Assessment 2: Applying Cost Accounting Concepts to Analyze and Estimate Costs

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Assessment 2 Part 1

Assessment 2 Part 1: Interpretation of Regression Results
Scenario
Your company provides a variety of delivery services. Management wants to know the volume of a particular delivery that would generate $11,000 per month in operating profits before taxes. The company charges $22 per delivery. The controller’s office has estimated overhead costs at $9,900 per month for fixed costs and $12 per delivery for variable costs. You believe that the company should use regression analysis. Your analysis shows the results to be: Monthly overhead=$26,501+$10.70 per Your estimate was based on the following data:
Month Overhead Costs Number of Deliveries
  1 $ 159,630.00 12510
  2   183,990 15060
  3   142,860 11430
  4   194,430 15450
  5   151,890 12180
  6   150,120 11970
  7   192,600 15660
  8   154,080 12630
  9   141,030 11250
10   184,800 15300
11   203,490 12780
12   183,120 14580
13   180,630 14730
REQUIRED
The company controller is somewhat surprised that your cost estimates are so different from the controller's. You have been asked to recheck your work and see if you can figure out the difference between your results and the controller’s results.
1. Analyze the data and your results. Explain your reasons for supporting or rejecting your cost equation. Show all calculations.
2. Write a report that informs management about the correct volume that will generate $11,000 per month in operating profits before taxes.

Assessment 2 Part 2

Assessment 2 Part 2: Operations Costing
Scenario:
Nevada Instruments manufactures two models of calculators. The finance model is the Financial 5 and the scientific model is the Scientific 6. Both models are assembled in the same plant and require the same assembling operations. The difference between the models is in the cost of the parts. The following data are available for August:
 Financial 5  Scientific 6 Total
Number of units 11,000 44,000     55,000
Parts cost per unit      $25      $30
Other costs:
Direct labor $  68,200
Indirect materials     19,250
Overhead     77,550
Total $165,000
REQUIRED
Nevada Instruments uses operations costing and assigns conversion costs based on the number of units assembled.
Compute the cost per unit of the Financial 5 and Scientific 6 models for August. Show all calculations.
Answers
Financial 5
Scientific 6

Assessment 2 Part 3

Assessment 2 Part 3: Analysis of Overhead Using a Predetermined Rate
Scenario:
Atchison Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows:
Direct labor-hours      150,000      180,000      210,000
Variable overhead costs $1,155,000.00 $1,386,000.00 $1,617,000.00
Fixed overhead costs      712,800      712,800      712,800
Total overhead $1,867,800.00 $2,098,800.00 $2,329,800.00
The expected volume is 180,000 direct labor-hours for the entire year. The following information is for September, when Jobs 6023 and 6024 were completed:
Inventories, September 1
Materials and supplies $  31,500
Work in process (Job 6023) $162,000
Finished goods $337,500
Purchases of materials and supplies
Materials $445,500
Supplies $  49,500
Materials and supplies requisitioned for production
Job 6023 $148,500
Job 6024   123,750
Job 6025     84,150
Supplies     19,800
$376,200
Factory direct labor-hours (DLH)
Job 6023 10,500 DLH
Job 6024 9,000 DLH
Job 6025 6,000 DLH
Labor costs
Direct labor wages (all hours @ $9) $229,500
Indirect labor wages (12,000 hours)     51,000
Supervisory salaries   118,800
Building occupancy costs (heat, light, depreciation, etc.)
Factory facilities $21,450
Sales and administrative offices      8,250
Factory equipment costs
Power    13,200
Repairs and maintenance      4,950
Other      8,250
$26,400
REQUIRED
Answer the following questions:
Answers
1. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year. (Note: Regardless of your answer to requirement [1], assume that the predetermined overhead rate is $10 per direct labor-hour. Use this amount in answering requirements [2] through [5].)
2. Compute the total cost of Job 6023 when it is finished.
3. How much of factory overhead cost was applied to Job 6025 during September?
4. What total amount of overhead was applied to jobs during September?
5. Compute actual factory overhead incurred during September.
6. At the end of the year, Atchison Company had the following account balances:
Overapplied Overhead $      3,300
Cost of Goods Sold  3,234,000
Work-in-Process Inventory     125,400
Finished Goods Inventory     270,600
How would you recommend treating the over applied overhead, assuming that it is not material? Show the new account balances in the following table:
Overapplied Overhead
Cost of Goods Sold
Work-in-Process Inventory
Finished Goods Inventory