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L15.2030 - Cost Accounting (2025/2026)
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Company Ex sells only two products, Product A and Product B.
| Selling price | VC p/unit | |
| Product A | 40 | 24 |
| Product B | 50 | 40 |
Company Ex incurred fixed manufacturing costs of $16000 during 20x4. Other information for 20x4 includes:
Budgeted denominator level | 2000 | units |
| Total units produced | 2338 | units |
| Total units sold | 1900 | units |
| Variable cost per unit | 4 | $ |
| Beginning inventory | 0 |
Beginning WIP inventory | 20000 |
| Ending WIP inventory | 23000 |
| Beginning finished goods inventory | 36000 |
| Ending finished goods inventory | 34000 |
| Cost of goods manufactured | 214540 |
| Sales | 300000 |
Company Ex manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $18 per direct labor-hour. The following data are obtained from the accounting records for June 20x3 (amounts in US$):
Direct materials | 140000 |
| DL (4000 hours @ $10/hour) | 40000 |
| Indirect labor | 15428 |
| Plant facility rent | 30000 |
| Depreciation on plant mach and equipment | 22500 |
| Sales comissions | 24000 |
| Administrative expenses | 28000 |
- Budgeted level of production: 1700
- Units produced in January: 1360
- Units sold in January: 1190
- Inventory, January 1st: 0 units
Company X employs 4 designers and 6 accounts managers. Direct and indirect costs are applied on a professional labor-hour basis that includes both designers and account managers. Company X presented the following information:
Budget:- Indirect costs: $300000
- Annual salary of each designer: $90000
- Annual salary of each account manager: $60000
- Total professional hours: 15000
The following information is available for Company X, with fixed costs at $640000:
Product A:
- Units sold: 12000
- Selling price: $100 /unit
- Variable costs: $40 /unit
Product B:
- Units sold: 3000
- Selling price: $200 /unit
- Variable costs: $120 /unit
Company Ex provide tax consulting for estates and trusts. Their job-costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (research support). The indirect-cost pool contains all the costs except direct personnel costs. All budgeted indirect costs are allocated to individual jobs using actual professional labor-hours.
Required:
a. Discuss the reasons a consulting firm might use a normal costing system rather than an actual costing system.
b. What might be some reasons for the firm to change from a one-pool to a multiple-pool allocation concept?
Company Ex incurred fixed manufacturing costs of $16000 during 20x4. Other information for 20x4 includes:
Budgeted denominator level | 2000 | units |
| Total units produced | 2103 | units |
| Total units sold | 1900 | units |
| Variable cost per unit | 4 | $ |
| Beginning inventory | 0 |
Company Ex produces a unique valve, and has the capacity to produce 50000 valves annually. Currently Company Ex produces 40000 valves and is thinking about increasing production to 45000 valves next year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs given this change?