Cost Accounting unit 1

Complete the following exercise and problem:

· Exercise 1-25, "Accounting Systems," page 26.

· Problem 1-39, "Cost Data for Managerial Purposes," page 30.

1-25. Accounting Systems

McDonald’s is a major company in the restaurant business.

Required

For each of the decisions below, indicate whether the decision maker would be more likely to get information from the financial (F) or cost (C) accounting system of McDonald’s (in addition, perhaps, to other information).

a. An investor is deciding whether to purchase stock in McDonald’s.

b. A marketing manager at McDonald’s is trying to determine whether to offer breakfast items all day long.

c. A fast-food competitor wants to compare her company’s financial performance to McDonald’s.

d. A labor organization representing workers at McDonald’s outlets is deciding whether McDonald’s is profitable enough to negotiate for pay raises.

e. An advertising manager at McDonald’s is deciding what media to use for commercials based on the profitability of different demographic groups.

1-39. Cost Data for Managerial Purposes

T-Comm makes a variety of products. It is organized in two divisions, North and South. The managers for each division are paid, in part, based on the financial performance of their divisions. The South Division normally sells to outside customers but, on occasion, also sells to the North Division. When it does, corporate policy states that the price must be cost plus 15 percent to ensure a “fair” return to the selling division. South received an order from North for 600 units. South’s planned output for the year had been 2,400 units before North’s order. South’s capacity is 3,000 units per year. The costs for producing those 2,400 units follow:

	Total	Per Unit
Materials	$ 480,000	$ 200
Direct labor	230,400	96
Other costs varying with output	153,600	64
Fixed costs (do not vary with output)	2,016,000	840
Total costs	$2,880,000	$1,200

Required

Complete the following problems:

· Problem 2-56, "Cost Concepts," page 74.

· Problem 2-59, "Prepare Statements for a Manufacturing Company," page 76.

Sales price (per unit)	$ 448
Manufacturing costs:
Fixed overhead (for the month)	50,400
Direct labor (per unit)	35
Direct materials (per unit)	112
Variable overhead (per unit)	70
Marketing and administrative costs:
Fixed costs (for the month)	67,500
Variable costs (per unit)	14

Required

a. Compute:

1. Variable manufacturing cost per unit.

2. Full cost per unit.

3. Variable cost per unit.

4. Full absorption cost per unit.

5. Prime cost per unit.

6. Conversion cost per unit.

7. Profit margin per unit.

8. Contribution margin per unit.

9. Gross margin per unit.

b. If the number of units produced increases from 900 to 1,200, which is within the relevant range, cost per unit will decrease (you can check this by redoing requirement [a] above). Therefore, we should recommend that Columbia Products increase its production to reduce its costs. Do you agree? Explain.

2-59. Prepare Statements for a Manufacturing Company

( LO 2-2 , 4 )

The administrative offices and manufacturing plant of Billings Tool & Die share the same building. The following information (in $000s) appears in the accounting records for last year:

Administrative costs	$ 9,600
Building and machine depreciation (75% of this amount is for factory)	5,400
Building utilities (90% of this amount is for factory)	7,500
Direct labor	5,040
Direct materials inventory, December 31	84
Direct materials inventory, January 1	72
Direct materials purchases	21,900
Factory supervision	2,940
Finished goods inventory, December 31	390
Finished goods inventory, January 1	324
Indirect factory labor	5,472
Indirect materials and supplies	4,110
Marketing costs	5,226
Property taxes on building (80% of this amount is for factory)	5,040
Sales revenue	77,820
Work-in-process inventory, December 31	174
Work-in-process inventory, January 1	192

Required

Prepare an income statement with a supporting cost of goods sold statem