Rays Inventory Farm Store recorded the following purchases and sales of fertilizer during the past year: Jan.1 Beginning Inventory Feb. 25 Purchased June 15 Purchased Aug. 15 Purchased Oct. 15 Purchased Dec. 15 Purchased Total goods available for sale Total sales Dec. 31 Ending Inventory 250 cases @ $23 100 cases @ $23 400 cases @ $23 100 cases @ $23 300 cases @ $23 200 cases @ $23 1,350 cases 1,000 cases 350 cases $5,750 2,600 11,200 2,600 8,400 6,000 $36,550
1) Determine the Cost of Goods Sold and Ending Inventory under the three cost-flow assumptions: FIFO, LIFO, and Average Cost. 2) Calculate the LIFO reserve ending balance on Dec. 31.
High-Low method The company reports the following utility costs for different levels of activity during the first half of the year: Month Machine hours Total utility costs January 470 $14,900 February 500 15,350 March 570 16,450 April 625 17,300 May 610 16,800 June 525 15,800 Using the high-low method, estimate the variable cost rate.
CVP analysis SMC, Inc. is a producer of hand-held electronic games. Its 2008 income statement was as follows: SMC, Inc. Contribution Margin Income Statement For the Year Ended Dec.31,, 2008 Total Sales Revenue (150,000 games) $5,250,000 Less variable costs 3,750,000 Contribution margin 1,500,000 Less fixed costs 900,000 Net income 600,000
Per Unit $35 $10
1) 25 Calculate the break-even point (in units, i.e., number of games) for SMC, Inc. 2) Calculate the number of games needed for SMC, Inc. to make a target profit of 900,000. 3) Suppose SMC, Inc. is considering investing $200,000 in advertising that will boost the sales to 200,000 games at the current price. Is this a right decision? 4) Suppose SMC, Inc. is planning to give a holiday discount of $3/unit on the games and presumably the sales would go up to 180,000 games. Should AMC, Inc. give the discount? Costing VG Company has identified the following cost pools and cost drivers: Cost Pools Machine setup Material handling Electric power Overhead $360,000 100,000 40,000 Cost Drivers 6,000 setup hours 50,000 pounds of material 80,000 kilowatt-hours
The flowing information pertains to the production of product V203 and G179. Item Number of units produced Direct material cost Direct labor cost Number of setup hours Pounds of material used Kilowatt-hours V203 5,000 $25,000 $14000 120 5,000 2,000 G179 15,000 $33,000 $16,000 150 10,000 3,000
1) Assume that VG Company currently is using traditional costing system under which the total overhead is allocated based on direct labor cost, calculate the unit product cost for V203 and G179. 2) Determine the unit product for each of the two products using activity-based costing.