Required: Construct a flexible budget performance report that would be useful in assessing how well costs were controlled in this department.
Question 2.
Direct materials………………………………………..$18,000
Direct labor………………………………………………20,000
Variable manufacturing overhead………………. 12,000
Fixed manufacturing overhead………………….. 30,000
Total costs……………………………………………….80,000
An outside supplier has offered to provide Part X at a price of $13 per unit. If Lindon stops producing the part internally, one third of the manufacturing overhead would be eliminated.
Required: Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier’s offer.
Question 3.
Sales…………………………………………………$70,000 Less cost of goods sold: Beginning inventory………………………………………. 0 Add cost of goods manufactured………………48,000 Goods available for sale………………………….48,000 Less ending inventory………………………………6,000 Cost of goods sold………………………………..42,000 Gross margin……………………………………….28,000 Less selling and admin. expenses……………..25,000 Net operating income…………………………..$ 3,000
Data on units produced and sold for the year are given below.
Units in beginning inventory……………………………..0 Units produced……………………………………….8,000 Units sold………………………………………………7,000
Fixed factory overhead totaled $16,000 for the year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold.
Required: Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements.
Question 4.
Work in process, beginning:
Units in beginning work in process inventory 400
Materials costs $6,900
Conversion costs $2,500
Percent complete for materials 80%
Percent complete for conversion 15%
Units started into production during the month 6,000
Units transferred to the next department during the month 5,400