acc503-chapter-5-pre-built-assignment

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1.

value:
10.00 points

The accounting records for Frankie’s Fixtures report the following production costs for the past year:

Direct Materials

$

636,000

Direct Labor

546,000

Variable Overhead

477,000


Production was 226,000 units. Fixed manufacturing overhead was $725,000.

For the coming year, costs are expected to increase as follows: direct materials costs by 20 percent, excluding any effect of volume changes; direct labor by 4 percent; and fixed manufacturing overhead by 10 percent. Variable manufacturing overhead per unit is expected to remain the same.

Required:

(a)

Prepare a cost estimate for a volume level of 236,000 units of product this year. (Do not round your intermediate computations. Round your final answers to nearest whole dollar amount.)

(b)

Determine the costs per unit for last year and for this year. (Round your answers to 2 decimal places.)

[The following information applies to the questions displayed below.]

Caiman Distribution Partners is the Brazilian distribution company of a U.S. consumer products firm. Inflation in Brazil has made bidding and budgeting difficult for marketing managers trying to penetrate some of the country’s rural regions. The company expects to distribute 460,000 cases of products in Brazil next month. The controller has classified operating costs (excluding costs of the distributed product) as follows:

Account

Operating Cost

Behavior

Supplies

$

350,000

All variable

Supervision

225,000

$

160,000

Fixed

Truck expense

1,280,000

$

190,000

Fixed

Building leases

855,000

$

550,000

Fixed

Utilities

210,000

$

125,000

Fixed

Warehouse labor

860,000

$

150,000

Fixed

Equipment leases

765,000

$

600,000

Fixed

Data processing equipment

1,015,000

All fixed

Other

860,000

$

410,000

Fixed




Total

$

6,420,000








A consulting firm’s accounting records show the following costs for year 1:

Direct materials (supplies)

$

137,000

Direct labor

864,000

Total overhead

406,000


Production was 113,000 billable hours. Fixed overhead was $223,000.

For year 2, direct materials costs are expected to increase by 10 percent per unit. Direct labor costs are expected to increase by 15 percent. Variable overhead per billable hour is expected to remain the same, but fixed overhead is expected to increase by 5 percent.

Required:

(a)

Year 2 production is expected to be 158,000 billable hours. What are the estimated direct materials, direct labor, variable overhead, and fixed overhead costs for year 2? (Do not round your intermediate computations. Round your final answers to nearest whole dollar amount.)

(b)

Determine the total costs per billable hour for year 1 and year 2. (Round your answers to 2 decimal places.)

Although overhead costs were related to revenues throughout the company, the experience in Brazil suggested to the managers that they should incorporate information from a published index of Brazilian prices in the distribution sector to forecast overhead in a manner more likely to capture the economics of the business.

Following instructions from the corporate offices, the controller’s office in Brazil collected the following information for monthly operations from last year:

Month

Cases

Price Index

Operating Costs

1

347,000

118

$

5,789,139

2

364,000

120

5,896,638

3

360,000

121

5,939,905

4

382,000

125

6,017,617

5

376,000

127

6,029,135

6

397,000

128

6,133,364

7

369,000

131

6,008,495

8

414,000

136

6,223,868

9

400,000

136

6,216,130

10

423,000

135

6,276,625

11

419,000

139

6,298,799

12

434,000

142

6,452,255


These data are considered representative for both past and future operations in Brazil.

3.

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Required:

(a)

Compute an estimate of operating costs assuming that 460,000 cases will be shipped next month based on the controller’s analysis of accounts.

4.

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(b)

Use the high-low method to compute an estimate of operating costs assuming that 460,000 cases will be shipped next month. (Round variable costs to five decimal places. Round your other intermediate calculations and final answer to nearest whole dollar value.)

5.

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(c)

Compute an estimate of operating costs assuming that 460,000 cases will be shipped next month by using the results of a simple regression of operating costs on cases shipped. (Round variable costs to five decimal places. Round your other intermediate calculations and final answer to nearest whole dollar value.)

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(d)

Compute an estimate of operating costs assuming that 460,000 cases will be shipped next month by using the results of a multiple regression of operating costs on cases shipped and the price level. Assume a price level of 142 for next month. (Round variable costs to five decimal places. Round your other intermediate calculations and final answer to nearest whole dollar value.)

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