Exercise 1-9

1. If 18,000 units are produced and sold, what is the variable cost per unit produced and sold?

Direct Materials $ 7.00

Direct Labor $ 4.00
Variable Manufacturing Overhead $ 1.50
Sales
$ 1.00
Commissions
Variable Administrative Expense $ 0.50
Variable Cost Per Unit Sold $ 14.00

2. If 22,000 units are produced and sold, what is the variable cost per unit produced and sold?

Direct Materials $ 7.00

Direct Labor $ 4.00
Variable Manufacturing Overhead $ 1.50
Sales
$ 1.00
Commissions
Variable Administrative Expense $ 0.50
Variable Cost Per Unit Sold $ 14.00

3. If 18,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold?

Direct Labor $ 4.00

Variable Manufacturing Overhead $ 1.50
Sales
$ 1.00
Commissions
Variable Administrative Expense $ 0.50
Variable Cost Per Unit Sold $ 7.00

Variable Cost Per Unit Sold (a) $ 7.00

Number of Units Sold (b) 18,000
Total Variable Costs (a) x (b) $ 126,000.00

4. If 22,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold?

Direct Labor $ 4.00

Variable Manufacturing Overhead $ 1.50
Sales
$ 1.00
Commissions
Variable Administrative Expense $ 0.50
Variable Cost Per Unit Sold $ 7.00

Variable Cost Per Unit Sold (a) $ 7.00

Number of Units Sold (b) 22,000
Total Variable Costs (a) x (b) $ 154,000.00

5. If 18,000 units are produced, what is the average fixed manufacturing cost per unit produced?

Fixed Manufacturing Overhead Per Unit (a) $ 5.00

Number of Units Budgeted
20,000
(b)
Total Fixed Manufacturing costs (a) x (b) $ 100,000.00

Total Fixed Manufacturing costs (a) $ 100,000.00

Number of Units Produced
18,000
(b)
Average Fixed Manufacturing Cost Per Unit Produced (a) ÷ (b) $ 5.56

6. If 22,000 units are produced, what is the average fixed manufacturing cost per unit produced?

Fixed Manufacturing Overhead Per Unit (a) $ 5.00

Number of Units Budgeted
24,000
(b)
Total Fixed Manufacturing costs (a) x (b) $ 120,000.00
 Total Fixed Manufacturing costs (a) $ 120,000.00
Number of Units Produced
22,000
(b)
Average Fixed Manufacturing Cost Per Unit Produced (a) ÷ (b) $ 5.45

7. If 18,000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of
production?
Fixed Manufacturing Overhead Per Unit (a) $ 5.00
Number of Units Budgeted (b) 20,000
Total Fixed Manufacturing Costs (a) x (b) $ 100,000.00

Variable Overhead Per Unit (a) $ 1.50

Number of Units Produced (b) 18,000
Total Variable Overhead Cost (a) x (b) $ 27,000.00
Total Fixed Overhead $ 100,000.00
Total Manufacturing Overhead Cost $ 127,000.00

8. If 22,000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production

Fixed Manufacturing Overhead Per Unit (a) $ 5.00

Number of Units Budgeted (b) 24,000
Total Fixed Manufacturing Costs (a) x (b) $ 120,000.00

Variable Overhead Per Unit (a) $ 1.50

Number of Units Produced (b) 22,000
Total Variable Overhead Cost (a) x (b) $ 33,000.00
Total Fixed Overhead $ 120,000.00
Total Manufacturing Overhead Cost $ 153,000.00
 Exercise 2-9
1. Compute the plantwide predetermined overhead rate.

Estimated Total Manufacturing Overhead Cost

Predetermined Overhead Rate =
Estimated Total Amount of the Allocation Base

Estimated Total Manufacturing Overhead Cost $ 990,000.00

Estimated Total Amount of the Allocation Base 165,000
Predetermined Overhead Rate $ 6.00

2. Compute the total manufacturing cost assigned to Job P90.

Y = a + bX

Estimated Variable Manufacturing Overhead Cost Per Unit of Allocation Base (b)
Estimated Total Amount of the Allocation Base (X)

Estimated Total Fixed Manufacturing Overhead Cost (a)

Estimated Total Manufacturing Overhead Cost (Y)

3. Upon comparing Job P90’s sales revenue to its total manufacturing cost, the company’s chief fin
through our front door tomorrow, I’d turn it down rather than making it and selling it for $2,500.

a. Construct an argument that refutes the chief financial officer’s assertion.

If the company can only work 50% of its capacity then they should should sell the company as
soon as possible because it will better benefit them in the long term.

b. Construct an argument that supports the chief financial officer’s assertion.

Because they are only working at 50% capacity it would be a bad investment to sell for $2500
when they have a greater capacity than in use, which should allow them to make more therefore
being able to sell for more.

Exercise 2-11

1. Assuming the estimated variable manufacturing overhead cost per unit is $2.00, what must be t
quarter?
1. Assuming the estimated variable manufacturing overhead cost per unit is $2.00, what must be t
quarter?

Y = a + bX
Estimated Total Manufacturing Overhead Cost (Y)
Estimated Variable Manufacturing Overhead Cost Per Unit of Allocation Base (b)
Estimated Total Amount of the Allocation Base (X)

Estimated Total Fixed Manufacturing Overhead Cost (a)

2. Assuming the assumptions about cost behavior from the first three quarters hold constant, wha
estimated unit product cost for the fourth quarter?

Quarter 1 = $8.35 (+ 1.75)

Quarter 2 = $10.10 (+ 1.75 * 2)
Quarter 3 = $13.60 (+ 1.75 * 3)
Quarter 4 = $20.60 (+ 1.75 * 4)

3. What is causing the estimated unit product cost to fluctuate from one quarter to the next?

Each quarter is increasing by the original amount plus the amount before, so it goes 1.75
-> 3.50 -> 5.25 -> 7.00

4. How would you recommend stabilizing the company’s unit product cost? Support your answer with comput

I think that it is stable and is increasing at a positive rate.

Exercise 2-15

1. Assume Delph uses a plantwide predetermined overhead rate based on machine-hours.

a. Compute the plantwide predetermined overhead rate.

Estimated Fixed Manufacturing Overhead $ 910,000.00

Estimated Variable Manufacturing Overhead
($4.00 per MH x 50,000 MHs) $ 200,000.00
Estimated Total Manufacturing Overhead Cost $ 1,110,000.00

Estimated Total Manufacturing Overhead Cost $ 1,110,000.00

Estimated Total Amount of the Allocation Base 50,000
 Predetermined Overhead Rate $ 22.20

b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.

D-70
Direct Materials $ 700,000.00
Direct Labor $ 360,000.00
Manufacturing Overhead Applied
($22.20 per MH x 20,000 MHs) $ 444,000.00
($22.20 per MH x 30,000 MHs)

Total Manufacturing Cost $ 1,504,000.00

c. If Delph establishes bid prices that are 150% of total manufacturing cost, what bid prices would it
have established for Job D-70 and Job C-200?

D-70 C-200
Total Manufacturing Cost $ 1,504,000.00 $ 1,616,000.00
Markup Percentage 150% 150%
Bid Price $ 2,256,000.00 $ 2,424,000.00

d. What is Delph’s cost of goods sold for the year?

Cost of Goods Sold = $1,504,000 + $1,616,000

COGS = $ 3,120,000.00

2. Assume Delph uses departmental predetermined overhead rates based on machine-hours.

a. Compute the departmental predetermined overhead rates.

Molding
Estimated Fixed Manufacturing Overhead $ 700,000.00
Estimated Variable Manufacturing Overhead
($3.00 per MH x 20,000 MHs) $ 60,000.00
($1.00 per MH x 30,000 MHs)
Estimated Total Manufacturing Overhead Cost $ 760,000.00

Estimated Total Manufacturing Overhead Cost $ 760,000.00

 Estimated Total Amount of the Allocation Base 20,000
Predetermined Overhead Rate $ 38.00

b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.

D-70
Molding
Direct Materials $ 375,000.00
Direct Labor $ 200,000.00
Manufacturing Overhead Applied
($38.00 per MH x 14,000 MHs) $ 532,000.00
($8.00 per MH x 6,000 MHs)
($38.00 per MH x 6,000 MHs)
($8.00 per MH x 24,000 MHs)

Total Manufacturing Cost $ 1,107,000.00

c. If Delph establishes bid prices that are 150% of total manufacturing cost, what bid prices would it
have established for Job D-70 and Job C-200?

D-70
Molding Fabrication
Total Manufacturing Cost $ 1,107,000.00 $ 533,000.00
Markup Percentage 150% 150%
Bid Price $ 1,660,500.00 $ 799,500.00

d. What is Delph’s cost of goods sold for the year?

Cost of Goods Sold = $1,107,000 + $533,000 + $703,000 + $667,000

COGS = $ 3,010,000.00

3. What managerial insights are revealed by the computations that you performed in this problem
cost of goods sold amounts that you computed in requirements 1 and 2 differ from one another? D
that you computed in requirements 1 and 2 differ from one another? Why?)

The prices all differ because in number 2 we took the numbers and brought them more in depth giving us a
more specific and direct answer to the questions asked.
 $ 2.00
165,000
$ 330,000.00
$ 990,000.00
$ 1,320,000.00

t, the company’s chief financial officer said “If this exact same opportunity walked
and selling it for $2,500.”

hould sell the company as

ion.

vestment to sell for $2500

hem to make more therefore

is $2.00, what must be the estimated total fixed manufacturing overhead cost per
 $ 668,000.00
$ 2.00
80,000
- $ 160,000.00
$ 508,000.00

rters hold constant, what is the

the next?

rt your answer with computations.

machine-hours.
200.

C-200
$ 550,000.00
$ 400,000.00

$ 666,000.00

$ 1,616,000.00

st, what bid prices would it

on machine-hours.

Fabrication
$ 210,000.00

$ 30,000.00
$ 240,000.00

$ 240,000.00
 30,000
$ 8.00

200.

C-200
Fabrication Molding Fabrication
$ 325,000.00 $ 300,000.00 $ 250,000.00
$ 160,000.00 $ 175,000.00 $ 225,000.00

$ 48,000.00
$ 228,000.00
$ 192,000.00

$ 533,000.00 $ 703,000.00 $ 667,000.00

st, what bid prices would it

C-200
Molding Fabrication
$ 703,000.00 $ 667,000.00
150% 150%
$ 1,054,500.00 $ 1,000,500.00

erformed in this problem? (Hint: Do the

ffer from one another? Do the bid prices
y?)

em more in depth giving us a

 Exercise 3.3
1. Prepare a schedule of cost of goods manufactured for the month.

DM $ 30,000
RM Inv, beginning $ 12,000
Purchases: RM $ 42,000
Total RM av. $ (18,000)
RM Inc, ending $ 24,000
RM used $ (5,000)
InDM in MOH $ 19,000
DL $ 58,000
MOH applied to WIP $ 87,000
Total Mfg Costs $ 164,000
WIP Inv, beginning $ 56,000
$ 220,000
WIP Inv, ending $ (65,000)
Cost of Goods Manufactured $ 155,000

1. Prepare a schedule of cost of goods sold for the month. Assume the underapplied or
overapplied overhead is closed to Cost of Goods Sold.

DM $ 30,000
RM Inv, beginning $ 12,000
Purchases: RM $ 42,000
Total RM av. $ (18,000)
RM Inc, ending $ 24,000
RM used $ (5,000)
InDM in MOH $ 19,000
DL $ 58,000
MOH applied to WIP (+underapplied OH) $ 91,000
Total Mfg Costs $ 168,000
WIP Inv, beginning $ 56,000
$ 224,000
WIP Inv, ending $ (65,000)
Cost of Goods Manufactured $ 159,000

Exercise 3.5
a)
Raw Materials $ 210,000.00
Accounts Payable $ 210,000.00
b)
Raw Materials Used $ (190,000.00)
DM $ (178,000.00)
InDM $ (12,000.00)
c)
Accrued Costs (Salary) $ (200,000.00)
DL $ (90,000.00)
InDL $ (110,000.00)
d)
Equiptment Exp $ (40,000.00)
Depreciation $ (40,000.00)
e)
Accrued Costs $ (70,000.00)
MOH $ (70,000.00)
f)
MOH Costs $ (240,000.00)
Machine Costs $ (240,000.00)
g)
Job Costs $ (520,000.00)
Finished Goods $ (520,000.00)
h)
Job Cost Sheets $ 600,000.00
Sale increase $ 600,000.00