View the step-by-step solution to:

Use the following information to answer questions 6 and 7: Alabaster Co. had sales of $500,000 for April and $1,000,000 for May. Selling price per...

 

Use the following information to answer questions 6 and 7:

Alabaster Co. had sales of $500,000 for April and $1,000,000 for May. Selling price per unit

remained at $5 for each month. The company started April with no beginning inventory and

then produced 200,000 units in April and 100,000 units in May. Variable manufacturing cost

per unit decreased from $1.10 in April to $1.00 in May . This was due to a change in labour

rates. Direct materials costs remained constant at $0.45 per unit. Fixed manufacturing costs

remained the same for both months at $450,000. There are no non-manufacturing costs. The

company uses the first-in, first-out (FIFO) method for costing inventory.

 

6. What is the variable cost operating income for May?

 

7. What is the throughput costing operating income for May?

 

8. Kunchai Corp. manufactures a cleaning product called Gemini. Expected sales for Gemini

(in litres) for the November to January quarter are as follows:

 

November

 December

January

Budgeted sales of Gemini (litres)

62,500

  67,500

55,000

 

November beginning inventory of Gemini is 3,125 litres and the company keeps an ending

inventory equal to 5% of next month's sales.

The following information relates to Gemini's two main ingredients, Alpha and Beta:

 

 

 

 

 

 

 

Units required to make

1 litre of Gemini

Cost per unit

Opening

inventory

Alpha

4

$4.00

1,020

Beta

12

$8.20

 3,080

 

To maintain smooth operations, the company uses just-in-time inventory management and

keeps just 0.2% of next month's production requirements on hand in ending inventory.

How much should Kunchai's controller budget for the cost of raw materials purchases of

Alpha and Beta for November?

 

9) 4. Goldstein Inc.'s budget committee has agreed on the following budgeted income for the

second quarter of next year.

 

April

May 

June

Sales    

$ 20,000

$ 40,000 

 $ 100,000

Beginning inventory

22,000     

24,000     

88,000

Purchases     

10,000     

75,000    

 24,000

Ending inventory     

(24,000)     

(88,000)     

(72,000)

Cost of sales     

8,000     

11,000     

 40,000

Gross margin     

12,000  

 29,000   

 60,000

Depreciation expense     

(2,000) 

   (2,000)     

(2,000)

Rent expense     

(16,000)     

(16,000)     

(16,000)

Variable selling expense    

 (4,000)      

(8,000)   

 (20,000)

Operating income   

$ (10,000) 

 $ 3,000

  $ 22,000

 

 

Goldstein's accounting department collects 50% of sales in cash. The other 50% are credit

card sales, with 50% of these sales collected in the month of sale and the remaining 50%

collected the month following sale. The credit card company pays Goldstein 95% of the

amount owing and keeps 5% as a service charge.

Purchases paid within 10 days qualify for a 2% discount. Goldstein always takes the

discount, and therefore always pays for its purchases in 10 days (20 of the 30 days in

each month will be paid that month and 10 of the 30 days will be paid in the next month).

Purchases are incurred evenly throughout the month. Rent is paid fully in the month

incurred and 75% of variable selling expenses are paid for in the month of the expense;

the balance is paid in the following month.

How much cash will be disbursed in June for purchases and general expenses?

 

 

 

 10) 5. Hughes Aerospace Components Ltd. manufactures metal components for aircraft. The

company's main process is stamping sheet metal into parts that are used for the body of

the aircraft. The company's process consists of two departments : Stamping and Finishing.

Hughes uses a normal costing system, and has collected the following budgeted data for

fixed manufacturing overhead:

Department

 

Fixed manufacturing

overhead

Cost driver

Practical

capacity

Average

activity level

Planned

activity

level

Stamping 

$1,680,000 

Machine hours 

14,000

 9,400 

11,200

Finishing

 $ 630,000 

Labour hours 

11,000

 6,500

 9,500

 

 The company's research and development department has just designed a lightweight

component using new technology. Due to lack of competition, the marketing department

has decided to price the component based on the total manufacturing cost plus a markup

of 40%.  

 

The following is a list of variable costs by department related to the new component:

 

Stamping:

           Direct materials                                             $6.75 per component

           Direct labour                                                             $28.00 per hour and 0.8 hours per component

           Variable overhead                                         $35.00 per machine hour and 0.25 machine hours per component

 

Finishing:

           Direct materials                                             $3.75 per component

           Direct labour                                                             $32.00 per hour and 1.1 direct labour hours

           Variable overhead                                         $22.00 per direct labour hour

 

 

Use the following information to answer questions 6 and 7:

Alabaster Co. had sales of $500,000 for April and $1,000,000 for May. Selling price per unit

remained at $5 for each month. The company started April with no beginning inventory and

then produced 200,000 units in April and 100,000 units in May. Variable manufacturing cost

per unit decreased from $1.10 in April to $1.00 in May . This was due to a change in labour

rates. Direct materials costs remained constant at $0.45 per unit. Fixed manufacturing costs

remained the same for both months at $450,000. There are no non-manufacturing costs. The

company uses the first-in, first-out (FIFO) method for costing inventory.

 

6. What is the variable cost operating income for May?

 

7. What is the throughput costing operating income for May?

 

8. Kunchai Corp. manufactures a cleaning product called Gemini. Expected sales for Gemini

(in litres) for the November to January quarter are as follows:

 

November

 December

January

Budgeted sales of Gemini (litres)

62,500

  67,500

55,000

 

November beginning inventory of Gemini is 3,125 litres and the company keeps an ending

inventory equal to 5% of next month's sales.

The following information relates to Gemini's two main ingredients, Alpha and Beta:

 

 

 

 

 

 

 

Units required to make

1 litre of Gemini

Cost per unit

Opening

inventory

Alpha

4

$4.00

1,020

Beta

12

$8.20

 3,080

 

To maintain smooth operations, the company uses just-in-time inventory management and

keeps just 0.2% of next month's production requirements on hand in ending inventory.

How much should Kunchai's controller budget for the cost of raw materials purchases of

Alpha and Beta for November?

 

9) 4. Goldstein Inc.'s budget committee has agreed on the following budgeted income for the

second quarter of next year.

 

April

May 

June

Sales    

$ 20,000

$ 40,000 

 $ 100,000

Beginning inventory

22,000     

24,000     

88,000

Purchases     

10,000     

75,000    

 24,000

Ending inventory     

(24,000)     

(88,000)     

(72,000)

Cost of sales     

8,000     

11,000     

 40,000

Gross margin     

12,000  

 29,000   

 60,000

Depreciation expense     

(2,000) 

   (2,000)     

(2,000)

Rent expense     

(16,000)     

(16,000)     

(16,000)

Variable selling expense    

 (4,000)      

(8,000)   

 (20,000)

Operating income   

$ (10,000) 

 $ 3,000

  $ 22,000

 

 

Goldstein's accounting department collects 50% of sales in cash. The other 50% are credit

card sales, with 50% of these sales collected in the month of sale and the remaining 50%

collected the month following sale. The credit card company pays Goldstein 95% of the

amount owing and keeps 5% as a service charge.

Purchases paid within 10 days qualify for a 2% discount. Goldstein always takes the

discount, and therefore always pays for its purchases in 10 days (20 of the 30 days in

each month will be paid that month and 10 of the 30 days will be paid in the next month).

Purchases are incurred evenly throughout the month. Rent is paid fully in the month

incurred and 75% of variable selling expenses are paid for in the month of the expense;

the balance is paid in the following month.

How much cash will be disbursed in June for purchases and general expenses?

 

 

 

 10) 5. Hughes Aerospace Components Ltd. manufactures metal components for aircraft. The

company's main process is stamping sheet metal into parts that are used for the body of

the aircraft. The company's process consists of two departments : Stamping and Finishing.

Hughes uses a normal costing system, and has collected the following budgeted data for

fixed manufacturing overhead:

Department

 

Fixed manufacturing

overhead

Cost driver

Practical

capacity

Average

activity level

Planned

activity

level

Stamping 

$1,680,000 

Machine hours 

14,000

 9,400 

11,200

Finishing

 $ 630,000 

Labour hours 

11,000

 6,500

 9,500

 

 The company's research and development department has just designed a lightweight

component using new technology. Due to lack of competition, the marketing department

has decided to price the component based on the total manufacturing cost plus a markup

of 40%.  

 

The following is a list of variable costs by department related to the new component:

 

Stamping:

           Direct materials                                             $6.75 per component

           Direct labour                                                             $28.00 per hour and 0.8 hours per component

           Variable overhead                                         $35.00 per machine hour and 0.25 machine hours per component

 

Finishing:

           Direct materials                                             $3.75 per component

           Direct labour                                                             $32.00 per hour and 1.1 direct labour hours

           Variable overhead                                         $22.00 per direct labour hour

 

What is the price per component if Hughes allocates fixed manufacturing costs based on

19,000 direct labour hours (rounded to the nearest cent)?

What is the price per component if Hughes allocates fixed manufacturing costs based on

19,000 direct labour hours (rounded to the nearest cent)?

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question