Pat is the CEO of Company X. Pat has to decide what bonuses to pay for last year's extraordinary performance. Find next the preliminary budget analysis provided by the internal control officer:

(only cost the company has is Direct Materials, which is measured in kg).

Pat decided to use the entire favourable level 0 variance of the contribution margin as a bonus to be distributed over 3 people:

·       Claire, which is director of sales, responsible for the volume of sales and the price charged on the market.

·       Greg, which is director of procurement, responsible for the price of purchased DM.

·       Olaf, which is director of production, responsible for the production costs.

Comment the following statement, explaining the underlying concept:

"We have already invested so much in the studies for this alternative that may as well go ahead with the construction of this particular building for our new factory, rather than going for another cheaper option."

What bonus should Claire get if she is responsible for the volume sold and the revenues generated?

In a process where the Inspection point is at 58% stage of production, the cost of normal spoilage is also allocated to the units in ending work-in-process (EWIP) inventory, in addition to completed units, if the units _________

What bonus should Greg get, if he is responsible for the price at which each kg of DM was purchased?

Company X uses process costing . The company uses a weighted average cost flow and conversion costs are added evenly in the process. Direct materials are added at the beginning of the process.  All spoilage is normal and is detected at end of the process. The information for the current month is

as follows:

• Beginning work in process (BWIP) = 20000

  units

• Units started = 40000

  units

• Units completed = 50000

  units

• Ending work in process (EWIP) = 9000

  units

Beginning work in process was 70% complete as to

conversion costs. Ending work in process was 45% complete.

If the costs per equivalent unit are $1,2 and $0,6 for direct material and conversion, respectively, what is the value of the total completed units inventory?

Company X produce two products at a joint cost of $200 000 and presented the following information:

Company X produces joint products Z1 and Z2. At split off point, products Z1 and Z2 have a selling price of $500 and $200, respectively. Both products can be further processed and sold for higher prices: $1,000 and $1,000. There are additional processing cost of $600 for Z1 and $700 for Z2.

Which of the following is TRUE assuming that the company wants to maximize their operating income?

Company X  uses process costing and weigthed average method. There is no spoilage. Direct material 1 is added at the start of the process, DM 2 is added when the units are 60% complete, DM 3 is added evenly between 20% and 60% of the process and Conversion costs (CC) are added evenly during the process. Company X presented the following information related to the cost per EUP:

• DM 1 = $9
• DM 2 = $10
• DM 3 = $10
• CC = $5

Compute the cost of 1 unit of EWIP inventory (50% complete for coversion costs)