Adv. Managerial Accounting/Cost Accounting
esurmen
MAC7200ProjectWeek5.xlsxWeek 5
| Pangea Corporation |
| Pangea manufactures sunglasses with various fashion frame options. Their sunglasses generally sell for $10-$15 per pair. |
| The frames are created in-house (molded), with the lenses and screws purchased from other companies. |
| Week 3 Assignment |
| 1) Using your annual budget data from Week 3 (on the 2nd/3rd tab of this sheet) and the data provided, calculate the fixed and variable costs for the 3 production departments. |
| 2) Using your annual budget data from Week 3 and the data provided, calculate the standard costs of the 2 product lines produced in your factory. |
| Note: You will be using activity based costing; the various cost drivers available are specified in the data |
| 3) Using the budgeted sales data, calculate the standard gross margin for each of the 2 products - both per unit and total gross margin with budgeted volume. |
| Note: Present the standard gross margin in a contribution income statement format (per unit for each product line and total for each product line) |
| Note: Because we are costing products and only calculating through standard gross margin, Sales and Advertising Expense and Interest Expense can be ignored this week. |
| 4) Write a paragraph explaining the results and recommending which product line would be best to advertise to gain additional sales, and why you chose that product line. |
| (I asked professor if she wants me to use the format she had or what I submitted for as Week 3 data, she said "You should look at what I sent versus what had and make corrections to yours and build for this week. You had points off for not have some categories be volume based, the loan needs to come out and just let me know what loan interest method you are using. I accepted 4 methods. I prefer the $100,000 / month amortization method.") |
| Plant Equipment |
| Pangea's Delaware plant has 3 production departments: Mixing, Extruding, and Assembly |
| The Mixing department has 1 mixing tank (to mix the plastic), and the Extruding department has 2 extruders (that fill metal molds with plastic to form the sunglass frames). |
| Each of the three machines was purchased when the plant first started up, and they all had the same original cost and useful life. |
| Assembly does not use any production equipment. |
| Mixing uses 40% of the plant's warehouse square footage as well as 40% of utilities costs. |
| Extruding use 40% of the plant's warehouse square footage as well as 40% of utilities costs. |
| Assembly uses 20% of the plant's warehouse square footage as well as 20% of utility costs (climate controlled area). |
| Other plant department information |
| 20% of total Salaries are attributable to the mixing tank |
| 30% of total Salaries are attributable to the extruding line |
| 50% of total Salaries are attributable to the assembly area |
| Fringe Benefits and Travel expenses are allocated the same as Salaries |
| The contractors divide their time between the mixing tank and extruder areas (50% each). |
| Manufacturing supplies are use evenly by all production areas. |
| Parts and Tools are used only in the assembly area. |
| Cost Driver |
| The main cost driver is machine hours for the Mixing and Extruding Department, and Man Hours for the Assembly Department |
| The Mixing Department expects to run 40 hours per week for 50 weeks this year. |
| The Extruding Department expects to run 40 hours per week for 50 weeks this year - for each machine. |
| The 5 employees in the Assembly Department are expected to each work 40 hour weeks for 50 weeks this year. |
| Product Information |
| There are two different frame styles produced in Pangea's Delaware manufacturing plant. Your budget from the prior weeks only included total volume. |
| Your budgeted volume will be divided by product as follows: 60% Rayz frames, and 40% Beamz frames |
| Rayz glasses sell for $11.50 each, and Beamz glasses sell for $14.00 each. |
| Purchased Material Costs |
| Each pair of sunglasses requires 2 lenses, 4 screws, and 0.5 gallons of plastic polymer (which gets made into frames) |
| Sunglass lenses cost $1.00 per lens, and screws cost $0.10 per screw. |
| Polymer costs $5.00 per gallon |
| Production of Sunglasses |
| Each batch of sunglasses makes 1000 pairs of sunglasses. |
| One batch of Rayz glasses takes 3 hours in the Mixing Department, 5 hours in the Extruding Department, and 12 hours in Assembly |
| One batch of Beamz glasses takes 3 hours in the Mixing Department, 8 hours in the Extruding Department, and 21 hours in Assembly |
Week 3 (prof's format)
| Data for Operating Budget | ||||||||||||
| 2016 Full Year | 2017 August YTD | 2017 full year | 2018 Full year | |||||||||
| Sales | 7,687,500 | 6,000,000 | 8,309,008 | 8,724,458 | Increase of 5% in sales from 2017. 2017 full year sales calculated above times 1.05 | |||||||
| Purchased Raw Materials | 3,075,000 | 2,400,000 | 3,323,603 | 3,489,783 | Increase of 5% in sales from 2017. 2017 full year sales calculated above times 1.05 | |||||||
| Expense Category | ||||||||||||
| Salaries and Wages | 775,000 | 485,667 | annualized | 728,500 | 750,355 | Increase of 3% for cost of living for 2018 | ||||||
| Fringe Benefits | 372,000 | 242,833 | 50% of salary | 364,250 | 375,178 | |||||||
| Travel & Entertainment | 40,000 | 28,000 | annualized | 42,000 | 5% increase | 44,100 | Taking the same 5% increase in T&E that occurred from 2016 to 2017 and carrying over to 2018 | |||||
| Outside Contractors | 145,000 | 100,000 | annualized | 150,000 | 3% increase | 206,000 | Increase of 3% for outside contractors = 154,500 / 3 = $51,500 per contractor X 4 people = 206,000 | |||||
| Manufacturing Supplies | 250,000 | 160,000 | volume based | 221,574 | 229,139 | if full year would have been .3333 per unit, (221,574/664,721) see savings below | ||||||
| Parts and Tools | 60,000 | 40,000 | volume based | 55,393 | 57,288 | if full year would have been .08333 per unit, (55,393/664,721) see savings below | ||||||
| Utilities | 300,000 rbamo: rbamo: 300,000/615,000=.4878 | 220,000 rbamo: rbamo: 220,000/480,000= .4583 | volume based | 304,664 | 315,075 | if full year would have been .4583 per unit, (304,664/664,721) see savings below | ||||||
| Depreciation | 150,000 | 110,000 | new mix tank | 167,167 rbamo: rbamo: month Depr 110,000/8= $13750*12 months plus addition depr for mixing tank $65,000/10 years = $6500/12 times 4 months Sept-Dec | 4 month depr | 171,500 | New mixing tank purchased Sept 2017 - 4 months depreciation in 2017, full year in 2018 | |||||
| Warehousing Costs | 80,000 | 50,000 | volume based | 69,242 rbamo: rbamo: Thru August 50,000/480,000 units = .104167 each |
rbamo: rbamo: 300,000/615,000=.4878 |
rbamo: rbamo: 220,000/480,000= .4583 | 71,636 | if full year would have been .1042 per unit, (69,242/664,721) see savings below | ||||
| Total Operating Expenses | 2,172,000 | 1,436,500 | 2,102,789 | 2,220,272 | ||||||||
| Sales and Advertising Exp | 450,000 | 300,000 | volume based | 415,450 | 436,223 | volume based in 2017 - per unit cost .625, case study silent on method of growth or savings | ||||||
| Interest expense | 14,000 | 12,000 | See accepted amortization methods | |||||||||
| Income from Operations | 1,990,500 | 1,863,500 | 2,453,165 | 2,566,180 | ||||||||
| Volume | 615,000 | 480,000 | 664,721 | 697,957 | ||||||||
| 12.50 | 12.50 | 12.50 | 12.50 | |||||||||
| 5 | 5 | 5 | 5 | |||||||||
| Notes: | based on | based on | based on | |||||||||
| 8 months | 12 months | 12 months | ||||||||||
| Units sold | 2018 Volume based savings | |||||||||||
| 2016 | 2017 based on 2016 | 2017 annual | 2018 Annual | Mfr supp | Parts | Utilities | Warehouse | |||||
| Jan-March | 102,705 | 102,705 | 110,897 | 116,442 | 0 | 0 | 0 | |||||
| Oct-Dec | 102,090 | - 0 | 110,900 | 116,445 | 1164.33 | 291.10 | 1601.00 | 364.01 | ||||
| April- Sept | 410,205 | 341,838 | 442,924 | 465,070 | 2325.12 | 581.31 | 3197.12 | 726.90 | ||||
| 615,000 | 444,543 | 664,721 | 697,957 | 3489.45 | 872.41 | 4798.13 | 1090.91 | |||||
| 480,000 | ||||||||||||
| 2017 % increase in sales over 2016 | 7.976% | sales based on | Sales 5% higher | |||||||||
| 7.976% volume | case study | |||||||||||
| increase | assumption |
Week 3 ( I submitted)
| Esra Surmen Case Study 1 | ||||||||
| Data for Operating Budget | ||||||||
| 2017 August YTD | 2017 Full Year | 2018 Full Year | Assumptions for 2017 | Assumptions for 2018 | ||||
| Sales | 7,687,500 | 6,000,000 | 8307692.5 | 8723077.13 | correct | Sales of materials based on 2016 selling price | Sales of materials based on 2016 selling price | |
| Purchased Raw Materials | 3,075,000 | 2,400,000 | 3323077 | 3489230.85 | correct | Assumed to vary according to volume | Assumed to vary according to volume | |
| Expense Category | ||||||||
| Salaries and Wages | 775,000 | 485,667 | 728,500 | 750,355.00 | correct | Increased by 3 percent per annum of 2017 value | ||
| Fringe Benefits | 372,000 | 242,833 | 364,250 | 375,177.50 | correct | Varies according to wages | Assumed to be 50 percent of 2017's total salaries and wages | |
| Travel & Entertainment | 40,000 | 28,000 | 42,000.00 | 44,100.00 | correct | Varies annually by 5 percent | Varies annually by 5 percent | |
| Outside Contractors | 145,000 | 100,000 | 150,000.00 | 200,000.00 | correct | Varies per month | The company hires four contractors | accepted 2017 over 2016 esculated 3% similar in 2018 |
| Manufacturing Supplies | 250,000 | 160,000 | 240,000.00 | 252,000.00 | minus 1 | Varies according to volume | Varies according to volume | missed 2nd half efficeincy measures |
| Parts and Tools | 60,000 | 40,000 | 55,384.62 | 58,153.85 | minus 1 | Varies according to volume | Varies according to volume | missed 2nd half efficeincy measures |
| Utilities | 300,000 | 220,000 | 304,615.39 | 319,846.16 | correct | Varies according to volume | Varies according to volume; volume related cost decreases by 3% for second half of 2018 | |
| Depreciation | 150,000 | 110,000 | 165000 | 171500 | correct | Varies monthly | Net depreciation of 2017 +depreciation of new machine | |
| Warehousing Costs | 80,000 | 50,000 | 69230.77 | 72692.31 | minus 1 | Varies according to volume | Varies according to volume | missed 2nd half efficeincy measures |
| Loan | 400,000 | 800,000.0 | minus 10 | Paid at end of 2017 | Paid at end of 2018 | Loan payments are not expenses. Payments is on fixed asset | ||
| Interest | 16000 | 32000 | accepted | Interest computed on 1200000 | Interest computed on 800000 | |||
| Total Operating Expense | 2,172,000 | 1,436,500 | 2,534,981 | 3,075,824.8 | ||||
| Sales and Advertising Exp | 450,000 | 300,000 | 415384.63 | 436153.86 | correct | Assumed to vary according to volume | Assumed to vary according to volume | |
| Income from Operations | 1,990,500 | 1,863,500 | 2,034,250.1 | 1,721,867.6 | ||||
| Volume | 615,000 | 480,000 | 664615.4 | 697846.17 | correct | |||
| 0.41 | 0.33 | 0.36 | 0.36 | |||||
| Process | ||||||||
| Sales estimation between August 2017 and September 2018 | ||||||||
| Let sales (in quantity) between October and March be X | Grade | 87 | ||||||
| Quantity of sales between April and September = 2X | ||||||||
| Therefore; | ||||||||
| Sales from January to August = 480,000 | ||||||||
| X/2+2X*5/6=480000 | ||||||||
| X= 221,538.5 units | ||||||||
| Assuming uniform distribution of sales; | ||||||||
| Demand for the month of September = 2X/6 | ||||||||
| Demand between October and December = (X/6)*3 | ||||||||
| Net demand = 2X/6+3X/6 =5X/6 | ||||||||
| =5 (221,538.5)/6 | ||||||||
| =184,615.4 units | ||||||||
| For simple simplification assume the demand to be 185,000 units | ||||||||
