Acc 550 - Cost Accounting - Final Project

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acc_550_hampshire_company_.xls
Home>Business & Finance homework help>Accounting homework help>Acc 550 - Cost Accounting - Final Project

Part I

Requirement 1
Units Price Totals
Sales 60,000 $12.50 $750,000
Variable Costs 60,000 $6.00 $360,000.00
Fixed Costs 295525 $295,525.00
Net Income $94,475.00
Requirement 2
Contribution Margin per Unit in Dollars = Selling Price – Variable Costs
Selling Price Variable Costs Contribution Margin per Unit
$12.50 $6.00 $6.50
Contribution Margin Ratio = Contribution Margin/Selling Price
Contribution Margin Selling Price Contribution Margin Ratio
$6.50 $12.50 52.00%
Requirement 3
Break-Even Point = Fixed Costs / Contribution Margin
Fixed Costs Contribution Margin Break-Even Point in Units (Rounded)
$295,525 $6.50 45,465
Break-Even Point in Units X Selling Price per Unit = Break-Even Point Sales
Break-Even Point in Units Selling Price per Unit Break-Even Point in Sales (Rounded)
45,465 $12.50 $568,317
Requirement 4A
Margin of Safety in Units = Current Unit Sales – Break-Even Point in Unit Sales
Current Unit Sales Break-Even Point in Sales Margin of Safety in Units
60,000 45,465 14,534.62
Requirement 4B
Margin of Safety in Dollars = Current Sales in Dollars – Break-Even Point Sales in Dollars
Current Sales in Dollars Break-Even Point in Dollars Margin of Safety in Dollars
$750,000 $568,317 $181,683
Requirement 4C
Margin of Safety as a Percentage = Margin of Sales in Units / Current Unit Sales
Margin of Safety in Units Current Unit Sales Margin of Safety Percentage
14,535 60,000 24%
Requirement 5
Degree of Operating Leverage = Contribution Margin / Operating Income
Contribution Margin Operating Income Operating Leverage
$390,000.00 $94,475.00 4.1281
Requirement 6
Units $ Per Unit Totals
Sales 72,000 $12.50 $900,000
Variable Costs 72,000 $6.00 $432,000.00
Fixed Costs $295,525.00
Net Income $172,475.00
Operating Leverage Times % Increase Increase would be XX%
2.71343673 20% 82.56%
Prior Income $94,475.00 From Part 1
Increase 82.56% Prior Income X XX% Above
Total $172,475.00
Requirement 7
Targeted Income = (Fixed Costs + Target Income) / Contribution Margin
Fixed Costs + Target Income Divided by Contribution Margin # of Units (Rounded)
Fixed Costs $295,525 $6.50 45,465
Target Income $120,000 $6.50 18462
Total $415,525 $6.50 63,927
# of Units Above X $ Per Unit
Proof Revenue 68542 x 12.50 $799,087
Variable Costs 68542 x 6.5 $383,562
Contribution Margin $415,525
Fixed Costs $295,525
Net Income $120,000
Requirement 8
Sales Mix
Current Specialty Total
Expected Sales Units 60,000 5,000 65,000
Revenue = Sales X Price $750,000 $55,000 $805,000
Variable Costs X Units $360,000 $31,000 $391,000
Contribution Margin $390,000 $24,000 $414,000
Fixed Costs $295,525 $15,000 $310,525
Operating Income $103,475
Prior Net Income From Requirement 1 $94,475.00
Additional Operating Income (Operating Income Above Less Prior Income) $9,000.00
Decision With Explanation Yes, the company should continue with the speciality sales as it will lead to increase in income of $9000

Part II

Requirement 1
Hampshire Company
Variable Costing Income Statement
Units $
Sales 60,000 $12.50 $750,000.00
Variable Cost of Goods Sold:
Beginning Inventory 0 $0
Direct Materials 80,000 $3.00 $240,000.00
Direct Labor 80,000 $1.50 $120,000.00
Manufacturing Overhead 80,000 $0.40 $32,000.00
Total Variable Costs $392,000.00
Cost of Good Available for Sale $392,000.00
Deduct Ending Inventory 20,000 $4.90 $98,000.00
Variable Costs of Goods Sold $294,000.00
Variable Selling Costs 60,000 $1.10 $66,000.00 $66,000.00
Contribution Margin $390,000.00
Fixed Costs:
Fixed Manufacturing Costs $216,000
Fixed Administrative Costs $79,525
Operating Income $94,475.00
Requirement 2
Hampshire Company
Absorption Costing Income Statement
Units $
Sales 60,000 $12.50 $750,000.00
Variable Cost of Goods Sold:
Beginning Inventory $0
Direct Materials 80,000 $3.00 $240,000.00
Direct Labor 80,000 $1.50 $120,000.00
Manufacturing Overhead 80,000 $0.40 $32,000.00
Total Variable Costs $392,000.00
Allocated Fixed Manufacturing Costs 80,000 $2.70 $216,000.00
Cost of Good Available for Sale $608,000.00
Deduct Ending Inventory 20,000 $7.60 $152,000.00
Costs of Goods Sold $456,000.00
Gross Margin $294,000.00
Fixed Costs:
Variable Selling Costs 60,000 $1.10 $66,000
Fixed Administrative Costs $79,525
Operating Income $148,475.00

Part III

Requirement 1
Price Variances:
(Actual Price – Standard Price) X Actual Quantity
Actual Standard Actual Quantity Variance Favorable or Unfavorable
Cloth $1.25 $1.15 128,000 $12,800 Unfav
Handle Assembly $0.99 $1.05 80,808 -$4,848 Fav
Labor Price Variance $7.62 $7.50 15,748 $1,890 unfav
Requirement 2
Efficiency Variances:
(Actual Quantity of Input Used – Standard Quantity of Input Allowed for Actual Output) X Budgeted Price of Input
Actual Standard Standard Price Variance Favorable or Unfavorable
Cloth 128,000 120,000 $1.15 $9,200 Unfav
(1.5 Yards per Unit)
Handle Assembly 80,808 80,000 $1.05 $848 unfav
(1 per Unit)
Labor 15,478 16,000 $7.50 -$3,915 Fav
(.20 per Unit)

Part IV

Cost Information From Instructions
Stick Collapsible
Units Sold 60,000 3,000
Selling Price $12.50 $14.00
Direct Material Cost Per Unit $3.00 $3.10
Direct Labor Cost Per Hour $7.50 $8.00
Variable MO $0.40 $0.40
Variable Selling Costs $1.10 $1.10
Labor Hours Per Unit 0.2 0.2
Sales Orders 120 1
Purchase Orders 50 3
Production Runs 45 6
Material Moves 86 10
Machine Setups 130 6
Machine Hours 525 32
Inspections 200 10
Shipments 60 3
Activity Information from Instructions
Activity Activity Cost Activity Cost Driver
Order Processing $35,000 Number of Sales Orders
Purchasing $36,000 Number of Purchase Orders
Material Handing $28,000 Material Moves
Machine Setup $14,000 Machine Setups
Production $99,000 Production Runs
Assembly $80,000 Machine Hours
Inspecting $11,000 Number of Inspections
Shipping $7,500 Number of Shipments
Requirement 1
Activity Total Costs Quantity of Cost Allocation Base Overhead Allocation Rate
Order Processing $35,000 121 $289
Purchasing $36,000 53 $679
Material Handing $28,000 96 $292
Machine Setup $14,000 136 $103
Production $99,000 51 $1,941
Assembly $80,000 557 $144
Inspecting $11,000 210 $52
Shipping $7,500 63 $119
Requirement 2
Traditional Costing
Stick Umbrella Collapsible Umbrella Total
Revenues $750,000 $42,000 $792,000
Direct Materials $180,000 $9,300 $189,300
Direct Labor $450,000 $24,000 $474,000
Variable Overhead $24,000 $1,200 $25,200
Variable Selling Costs $66,000 $3,300 $69,300
Allocated Fixed Overhead $295,714 $14,786 $310,500
Total Costs $1,015,714 $52,586 $1,068,300
Operating Income -$265,714 -$10,586 -$276,300
Operating Income % -35% -25% -35%
Per Unit Operating Income -$4.43 -$3.53 -$7.96
Requirement 3
Activity-Based Costing
Stick Umbrella Collapsible Umbrella Total
Revenues $750,000 $42,000 $792,000
Direct Materials $180,000 $9,300 $189,300
Direct Labor $450,000 $24,000 $474,000
Variable Overhead $24,000 $1,200 $25,200
Variable Selling Costs $66,000 $3,300 $69,300
Order Processing Costs $34,711 $289 $35,000
Purchasing Costs $33,962 $2,038 $36,000
Material Handing Costs $25,083 $2,917 $28,000
Machine Setup Costs $13,382 $618 $14,000
Production Costs $87,353 $11,647 $99,000
Assembly Costs $75,404 $4,596 $80,000
Inspecting Costs $10,476 $524 $11,000
Shipping Costs $7,143 $357 $7,500
Total Costs $1,007,515 $60,785 $1,068,300
Operating Income -$257,515 -$18,785 -$276,300
Operating Income % -34% -45% -35%
Per Unit Operating Income -$4.29 -$6.26 -10.5536996281139
Requirement 4
Costs per Unit Stick Umbrella Collapsible Umbrella
Traditional $16.93 $17.53
ABC $16.79 $20.26
Difference $0.14 -$2.73
Requirement 5