Solve Accounting Questions Solutions

Solve Accounting Questions Solutions
Instructions: Using the following data, complete the requirements given below. When you are given amounts to assume the answers to previous requirements, be careful to use such assumed amounts rather than your answers (in order to minimize carry-through errors).
The Finishing Department of Sark Sark reports the following for January 2020:
Production: All materials are added at the beginning of the process. Beginning work in process 11,000 units, 20% complete. Units started into production 88,000 units. Ending work in process 9,000 units, 40% complete.
Manufacturing Costs: Beginning work in process, $35,100, comprised of $21,100 of materials and $14,000 of conversion costs. Materials added $68,000; labor and overhead added $56,200.
(a) Required: Compute equivalent units of production for (1) materials and (2) conversion costs.
Materials Conversion
(b) Assume your answers to (a) above were 49,500 units for materials and 46,800 for conversion costs.
Required: Compute the unit costs for the month.
Materials Conversion
(c) Assume your answers to (b) above were $1.50 for materials and $0.80 for conversion costs. Required: Determine the costs to be assigned to the units transferred out.
(d) Assume the same unit costs as given in (c) above.
Required: Determine the costs assigned to the 9,000 units in ending work in process.
PART IV — ACTIVITY-BASED COSTING
Sophia Windows designs and builds custom windows for luxury homes. Most of the windows are custom made but occasionally the company does mass production on order. Its budgeted manufacturing overhead costs for the year 2020 are as follows:
Overhead Cost Pools Amount
Purchasing $ 26,000
Production (cutting, milling, finishing) 176,000
Setting up machines 65,000
Inspecting 35,000
Utilities 75,000
Total budget overhead costs $377,000
For the last three years, the company has been allocating overhead to products on the basis of machine hours. For the year 2020, 20,000 machine hours are budgeted.
The operations manager of Sophia recently directed her accountant to implement the activity-based costing system she has repeatedly proposed. The accountant and production foreman identified the following cost drivers and their usage for the previously budgeted overhead cost pools:
Overhead Cost Pools Activity Cost Drivers Total Activity
Purchasing Number of orders 80
Production (cutting, milling, finishing) Direct labor hours 16,000
Setting up machines Number of setups 250
Inspecting Number of inspections 1,250
Utilities Square feet occupied 15,000
During this month, the company received an order for 80 windows from a housing development contractor. The accountant prepared cost estimates for producing components for 80 windows to submit a contract price per window set to the contractor. The following data for the production of 80 windows is accumulated:
Direct materials $22,000
Direct labor $23,100
Machine hours 1,600
Direct labor hours 2,100
Number of purchase orders 8
Number of machine setups 15
Number of inspections 12
Number of square feet occupied 1,200
Instructions
(a) Compute the predetermined overhead rate using traditional costing with machine hours as the basis.
(b) Compute the manufacturing cost per window under traditional costing.
(c) Compute the manufacturing cost per window under the proposed activity-based costing system.
PART V — COST-VOLUME-PROFIT
Isabella Widgets manufactures a product that sells for $40 per unit. Isabella incurs a variable cost per unit of $24 and $1,400,000 in total fixed costs to produce this product. It is currently selling 92,000 units.
Instructions: Complete each of the following requirements, presenting labeled supporting computations.
(a) Compute and label the unit contribution margin and contribution margin ratio.
(b) Using the unit contribution margin, compute the break-even point in units.
(c) Using the contribution margin ratio, compute the break-even point in dollars.
(d) Compute the margin of safety and margin of safety ratio.
(e) Compute the number of units that must be sold in order to generate net income of $240,000 using the unit contribution margin.
(f) Should Isabella give a commission to its salesmen based on 8% of sales, if it will decrease fixed costs by $300,000 and increase sales volume 10%? Support your answer with labeled computations.
PART VI — OPERATING LEVERAGE
The following CVP income statements are available for Eloise Company and Teadora Company.
Eloise Company Teadora Company
Sales revenue $800,000 $800,000
Variable costs 325,000 195,000
Contribution margin 475,000 605,000
Fixed costs 375,000 505,000
Net income $100,000 $100,000
Instructions
(a) Compute the degree of operating leverage for each company.
(b) Prepare a CVP income statement for each company, assuming that sales revenue decreases by 30%.

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