $10 Variable manufacturing overhead $5 Variable selling and administrative expenses $3 Fixed costs per year: Fixed manufacturing overhead $150,000 Fixed selling and administrative expenses $400,000

During the last year, 25,000 units were produced and 22,000 units were sold. The Finished Goodsinventory account at the end of the year shows a balance of $72,000 for the 3,000 unsold units.

Requirement 1:

(a) Is the company using absorption costing or variable costing to cost units in the Finished Goodsinventory account?

Variable costing

(b)Compute the total cost of finished goods inventory using variable costing and absorption costing. (Omit

the "$" sign in your response.)

VariableCosting

AbsorptionCosting

Total cost $72,000 $90,000

Requirement 2:

Assume that the company wishes to prepare financial statements for the year to issue to its stockholders.

(a) Is the $72,000 figure for Finished Goods inventory the correct amount to use on these statements forexternal reporting purposes?

No

(b)At what dollar amount should the 3,000 units be carried in the inventory for external reporting

purposes? (Omit the "$" sign in your response.)

Finished goods inventory $90,000

Worksheet Learning Objective: 07-1 Learning Objective: 07-4

Sierra Company incurs the following costs to produce and sell a single product.

Variable costs per unit: Direct materials $9 Direct labor $10 Variable manufacturing overhead $5 Variable selling and administrative expenses $3 Fixed costs per year: Fixed manufacturing overhead $150,000 Fixed selling and administrative expenses $400,000

During the last year, 25,000 units were produced and 22,000 units were sold. The Finished Goodsinventory account at the end of the year shows a balance of $72,000 for the 3,000 unsold units.

Requirement 1:

(a) Is the company using absorption costing or variable costing to cost units in the Finished Goodsinventory account?

Variable costing

(b)Compute the total cost of finished goods inventory using variable costing and absorption costing. (Omit

the "$" sign in your response.)

VariableCosting

AbsorptionCosting

Total cost $ 72,000 $ 90,000

Requirement 2:

Assume that the company wishes to prepare financial statements for the year to issue to its stockholders.

(a) Is the $72,000 figure for Finished Goods inventory the correct amount to use on these statements forexternal reporting purposes?

No

(b)At what dollar amount should the 3,000 units be carried in the inventory for external reporting

purposes? (Omit the "$" sign in your response.)

Assignment Print View http://ezto.mhhm.mcgraw-hill.com/hm_accounting.tpx?todo=printview

1 of 9 11/19/2009 12:17 AM

2.award:

5 out of

5 points

Finished goods inventory $ 90,000

Explanation:

1:

(b)

VariableCosting

AbsorptionCosting

Direct materials $9 $9 Direct labor 10 10 Variable manufacturing overhead 5 5 Fixed manufacturing overhead ($150,000 ÷ 25,000 units) 6

Unit product cost $24 $30

Total cost, 3,000 units $72,000 $90,000

2:

(a)

No, $72,000 is not the correct figure to use because variable costing is not generally accepted for externalreporting purposes or for tax purposes.

(b)

The Finished Goods inventory account should be stated at $90,000, which represents the absorption costof the 3,000 unsold units. Thus, the account should be increased by $18,000 for external reportingpurposes. This $18,000 consists of the amount of fixed manufacturing overhead cost that is allocated tothe 3,000 unsold units under absorption costing (3,000 units × $6 per unit fixed manufacturing overheadcost = $18,000).

Whitman Company has just completed its first year of operations. The company's absorption costingincome statement for the year appears below:

Whitman CompanyIncome Statement

Sales (35,000 units × $25 per unit) $875,000

Cost of goods sold (35,000 units × $16 per unit) 560,000

Gross margin 315,000

Selling and administrative expenses 280,000

Net operating income $35,000

The company's selling and administrative expenses consist of $210,000 per year in fixed expenses and $2per unit sold in variable expenses. The $16 per unit product cost given above is computed as follows:

Direct materials $5 Direct labor 6 Variable manufacturing overhead 1

Fixed manufacturing overhead ($160,000 ÷ 40,000 units) 4

Absorption costing unit product cost $16

Requirement 1:

Redo the company's income statement in the contribution format using variable costing. (Input all

amounts as positive values. Omit the "$" sign in your response.)

Sales $875,000

Variable expenses:

Variable selling and administrative expenses $ 70,000

Variable cost of goods sold 420,000 490,000

Contribution margin 385,000

Fixed expenses:

Fixed manufacturing overhead 160,000

Fixed selling and administrative expenses 210,000 370,000


Requirement 2:

Reconcile any difference between the net operating income on your variable costing income statement andthe net operating income on the absorption costing income statement above. (Omit the "$" sign in your

response.)

Variable costing net operating income (loss) $15,000

Add : Fixed manufacturing overhead cost deferred 20,000

Absorption costing net operating income (loss) $35,000


Whitman Company has just completed its first year of operations. The company's absorption costingincome statement for the year appears below:

Whitman CompanyIncome Statement

Sales (35,000 units × $25 per unit) $875,000

Cost of goods sold (35,000 units × $16 per unit) 560,000

Gross margin 315,000



2 of 9 11/19/2009 12:17 AM

3.award:

9 out of

9 points


The company's selling and administrative expenses consist of $210,000 per year in fixed expenses and $2per unit sold in variable expenses. The $16 per unit product cost given above is computed as follows:

Direct materials $5 Direct labor 6 Variable manufacturing overhead 1

Fixed manufacturing overhead ($160,000 ÷ 40,000 units) 4

Absorption costing unit product cost $16

Requirement 1:

Redo the company's income statement in the contribution format using variable costing. (Input all

amounts as positive values. Omit the "$" sign in your response.)

Sales $ 875,000

Variable expenses:

Variable cost of goods sold $ 420,000

Variable selling and administrative expenses 70,000 490,000

Contribution margin 385,000

Fixed expenses:

Fixed manufacturing overhead 160,000


Net operating income $ 15,000

Requirement 2:

Reconcile any difference between the net operating income on your variable costing income statement andthe net operating income on the absorption costing income statement above. (Omit the "$" sign in your

response.)

Variable costing net operating income (loss) $ 15,000

Add: Fixed manufacturing overhead cost deferred 20,000

Absorption costing net operating income (loss) $ 35,000

Explanation:

1:

Variable cost of goods sold (35,000 units × $12 per unit*) = $420,000Variable selling and administrative expenses (35,000 units × $2 per unit) = $70,000

*Direct materials $5 Direct labor 6

Variable manufacturing overhead 1

Total variable manufacturing cost $12

2:

Fixed manufacturing overhead cost deferred in inventory under absorption costing (5,000 units × $4 perunit in fixed manufacturing cost) = $20,000

Denton Company manufactures and sells a single product. Cost data for the product are given below:

Variable costs per unit: Direct materials $7 Direct labor 10 Variable manufacturing overhead 5 Variable selling and administrative 3

Total variable cost per unit $25

Fixed costs per month: Fixed manufacturing overhead $315,000 Fixed selling and administrative 245,000

Total fixed cost per month $560,000

The product sells for $60 per unit. Production and sales data for July and August, the first two months ofoperations, follows:

Units

ProducedUnitsSold

July 17,500 15,000 August 17,500 20,000

The company's Accounting Department has prepared absorption costing income statements for July andAugust as presented below:

July August Sales $900,000 $1,200,000

Cost of goods sold 600,000 800,000

Gross margin 300,000 400,000 Selling and administrative expenses 290,000 305,000

Net operating income $10,000 $95,000

Requirement 1:

Determine the unit product cost under Absorption costing and Variable costing. (Omit the "$" sign in

your response.)


3 of 9 11/19/2009 12:17 AM

Unit product cost

Absorption costing $40

Variable costing $22

Requirement 2:

Prepare contribution format variable costing income statements for July and August. (Input all amount as

positive value except net loss which should be indicated with a minus sign. Omit the "$" sign in

your response.)

July August

Sales $900,000 $1,200,000

Variable expenses:



Total variable expenses 375,000 500,000

Contribution margin 525,000 700,000

Fixed expenses: Fixed manufacturing overhead 315,000 315,000


Total fixed expenses 560,000 560,000

Net operating income (loss) $-35,000 $140,000

Requirement 3:

Reconcile the variable costing and absorption costing net operating income figures. (Input all amount as

positive value except net loss which should be indicated with a minus sign. Leave no cells blank -

be certain to enter "0" wherever required. Omit the "$" sign in your response.)

July August

Variable costing net operating income (loss) $-35,000 $140,000

Add fixed manufacturing overhead cost deferred

in inventory under absorption costing 45,000 0

Deduct fixed manufacturing overhead cost released

from inventory under absorption costing 0 45,000

Absorption costing net operating income $10,000 $95,000

Requirement 4:

Which is the most appropriate method of costing?

Variable Costing


Learning Objective: 07-1 Learning Objective: 07-3

Denton Company manufactures and sells a single product. Cost data for the product are given below:

Variable costs per unit: Direct materials $7 Direct labor 10 Variable manufacturing overhead 5 Variable selling and administrative 3

Total variable cost per unit $25

Fixed costs per month: Fixed manufacturing overhead $315,000 Fixed selling and administrative 245,000

Total fixed cost per month $560,000

The product sells for $60 per unit. Production and sales data for July and August, the first two months ofoperations, follows:

Units

ProducedUnitsSold

July 17,500 15,000 August 17,500 20,000

The company's Accounting Department has prepared absorption costing income statements for July andAugust as presented below:

July August Sales $900,000 $1,200,000

Cost of goods sold 600,000 800,000

Gross margin 300,000 400,000 Selling and administrative expenses 290,000 305,000

Net operating income $10,000 $95,000

Requirement 1:

Determine the unit product cost under Absorption costing and Variable costing. (Omit the "$" sign in

your response.)

Unit product cost

Absorption costing $ 40

Variable costing $ 22

Requirement 2:

Prepare contribution format variable costing income statements for July and August. (Input all amount as

positive value except net loss which should be indicated with a minus sign. Omit the "$" sign in

your response.)

July August

Sales $ 900,000 $ 1,200,000

Variable expenses:


4 of 9 11/19/2009 12:17 AM

4.award:

6 out of6 points



Total variable expenses 375,000 500,000

Contribution margin 525,000 700,000

Fixed expenses:

Fixed manufacturing overhead 315,000 315,000


Total fixed expenses 560,000 560,000

Net operating income (loss) $ -35,000 $ 140,000

Requirement 3:

Reconcile the variable costing and absorption costing net operating income figures. (Input all amount as

positive value except net loss which should be indicated with a minus sign. Leave no cells blank -

be certain to enter "0" wherever required. Omit the "$" sign in your response.)

July August

Variable costing net operating income (loss) $ -35,000 $ 140,000

Addfixed manufacturing overhead cost deferred in inventory under absorption costing 45,000 0

Deductfixed manufacturing overhead cost released from inventory under absorption costing 0 45,000

Absorption costing net operating income $ 10,000 $ 95,000

Requirement 4:

Which is the most appropriate method of costing? Variable Costing Explanation:

1:

AbsorptionCosting

VariableCosting

Direct materials $7 $7 Direct labor 10 10 Variable manufacturing overhead 5 5 Fixed manufacturing overhead ($315,000 ÷ 17,500 units)

18 —

Unit product cost $40 $22

2:

July August Variable cost of goods sold $22 per unit 330,000 440,000 Variable selling and administrative expenses $3 per unit 45,000 60,000

3:

July August Variable costing net operating income (loss) $(35,000) $140,000 Add fixed manufacturing overhead cost deferred in inventoryunder absorption costing (2,500 units × $18 per unit)

45,000 0

Deduct fixed manufacturing overhead cost released frominventory under absorption costing (2,500 units × $18 per unit)

0 45,000

Absorption costing net operating income $10,000 $95,000

The production department of Hareston Company has submitted the following forecast of units to beproduced by quarter for the upcoming fiscal year:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Units to be produced 7,000 8,000 6,000 5,000

In addition, the beginning raw materials inventory for the first quarter is budgeted to be 1,400 pounds andthe beginning accounts payable for the first quarter is budgeted to be $2,940.

Each unit requires 2 pounds of raw material that costs $1.40 per pound. Management desires to end eachquarter with an inventory of raw materials equal to 10% of the following quarter's production needs. Thedesired ending inventory for the fourth quarter is 1,500 pounds. Management plans to pay for 80% of rawmaterial purchases in the quarter acquired and 20% in the following quarter. Each unit requires 0.60 directlabor-hours and direct labor-hour workers are paid $14.00 per hour.

Requirement 1:

(a)Prepare the company's direct materials budget. (Input all amounts as positive values. Omit the "$"

sign in your response.)

Hareston CompanyDirect Materials Budget

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year

Production needs 14,000 16,000 12,000 10,000 52,000

Add : Desired ending inventory 1,600 1,200 1,000 1,500 1,500

Total needs 15,600 17,200 13,000 11,500 53,500

Less : Beginning inventory 1,400 1,600 1,200 1,000 1,400

Raw materials to be purchased 14,200 15,600 11,800 10,500 52,100

Cost of raw materials to be purchased $19,880 $21,840 $16,520 $14,700 $72,940

(b)Prepare the schedule of expected cash disbursements for purchases of materials for the upcomingfiscal year. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign

in your response.)

Schedule of Expected Cash Disbursements for Materials

© 2009 The McGraw-Hill Companies. All rights reserved.


5 of 9 11/19/2009 12:17 AM

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Accounts payable, beginning balance

$2,940 $0 $0 $0 $2,940

1st Quarter purchases 15,904 3,976 0 0 19,880

2nd Quarter purchases 0 17,472 4,368 0 21,840

3rd Quarter purchases 0 0 13,216 3,304 16,520

4th Quarter purchases 0 0 0 11,760 11,760

Total cash disbursements for materials

$18,844 $21,448 $17,584 $15,064 $72,940

Requirement 2:

Prepare the company's direct labor budget for the upcoming fiscal year, assuming that the direct laborworkforce is adjusted each quarter to match the number of hours required to produce the forecastednumber of units produced. (Omit the "$" sign in your response.)

Hareston CompanyDirect Labor Budget

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total direct labor-hours needed

4,200 4,800 3,600 3,000 15,600

Total direct labor cost $58,800 $67,200 $50,400 $42,000 $218,400


The production department of Hareston Company has submitted the following forecast of units to beproduced by quarter for the upcoming fiscal year:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Units to be produced 7,000 8,000 6,000 5,000

In addition, the beginning raw materials inventory for the first quarter is budgeted to be 1,400 pounds andthe beginning accounts payable for the first quarter is budgeted to be $2,940.

Each unit requires 2 pounds of raw material that costs $1.40 per pound. Management desires to end eachquarter with an inventory of raw materials equal to 10% of the following quarter's production needs. Thedesired ending inventory for the fourth quarter is 1,500 pounds. Management plans to pay for 80% of rawmaterial purchases in the quarter acquired and 20% in the following quarter. Each unit requires 0.60 directlabor-hours and direct labor-hour workers are paid $14.00 per hour.

Requirement 1:

(a)Prepare the company's direct materials budget. (Input all amounts as positive values. Omit the "$"



1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year


Add: Desired ending inventory 1,600 1,200 1,000 1,500 1,500

Total needs 15,600 17,200 13,000 11,500 53,500

Less: Beginning inventory 1,400 1,600 1,200 1,000 1,400

Raw materials to be purchased 14,200 15,600 11,800 10,500 52,100

Cost of raw materials to be purchased $ 19,880 $ 21,840 $ 16,520 $ 14,700 $ 72,940

(b)Prepare the schedule of expected cash disbursements for purchases of materials for the upcomingfiscal year. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign

in your response.)

Schedule of Expected Cash Disbursements for Materials 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Accounts payable, beginning balance

$ 2,940 $ 0 $ 0 $ 0 $ 2,940

1st Quarter purchases 15,904 3,976 0 0 19,880

2nd Quarter purchases 0 17,472 4,368 0 21,840

3rd Quarter purchases 0 0 13,216 3,304 16,520

4th Quarter purchases 0 0 0 11,760 11,760

Total cash disbursements for materials

$ 18,844 $ 21,448 $ 17,584 $ 15,064 $ 72,940

Requirement 2:

Prepare the company's direct labor budget for the upcoming fiscal year, assuming that the direct laborworkforce is adjusted each quarter to match the number of hours required to produce the forecastednumber of units produced. (Omit the "$" sign in your response.)

Hareston CompanyDirect Labor Budget

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total direct labor-hours needed

4,200 4,800 3,600 3,000 15,600

Total direct labor cost $ 58,800 $ 67,200 $ 50,400 $ 42,000 $ 218,400

Explanation:

1(a):


1st

Quarter2nd

Quarter3rd

Quarter4th

Quarter Year Required production 7,000 8,000 6,000 5,000 26,000 Raw materials per unit × 2 × 2 × 2 × 2 × 2



6 of 9 11/19/2009 12:17 AM

5.award:

5 out of

5 points

2:

Hareston Company Direct Labor Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Units to be produced 7,000 8,000 6,000 5,000 26,000

Direct labor time per unit (hours) × 0.60 × 0.60 × 0.60 × 0.60 × 0.60

Total direct labor-hours needed 4,200 4,800 3,600 3,000 15,600 Direct labor cost per hour × $14.00 × $14.00 × $14.00 × $14.00 × $14.00

Total direct labor cost $58,800 $67,200 $50,400 $42,000 $218,400

[The following information applies to the questions displayed below.]

Minden Company is a wholesale distributor of premium European chocolates. The company's balancesheet as of April 30 is given below:

Minden CompanyBalance Sheet

April 30Assets

Cash $9,000 Accounts receivable 54,000 Inventory 30,000 Buildings and equipment, net of depreciation 207,000 Total assets $300,000

Liabilities and Stockholders' Equity Accounts payable $63,000 Note payable 14,500 Capital stock, no par 180,000 Retained earnings 42,500 Total liabilities and stockholders' equity $300,000

The company is in the process of preparing budget data for May. A number of budget items have alreadybeen prepared, as stated below:

a. Sales are budgeted at $200,000 for May. Of these sales, $60,000 will be for cash; the remainder willbe credit sales. One-half of a month's credit sales are collected in the month the sales are made, andthe remainder is collected in the following month. All of the April 30 accounts receivable will becollected in May.

b. Purchases of inventory are expected to total $120,000 during May. These purchases will all be onaccount. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid inthe following month. All of the April 30 accounts payable to suppliers will be paid during May.

c. The May 31 inventory balance is budgeted at $40,000.d. Selling and administrative expenses for May are budgeted at $72,000, exclusive of depreciation. These

expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month.e. The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of

the interest relates to May.)f. New refrigerating equipment costing $6,500 will be purchased for cash during May.g. During May, the company will borrow $20,000 from its bank by giving a new note payable to the bank

for that amount. The new note will be due in one year.

Requirement 1:

(a)What is the expected cash receipts from sales and the expected cash payments for merchandisepurchases? (Omit the "$" sign in your response.)

Total cash receipts $184,000

Total cash payments $111,000

(b)Compute the following for the month May. (Hint: Prepare your answer using the layout of a Cash

Budget.) (Omit the "$" sign in your response.)

Total cash available $193,000

Total cash disbursements 189,500

Excess (deficiency) of receipts over disbursements 3,500

Total financing 5,400

Cash balance, ending $8,900


Learning Objective: 09-10 Learning Objective: 09-4 Learning Objective: 09-9

Requirement 1:

(a)What is the expected cash receipts from sales and the expected cash payments for merchandisepurchases? (Omit the "$" sign in your response.)

Total cash receipts $ 184,000

Total cash payments $ 111,000

(b)Compute the following for the month May. (Hint: Prepare your answer using the layout of a Cash

Budget.) (Omit the "$" sign in your response.)

Total cash available $ 193,000


7 of 9 11/19/2009 12:17 AM

6.award:

4 out of

4 points


Excess (deficiency) of receipts over disbursements 3,500


Cash balance, ending $ 8,900

Explanation:

a):

Cash sales—May $60,000 Collections on accounts receivable:

April 30 balance 54,000

May sales(50% × $140,000) 70,000

Total cash receipts $184,000

Schedule of cash payments for purchases: April 30 accounts payable balance $63,000

May purchases (40% × $120,000) 48,000

Total cash payments $111,000

(b):

Minden CompanyCash Budget

For the Month of May Cash balance, beginning $9,000

Add receipts from customers (above) 184,000

Total cash available 193,000

Less disbursements: Purchase of inventory (above) 111,000 Selling and administrative expenses 72,000

Purchases of equipment 6,500


Excess of receipts over disbursements 3,500

Financing: Borrowing—note 20,000 Repayments—note (14,500)

Interest (100)


Cash balance, ending $8,900

Requirement 2:

Prepare a budgeted income statement for May. (Input all amounts as positive values. Omit the "$"


Minden CompanyBudgeted Income Statement

For the Month of May Sales $200,000

Cost of goods sold:

Beginning inventory $30,000

Add : Purchases 120,000

Goods available for sale 150,000

Deduct : Ending inventory 40,000

Cost of goods sold 110,000

Gross margin 90,000


Net operating income 16,000

Interest expense 100

Net income $15,900



Requirement 2:

Prepare a budgeted income statement for May. (Input all amounts as positive values. Omit the "$"


Minden CompanyBudgeted Income Statement

For the Month of May

Sales $ 200,000

Cost of goods sold:

Beginning inventory $ 30,000

Add: Purchases 120,000

Goods available for sale 150,000

Deduct: Ending inventory 40,000

Cost of goods sold 110,000

Gross margin 90,000


Net operating income 16,000

Interest expense 100


8 of 9 11/19/2009 12:17 AM

7.award:

4 out of

4 points

Net income $ 15,900

Explanation:

Selling and administrative expenses ($72,000 + $2,000) = 74,000

Requirement 3:

Prepare a budgeted balance sheet as of May 31. (Omit the "$" sign in your response.)

Minden CompanyBudgeted Balance Sheet

May 31Assets Liabilities and Equity

Cash $8,900 Accounts payable $72,000

Accounts receivable 70,000 Note payable 20,000

Inventory 40,000 Capital stock 180,000

Buildings and equipment, net of depreciation 211,500 Retained earnings 58,400

Total assets $330,400 Total liabilities and equity $330,400



Requirement 3:

Prepare a budgeted balance sheet as of May 31. (Omit the "$" sign in your response.)

Minden CompanyBudgeted Balance Sheet

May 31Assets Liabilities and Equity

Cash $ 8,900 Accounts payable $ 72,000

Accounts receivable 70,000 Note payable 20,000

Inventory 40,000 Capital stock 180,000

Buildings and equipment, net of depreciation 211,500 Retained earnings 58,400

Total assets $ 330,400 Total liabilities and equity $ 330,400

Explanation:

Accounts receivable (50% × $140,000) = $70,000 Buildings and equipment, net of depreciation ($207,000 + $6,500 – $2,000) = $211,500 Accounts payable (60% × 120,000) = $72,000 Retained earnings ($42,500 + $15,900) = $58,400


9 of 9 11/19/2009 12:17 AM

managerial accounting - ws4 connect homework graded

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