Comment on the following article, extracted from the textbook (Horngren, 16th edition, page 368).

While this is an open-book exam, direct copying of content from the textbook or class notes will not earn points. Answers should demonstrate your understanding and application of the concepts.

Comment on the following article, extracted from the textbook (Horngren, 16th edition, page 99). (hint: your comment should include 3 valid different points that relate the case to the topics covered in the course. You can relate directly to chapter 3, or choose topics covered from other chapters. Please note that we do not reward replications from the case or direct reproductions of the textbook theory concepts in your answer.)

Comment on the following article, extracted from the textbook (Horngren, 16th edition, page 54). (hint: your comment should include 3 valid different points that relate the case to the topics covered in the course. You can relate directly to chapter 2, or choose topics covered from other chapters. Please note that we do not reward replications from the case or direct reproductions of the textbook theory concepts in your answer.)

Company

X produces 2 products (A and B). Company X uses ABC costing and one of the

activity cost pools is the assembly (with an overhead cost of $517723), which

has as cost driver the number of total parts. Company X presented the

following

                                           Product

A                    Product B

• Units

  produced             5000                           10000

• Number

  of parts            20                                30

Company X manufactures and sells a single product. The following data is available:

• direct materials cost = $3329 / unit
• direct manufacturing labor cost = $20 per hour; each units takes 100 hours of direct labor for completion
• manufacturing overhead is applied at $26 per direct manufacturing labor hour

Company

X computes the overhead budgeted rates on the basis of direct labor hours.

Company X presented the following information:

• Direct

  materials = $ 25000

• Indirect

  materials = $ 24439

• Direct

  labor = $30000

• Salary

  of production supervisor = $ 52000

• Rent

  on the factory =$ 18000

• Sales

  commissions = $ 15000

• Marketing expenses = $12000

If Company X estimates to use

50000 machine hours and 20000 direct labor hours, what will be the overhead

budgeted rate?

Company

X presents the following information:

• Revenues

  = $200000

• Selling

  price = $20

• Contribution

  margin = $150000

• Operating

  income before taxes = $50000

• Income tax

  rate = 22%

What will be the impact in the net income after taxes if the

company sells 20000 units?

+: operating income increases; -: operating income decreases

Under absorption costing, if a manager's bonus is tied to operating income, then increasing inventory levels compared to last year would result in

The following information is available for Company X:

• Fixed costs are constant at $400000 per month
• During high-output months variable costs are $320000, with 16000 budgeted machine hours
• During low-output months variable costs are $80000, with 4000 budgeted machine hours