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L15.2030 - Cost Accounting (2025/2026)
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- Unit sales: Actual 77448 units; Master Budget 64540 units
- Sales revenue: Actual $ 774480; Master Budget $ 774480
- Variable costs: Actual $ 542136; Master Budget $ 516320
- Fixed costs: Actual $ 357896; Master Budget $ 348963
The sales price variance for the period is (FAV: favorable; UNF: unfavorable):
Company X manufactures product M. Its costing system uses two cost categories:
Direct material: added at the beginning
of production.
Conversion costs: allocated evenly
throughout production.
Each product must pass through Department A and Department B. Data from Department A for March:
BWIP: 413 physical units (40%
completed)
- Started: 1.000 Physical units
EWIP: 300 physical units (70%
completed)
What is the difference between WA and FIFO in terms of
EUP for direct materials and conversion costs, assuming no spoilage?
- Unit sales: Actual 79848 units; Master Budget 66540 units
- Sales revenue: Actual $ 798480; Master Budget $ 798480
- Variable costs: Actual $ 558936; Master Budget $ 532320
- Fixed costs: Actual $ 357896; Master Budget $ 348963
The sales volume variance for the period is (FAV: favorable; UNF: unfavorable):
2
What
are the major benefits and limitations of outsourcing?
Manufacturing rethinks outsourcing
The economic recession has resulted in original equipment manufacturers (OEMs) seeking to drive down costs by re-examining their manufacturing strategy, with many companies increasing their level of outsourcing, writes Ronnie Darroch, Plexus regional president (EMEA) in Electronics Weekly . He argues that OEMs can be of benefit to electronic manufacturing service (EMS) providers (like Plexus who provide electronics design, manufacturing and after market services to companies with high complexity products) as OEMs undertake strategic reviews and decide to outsource manufacturing to an EMS provider. Outsourcing all or a portion of their manufacturing allows OEMs to convert internal fixed costs to external variable costs, leaving it more able to deal with changes in end market demand, particularly during periods of economic instability. This can create a win win for both companies with growth opportunities for the EMS provider and the OEM left to focus on its core competencies.
Questions
1. How can outsourcing change the cost structure of an organization?
3. Compute the cost recognized in the income statement in this month, if no units were sold
What is the advantage and disadvantage of early
inspections and why do companies often conduct multiple inspections?
(4 points) (10-20 mins) Company X developed standard costs for direct material and direct labor. In 2020, the company estimated the following standard costs for one of their major products, the 30-liter heavy-duty plastic container.
Budgeted quantity
|
Budgeted price
|
Direct materials
|
0,60 kgs
|
€20 per kg
|
Direct labor
|
0,30 hours
|
€14 per hour
|
During July, Company X produced and sold 4 000
containers using 2 700 kgs of direct materials at an average cost per kg of €19 and 1464 direct manufacturing labor hours at an average wage of €14,30
per hour.
Required (present all the necessary auxiliary calculations):
a) Calculate the direct manufacturing labor flexible-budget variance during July.
b) Calculate the direct manufacturing labor price variance during July.
c) Calculate the direct manufacturing labor efficiency variance during July.When we covered spoilage costs in class, we discussed
the concepts of normal and abnormal spoilage. Can these concepts be related to
the different types of variances we analyzed as well? Which of the 3rd
level variances relates more to the spoilage concepts we studied? (Identify the
variance related to spoilage and explain in two lines max how you would relate
the two topics.)
(7 points) (20-30 mins) Company X obtains fish and then processes them into frozen fillets and then prepares the frozen fish fillets for distribution to its retail sales department. Direct materials are added at the initiation of the cycle. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some fillets are spoiled due to undetectable defects. Inspection occurs when units are 40% converted. Spoiled fillets generally constitute 6% of the good fillets. Data for April 2020 are as follows:
WIP, beginning inventory 1/4/2020
|
94 000
|
fillets
|
Direct materials (100% complete)
|
|
|
Conversion costs (50% compete)
|
|
|
Started during April
|
139 000
|
fillets
|
Completed and transferred out 30/4/2020
|
185 000
|
fillets
|
WIP, ending inventory 30/4/2020
|
29 000
|
fillets
|
Direct materials (100% complete)
|
|
|
Conversion costs (20% complete)
|
|
|
Costs for April:
|
|
|
WIP, beginning inventory:
|
|
|
Direct materials
|
€135 000
|
|
Conversion costs
|
101 910
|
|
Direct materials added
|
304 000
|
|
Conversion costs added
|
389 130
|
|
Calculate the total cost allocated to normal and abnormal spoilage using the weighted-average method of process costing. (Present all the necessary auxiliary calculations.)