a leading manufacturing company has two main lines of products Traditional and M
ID: 2556830 • Letter: A
Question
a leading manufacturing company has two main lines of products Traditional and Modern with the unit sales prices for $340 and $440 respectively. Manufacturing overhead are applied as $544.025 per direct labor hour.
Budgeted statement of gross margin 2018
Products
Sales in units
Traditional
10000
Modern
10000
Total
20000
Beginning finished goods
$480,000.00
$600,000.00
$1,080,000.00
Direct material
$2,000,000.00
$3,500,000.00
$5,500,000.00
Direct labor
$370,370.00
$185,186.00
$555,556.00
Ending finished goods
$480,000.00
$600,000.00
$1,080,000.00
Overhead breakdown in percentage
Machining
52.02%
Assembly
26.59%
Material Handling
6.94%
Inspection
14.45%
Total
100.00%
Products
Cost pool info for 2018
Traditional
Modern
Direct labor hours
2000
1000
Machine hours
30000
60000
Assembly hours
12000
11000
Material handling parts
10
20
Inspection hours
1000
1500
Products
Projections 2019
Traditional
Modern
Ending inventory in dollars
$260,000.00
$440,000.00
Sales in units
10200
9800
Material, labors and overhead are expected to increase by 10% each in 2019. Unit sale prices for both products are expected to increase by $10 each in 2019 Percentage of overhead remains the same in 2019
The cost drivers units are staying the same in 2019
There are two clients with special orders for Traditional. The two clients ordered the same number of units
You tracked their COGS by their extra number of specifications per unit by month in 2018
Client one in 2018
# of specifications
COGS
Jan
85
$45,000.00
Feb
65
$32,000.00
Mar
110
$55,000.00
Apr
160
$78,000.00
May
65
$36,000.00
Jun
37
$34,000.00
Jul
29
$19,000.00
Aug
37
$21,000.00
Sep
68
$39,000.00
Oct
81
$51,000.00
Nov
48
$36,000.00
Dec
124
$74,000.00
Total
909
$520,000.00
Client two in 2018 # of specifications COGS
Jan
75
$25,000.00
Feb
55
$15,000.00
Mar
120
$45,000.00
Apr
150
$60,000.00
May
55
$30,000.00
Jun
34
$25,000.00
Jul
27
$15,000.00
Aug
33
$20,000.00
Sep
61
$35,000.00
Oct
77
$45,000.00
Nov
42
$25,000.00
Dec
116
$60,000.00
Total
845
$400,000.00
Required
(Do not round down in calculations until the final answer at two decimal point.)
Prepare a gross margin table based on traditional costing method with sales and COGS in total dollars for 2018 for both product lines
Prepare a gross margin table based on activities method with sales and COGS in total dollars for 2018 for both product lines
What does the information in both 2018 tables tell you?
Prepare a gross margin table based on activities method with sales and COGS in total dollars for 2019 for both product lines
Calculate the fixed cost and variable cost components of COGS for the two clients using the least squares regression method. Show your work and write out the regression model equation for each client.
Discuss the two clients COGS in terms of fixed cost and variable cost according to special specifications.
Sales in units
Traditional
10000
Modern
10000
Total
20000
Beginning finished goods
$480,000.00
$600,000.00
$1,080,000.00
Direct material
$2,000,000.00
$3,500,000.00
$5,500,000.00
Direct labor
$370,370.00
$185,186.00
$555,556.00
Ending finished goods
$480,000.00
$600,000.00
$1,080,000.00
Explanation / Answer
As per Chegg policy only 4 part of 1 question is allowed.
1. Statement Showing Gross Margin Table on traditional Costing Method Distributing Manufacturing overhead to various cost pools :- Traditional Modern Total Total Overhead $1,632,075 Sales (a) $3,400,000 $4,400,000 $7,800,000 Machining 52.02% $849,005 10000 units @ $340 10000 units @ $440 Assembly 26.59% $433,969 Direct Material (b) $2,000,000 $3,500,000 $5,500,000 Material Handling 6.94% $113,266 Direct Labor (c ) $370,370 $185,186 $555,556 Inspection 14.45% $235,835 Manufacturing overhead (d) $1,088,050 $544,025 $1,632,075 2000 Hrs @ $544.025 1000 Hrs @ $544.025 Total COGS (e=b+c+d) $3,458,420 $4,229,211 $7,687,631 Gross Margin (a-e) ($58,420) $170,789 $112,369 Allocation of Manufacturing overhead based on Activities and cost pools :- Cost Sum of Cost Pool Rate Cost Pool Traditional ($) Cost Pool Modern ($) Total ($) Machining $849,005 90000 $9.43 30000 $283,002 60000 $566,004 $849,005 Assembly $433,969 23000 $18.87 12000 $226,418 11000 $207,550 $433,969 Material Handling $113,266 30 $3,775.53 10 $37,755 20 $75,511 $113,266 Inspection $235,835 2500 $94.33 1000 $94,334 1500 $141,501 $235,835 Total $1,632,075 $641,510 $990,565 $1,632,075 2. Statement Showing Gross Margin Table on Activity Based Costing Method Traditional Modern Total Sales (a) $3,400,000 $4,400,000 $7,800,000 10000 units @ $340 each 10000 units @ $440 each Direct Material (b) $2,000,000 $3,500,000 $5,500,000 Direct Labor © $370,370 $185,186 $555,556 Manufacturing overhead (d) $641,510 $990,565 $1,632,075 Total COGS (e=b+c+d) $3,011,880 $4,675,751 $7,687,631 Gross Margin (a-e) $388,120 ($275,751) $112,369 3.On following Activity Cost Method Modern will show loss of $275751 despite of profit shown as per traditional method and Tradition shows profit as per ABC, but shown as loss in traditional methid 4. Statement Showing Gross Margin Table on Activity Based Costing Method for 2019 Traditional Modern Total Sales (a) $3,814,800 $4,743,200 $8,558,000 10200 units @ $340*110% each 9800units @ $440*110% each Direct Material (b) ( increase by10%) $2,000,000 $3,500,000 $5,500,000 Direct Labor © (increase by 10%) $407,407 $407,407 $814,814 Manufacturing overhead (d)(increase by 10%) $705,661 $705,661 $1,411,322 Total COGS (e=b+c+d) $3,113,068 $4,613,068 $7,726,136 Gross Margin (a-e) $701,732 $130,132 $831,864As per Chegg policy only 4 part of 1 question is allowed.
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