1. The following is a list of various costs of producing sweatshirts. Classify e
ID: 2565982 • Letter: 1
Question
1. The following is a list of various costs of producing sweatshirts. Classify each cost as either a variable, fixed, or mixed cost for units produced and sold.
(a)
Lubricants used to oil machinery.
(b)
Warehouse rent of $6,000 per month plus $.50 per square foot of storage used.
(c)
Thread.
(d)
Electricity costs of $.025 per kilowatt-hour.
(e)
Janitorial costs of $2,000 per month.
(f)
Advertising costs of $10,000 per month.
(g)
Sales salaries.
(h)
Color dyes for producing different colors of sweatshirts.
(i)
Salary of the production supervisor.
(j)
Straight-line depreciation on sewing machines.
(k)
Patterns for different designs. Patterns typically last many years before being replaced.
(l)
Hourly wages of sewing machine operators.
(m)
Property taxes on factory, building, and equipment.
(n)
Cotton and polyester cloth.
(o)
Maintenance costs with sewing machine company. The cost is $2,000 per year plus $.001 for each machine hour of use.
2. On October 31, the end of the first month of operations, Morristown & Co. prepared the following income statement based on absorption costing:
Morristown & Co.
Income Statement
For Month Ended October 31, 20-
Sales (2,600 units)
$104,000
Cost of goods sold:
Cost of goods manufactured
$85,500
Less ending inventory (400 units)
11,400
Cost of goods sold
74,100
Gross profit
$ 29,900
Selling and administrative expenses
21,500
Income from operations
$ 8,400
========
If the fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600, prepare an income statement in accordance with the variable costing concept.
3. Based on the following production and sales data of Shingle Co. for March of the current year, prepare (a) a sales budget and (b) a production budget.
Product T
Product X
Estimated inventory, March 1
28,000 units
20,000 units
Desired inventory, March 31
32,000 units
15,000 units
Expected sales volume:
Area I
320,000 units
260,000 units
Area II
190,000 units
130,000 units
Unit sales price
$6
$14
4. Door & Window Co. was organized on August 1 of the current year. Projected sales for the next three months are as follows:
August
$120,000
September
200,000
October
230,000
The company expects to sell 40% of its merchandise for cash. Of the sales on account, 25% are expected to be collected in the month of the sale and the remainder in the following month.
Prepare a schedule indicating total cash collections for August, September, and October.
5. For the current year ending April 30, Hal Company expects fixed costs of $60,000, a unit variable cost of $70, and a unit selling price of $105.
(a)
Compute the anticipated break-even sales (units).
(b)
Compute the sales (units) required to realize an operating profit of $8,000.
6. The Filling Department of Rose Petal Lotion Company had 2,300 ounces in beginning work in process inventory (70% complete). During the period 46,500 ounces were completed. The ending work in process inventory was 1,800 ounces (25% complete). What are the equivalent units for both direct materials and conversion costs (if materials are added at the beginning of the process)?
7. Standard and actual costs for direct materials for the manufacture of 1,000 units of product were as follows:
Actual costs
1,550 lbs. @ $9.10
Standard costs
1,600 lbs. @ $9.00
Determine the (a) quantity variance, (b) price variance, and (c) total direct materials cost variance.
8. Standard and actual costs for direct labor for the manufacture of 1,000 units of product were as follows:
Actual costs
950 hours @ $37.00
Standard costs
975 hours @ $36.00
Determine the (a) time variance, (b) rate variance, and (c) total direct labor cost variance.
(a)
Lubricants used to oil machinery.
(b)
Warehouse rent of $6,000 per month plus $.50 per square foot of storage used.
(c)
Thread.
(d)
Electricity costs of $.025 per kilowatt-hour.
(e)
Janitorial costs of $2,000 per month.
(f)
Advertising costs of $10,000 per month.
(g)
Sales salaries.
(h)
Color dyes for producing different colors of sweatshirts.
(i)
Salary of the production supervisor.
(j)
Straight-line depreciation on sewing machines.
(k)
Patterns for different designs. Patterns typically last many years before being replaced.
(l)
Hourly wages of sewing machine operators.
(m)
Property taxes on factory, building, and equipment.
(n)
Cotton and polyester cloth.
(o)
Maintenance costs with sewing machine company. The cost is $2,000 per year plus $.001 for each machine hour of use.
Explanation / Answer
Solution:
1) Classification of cost
Cost Classification
(a)
Lubricants used to oil machinery.
Variable
(b)
Warehouse rent of $6,000 per month plus $.50 per square foot of storage used.
Mixed (Because it has $0.50 per sft variable and $6,000 fixed)
(c)
Thread.
Variable
(d)
Electricity costs of $.025 per kilowatt-hour.
Variable (Since the electricity costs varies with the use of electricity it is variable)
(e)
Janitorial costs of $2,000 per month.
Fixed (It is fixed per month)
(f)
Advertising costs of $10,000 per month.
Fixed (It is fixed per month)
(g)
Sales salaries.
Fixed (It is fixed per month)
(h)
Color dyes for producing different colors of sweatshirts.
Variable
(i)
Salary of the production supervisor.
Fixed
(j)
Straight-line depreciation on sewing machines.
Fixed
(k)
Patterns for different designs. Patterns typically last many years before being replaced.
Fixed
(l)
Hourly wages of sewing machine operators.
Variable (Since wages depends upon the hourly work)
(m)
Property taxes on factory, building, and equipment.
Fixed
(n)
Cotton and polyester cloth.
Variable
(o)
Maintenance costs with sewing machine company. The cost is $2,000 per year plus $.001 for each machine hour of use.
Mixed (Because it has $0.001 per machine hour variable and $2,000 fixed)
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Cost Classification
(a)
Lubricants used to oil machinery.
Variable
(b)
Warehouse rent of $6,000 per month plus $.50 per square foot of storage used.
Mixed (Because it has $0.50 per sft variable and $6,000 fixed)
(c)
Thread.
Variable
(d)
Electricity costs of $.025 per kilowatt-hour.
Variable (Since the electricity costs varies with the use of electricity it is variable)
(e)
Janitorial costs of $2,000 per month.
Fixed (It is fixed per month)
(f)
Advertising costs of $10,000 per month.
Fixed (It is fixed per month)
(g)
Sales salaries.
Fixed (It is fixed per month)
(h)
Color dyes for producing different colors of sweatshirts.
Variable
(i)
Salary of the production supervisor.
Fixed
(j)
Straight-line depreciation on sewing machines.
Fixed
(k)
Patterns for different designs. Patterns typically last many years before being replaced.
Fixed
(l)
Hourly wages of sewing machine operators.
Variable (Since wages depends upon the hourly work)
(m)
Property taxes on factory, building, and equipment.
Fixed
(n)
Cotton and polyester cloth.
Variable
(o)
Maintenance costs with sewing machine company. The cost is $2,000 per year plus $.001 for each machine hour of use.
Mixed (Because it has $0.001 per machine hour variable and $2,000 fixed)
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