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Question #1 The XYZ Company has budgeted sales of 900,000 units in 2012. Its target ending inventory is 80,000 units and its beginning inventory is 100,000 units. Each unit of XYZ’s product requires 4 pounds of material to produce. Its target ending inventory for material is 60,000 pounds and its beginning inventory for materials is 50,000 pounds. a) Compute the number of units to be produced. b) Compute the budgeted number of pounds of materials to be purchased. Question #2 The Thomas Company makes all its sales on credit. It expects to collect cash from receivables according to the following schedule: 70% collected in the month of sale. 15% in the month after sale. 10% in the second month after sale. 4% in the third month after sale Budgeted sales are as follows: January $70,000 February $90,000 March $100,000 April $120,000 May $100,000 June $90,000 . What are the budgeted cash collections for April? Question #3 Expected production (units) 8,000 Standard pounds of DM usage per unit 3.00 Standard DM price per pound $5 Standard DML hours per unit 5.00 Standard DML rate per hour $15.00 Standard VMOH rate $6.00 per DLH Standard FMOH rate $8.00 per DLH Actual Units produced 7,800 Pounds of DM purchased 25,000 Total cost of DM purchased $130,000 Pounds of DM used 23,100 DML hours worked 40,100 Total cost of DML $585,460 VMOH $250,000 FMOH $350,000 a) Calculate the following variances: o Direct materials price variance o Direct materials efficiency variance o Direct manufacturing labor rate variance o Direct manufacturing labor efficiency variance o VMOH spending variance o VMOH efficiency variance o FMOH spending variance o FMOH production-volume variance b) Explain what each of the calculated variances imply about the firm’s operations: o Direct materials price variance o Direct materials efficiency variance o Direct manufacturing labor rate variance o Direct manufacturing labor efficiency variance o VMOH spending variance o VMOH efficiency variance o FMOH spending variance o FMOH production-volume variance c) Prepare the following journal entries: o Purchase of direct materials o Usage of direct materials o Paying of wages for direct manufacturing labor o Incurrence of VMOH & FMOH o Application of VMOH & FMOH to production o Closing out VMOH and FMOH accounts Question #4 a) When allocating overhead costs, is it better to use budgeted rates or actual rates? Be sure to support your answer with specifics. b) When allocating overhead costs, is it better to use budgeted usage of the allocation base or actual usage of the allocation base? Be sure to support your answer with specifics. Question #5 Consider the following information: Bud CM Bud Market Bud Market Act CM Act Market Act Market Product per Unit Size (units) Share per Unit Size (Units) Share 1 $3.00 4,800,000 10% $2.70 3,960,000 15% 2 $2.20 3,600,000 20% $2.00 4,840,000 15% a) Calculate the following variances for each product: o Sales-volume variance o Sales-mix variance o Sales-quantity variance o Market size variance o Market share variance b) What insights can you draw from the above variances? Question #6 The ABC Company has two operating divisions and two support divisions. The following table presents the amount of hours of service provided by the two support divisions: OP 1 OP 2 SUP 1 SUP 2 SUP 1 1,000 2,000 0 1,000 SUP2 3,000 1,500 500 0 The costs for the four departments appear below: Department Costs OP 1 $250,000 OP 2 $300,000 SUP 1 $150,000 SUP 2 $60,000 a) Allocate the support department costs to the operating departments using the direct method. b) Allocate the support department costs to the operating departments using the step-down method, starting with Support Department 1. c) State the equations one would use to allocate the support department costs to the operating departments using the reciprocal method. You do not need to solve the equations! Question #7 A company purchases and processes 15,000 gallons of raw material at a cost of $30,000. From this process, it produces 600 pounds of JP1 and 900 pounds of JP2. JP1 can be sold for $21 per pound or processed further into 6,000 units of FP1 at a total cost of $12,750. FP1 has a selling price of $4 per unit. JP2 can be sold for $26 per pound or processed further into 10,200 units of FP2 at a total cost of $26,250. FP2 has a selling price of $5 per unit. Assume that the company sells only FP1 and FP2. In other words, it further processes both joint products. Also, assume there is no beginning or ending inventory. a) Allocate the joint costs to JP1 and JP2 using the physical measure method (based on pounds), sales value at split off method, the NRV method, and the constant gross margin percentage NRV method. b) Is it a good idea for the firm to further process the joint products? Be sure to justify your conclusions with specific calculations.
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