Description
Managerial Accounting focuses heavily on finding solutions to numerical problems. With that in mind, most units will include a number of problems. For each problem, you will need to provide more than a simple numerical response. Your solutions should thoroughly address the issue and present the findings in a meaningful format similar to those developed within the chapters and as part of the review exercises solutions. Part value may be assigned for incorrect responses.
Question 1: (40 marks)
Stark and Company would like to evaluate one of the product lines that they sell to the defense department. Every month the Stark and Company produce an identical number of units, although the sales in units differ from month to month.
Selling price
$105
Units in beginning inventory
110
Units produced
6,400
Units sold
6,100
Units in ending inventory
600
Variable costs per unit:
Direct materials
$62
Direct labour
$48
Variable manufacturing overhead
$3
Variable selling and administrative
$7
Fixed costs:
Fixed manufacturing overhead
$64,000
Fixed selling and administrative
$35,600
Required:
1) Under variable costing, identify the unit product cost for the month.
2) What is the unit product cost for the month under absorption costing?
3) Prepare an income statement for the month using the contribution format and the variable costing method.
4) Prepare an income statement for the month using the absorption costing method.
Question 2: (12 marks)
The following information pertains to Death Star Corporation for a period:
Selling price per unit
49
Standard fixed manufacturing costs per unit
24
Variable selling and administrative costs per unit
3
Fixed selling and administrative cost per unit
14900
Beginning inventories:
Units
?
Standard fixed manufacturing cost
36,900
Standard variable manufacturing cost
18,700
Units produced
8,900
Units sold
8,600
Required:
1) Assume the unit standard costs data for the beginning and ending inventories remained constant during the period. What was the total standard cost of the ending inventory under absorption costing?
Question 3: (30 marks)
DC and Marvel would like to evaluate one of the product lines that they sell to defense department. Every month the Stark and Company produce an identical number of units, although the sales in units differ from month to month.
Selling price
$111
109
Units in beginning inventory
400
360
Units produced
8,800
6900
Units sold
8,900
7200
Variable costs per unit:
Direct materials
$34
29
Direct labour
$37
31
Variable manufacturing overhead
$3
2
Variable selling and administrative
$9
7
Fixed costs:
Fixed manufacturing overhead
$61,600
53,500
Fixed selling and administrative
$169,100
145,000
Required:
1) Compute the total Contribution Margin.
2) Compute the Operating Income under Variable Costing.
3) Prepare a reconciliation from your Variable Costing Operating Income to compute Operating Income under absorption costing.
Question 4: (18 marks)
Stark and Company’s has following cost data:
Systems development
$29,000
Final product testing and inspection
$1 2,000
Quality data gathering, analysis, and reporting
$ 9,000
Net cost of scrap
$58,000
Returns arising from quality problems
$56,000
Amortization of test equipment
$53,000
Rework labour and overhead
$16,000
Test and inspection of incoming materials
$38,000
Product recalls
$33,000
Required:
1) Determine the prevention cost?
2) Determine Total appraisal cost?
3) Determine the total internal failure?
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