18.2 problem
True Flight Golf manufacturers a popular shaft for golf clubs. Its trade secret is a unique process for weaving high-tension wire into the center of the shaft such that energy is accumulated during the swing and released at impact. A specialized machine costing $3,000,000 is utilized in the manufacturing process. The machine has a 3-year life and no salvage value. True Flight uses straight-line depreciation. During the year, 25,000 shafts were produced, and the company was operating at full capacity. $700,000 of wire was used during the year.
(a) Is machinery depreciation fixed or variable? Is wire fixed or variable?
(b) For the two noted cost items, how much was total variable cost and total fixed cost?
(c) For the two noted cost items, how much was variable cost per unit and how much was fixed cost per unit?
(d) Repeat requirements (b) and (c), assuming production was only 20,000 units (and wire usage was reduced proportionately).
(e) For the following year, if the company acquired an additional machine to enable production of 40,000 total units, what would happen to the expected total and per unit variable and fixed cost?
(f) If the company experiences significant growth, and finds it necessary to continue to add additional machines, how would the machine cost be characterized (hint: fixed, variable, or something else)? In theory, at what production level(s) would per unit cost be minimized?
&L&”Arial,Bold”&20 &R&”Myriad Web Pro,Bold”&20B-18.02
B-18.02
Worksheet
(a)
(b)
(c)
(d)
(e)
(f)
&L&”Myriad Web Pro,Bold”&12Name: Date: Section: &R&”Myriad Web Pro,Bold”&20B-18.02
B-18.02
19.2 Problem
Mary Ann Clark is an artist and is employed by Fenway Racing. Fenway Racing manufactures custom race cars to exact specifications of drivers. Mary Ann’s job is to hand paint logos and other custom artwork on each car. Below is her daily time sheet for March 7, 20X6:
FENWAY RACING
Employee: Mary Ann Clark Daily Time Sheet
Date: 03/07/X6
Start Time Stop Time Job Number Task Client Admin Hours Direct Labor Hours
8:00 8:30 set up Prepare paints and airbrush n/a 0.50 0.00
8:30 10:45 #11245 Paint race numbers Mario A. 0.00 2.25
10:45 11:00 repairs Repair broken compressor n/a 0.25 0.00
11:00 12:00 #11302 Paint advertising sign on door AJF 0.00 0.75
12:00 1:00 lunch n/a n/a 0.00 0.00
1:00 4:30 #11305 Paint hood logo Jeff G. 0.00 3.50
4:30 5:00 clean up Clean up equipment n/a 0.50 0.00
Total hours 1.25 6.50
(a) Examine the time sheet and find the error. What is the importance of correctly accumulating time by job? How does the time sheet data track to the cost assignment process?
(b) How much of Mary Ann’s time (after making the correction) is attributable to direct labor and how much to overhead? How is the direct labor cost assigned to individual jobs, and how is the overhead cost allocated?
&R&”Myriad Web Pro,Bold”&20B-19.02
B-19.02
Worksheet (2)
(a)
(b)
&L&”Myriad Web Pro,Bold”&12Name: Date: Section: &R&”Myriad Web Pro,Bold”&20B-19.02
B-19.02
20.2 Problem
Zeus Corporation produces cultured diamonds via a secretive process that grows the diamonds in a vacuum chamber filled with a carbon gas cloud. The diamonds are produced in a single continuous process, and Zeus uses the weighted-average process costing method of accounting for production. The production process requires constant utilization of facilities and equipment, as well as direct labor by skilled technicians. As a result, direct labor and factory overhead are both deemed to be introduced uniformly throughout production.
At the beginning of June, 20X9, 4,000 diamonds were in process. During June, an additional 8,000 diamonds were started, and 7,000 diamonds were completed and transferred to finished goods.
As of the beginning of the month, work in process was 80% complete with respect to materials and 60% complete with respect to conversion costs.
As of the end of the month, work in process was 70% complete with respect to materials and 40% complete with respect to conversion costs.
Prepare a “unit reconciliation” schedule that includes calculations showing the equivalent units of materials, direct labor, and factory overhead for June.
&L&”Arial,Bold”&20 &R&”Myriad Web Pro,Bold”&20B-20.02
B-20.02
Worksheet (3)
Unit Reconciliation:
Quantity Schedule
Beginning Work in Process
Started into Production
Total Units into Production Equivalent Units Calculations:
Conversion
Direct Materials Direct Labor Factory Overhead
To Finished Goods
Ending Work in Process
Total Units Reconciled
Ending WIP Completion Status: Materials = % Conversion = %
&L&”Myriad Web Pro,Bold”&12Name: Date: Section: &R&”Myriad Web Pro,Bold”&20B-20.02
B-20.02
21.2 Problem
Logan Township acquired its water system from a private company on June 1. No receivables were acquired with the purchase. Therefore, total accounts receivable on June 1 had a zero balance. Logan plans to bill customers in the month following the month of sale, and 70% of the resulting billings will be collected during the billing month. In the next following month, 90% of the remaining balance should be collectable. The remaining uncollectible amounts will relate to citizens who have moved away. Such amounts are never expected to be collected and will be written off. Water sales during June are estimated at $3,000,000, and expected to increase 30% in July. August sales will be 10% less than July sales.
(a) For each dollar of sales, how much is expected to be collected?
(b) Estimate the monthly cash collections for June, July, August, and September.
(c) As of the end of August, how much will be the estimated amount of receivables from which future cash flows are anticipated?
&L&”Arial,Bold”&12 &R&”Myriad Web Pro,Bold”&20B-21.02
B-21.02
Worksheet (4)
(a)
(b) June July August September
(c) June July August Total Receivables
&L&”Myriad Web Pro,Bold”&12Name: Date: Section: &R&”Myriad Web Pro,Bold”&20B-21.02
B-21.02