: gvIEW PROBLEMS Mee nlow Froductron (omits) Sales (uit) Seling peice Direct labor hours Manufacturing costs. Dirvet materials Direet labor Variable overhead Fined overhead Direct Common* Nonmanufactdring cots Variable seth Direct fixed selling ‘Common fixed selling” + conmen overhead tote $40,000 tion and Variable Costing: Segmented Income Statements eathers Company produces a ladies’ wallet and a men's wallet. Selected data for the past ‘Men's Wallet 100,000 200,000 90,000 210,000 $3.80 $4.50 0,000 £0,000 975,000 100,000 250,000 400,000 20,000 24,000 0,000 40,000 20,000 20,000 30,000 60,000 35,000 40,000 25,000 25,000 5 red aul beeen he wo Proc Conmon ne wling consol $5000 and we ded span Soares eros products Budgeted fined overhead for the year, tend is assigned 0 products using a were 130,000, The company had 10,000 m¢ ‘These wallets had the same unit cost Required: $130,000, equaled the actual fixed overhead. Fixed over~ plantwide rate based on expected direct labor hours, which en's wallets in inventory at the beginning of the year. 4s the men’s wallets produced during the year. 1 Compute the unit cost for the ladies’ Compute the unit cost using absorption costing. 2. Prepare an income statement using absorption costing. 3. Prepare an income statement using variable costing. 4, Prepare a segmented income statement using products as segments. Solution: 1. The unit cost for the ladies’ wallet is as follows: nd men’s wallets using the variable-costing method, Direct Materials = ($75,000/100,000) = $0.75 Direct Labor = ($250,000/100,000) = $2.50 Variable Overhead = ($20,000/1100,000) = $0.20 Variable Cost per Unit = (0.75 + $2.50 + $0.20) = $3.45 Fixed Overhead = (50,000 x $1.00)/ 100,000} = $0.50 Absorption Cost per Unit = ($3.45 + $0.50) = $3.95 The unit cost for the men’s wallet is as follows: Direct Materials = ($100,000/200,000) = $0.50 Direct Labor = ($400,000/200,000) = $2.00 Variable Overhead = (524,000/200,000) = $0.12 Variable Cost per Unit = ($0.50 + $2.00 + $0.12) = $2.62 Fixed Overhead = {(80,000 x $1.00)/200,000] = $0.40 Absorption Cost per Unit = (52.62 + $0.40) = $3.02 ‘Scanned with CamScannerae even Nnatee ‘costs is the that varial assignment of the f, coat is assigned using the Predet, hour $1 per not urs und so Feccive $} hot rivided by the units produced, gy ble nonmanufactuy both approaches, only mang Soe ts are used 10 co th as follows a emest under! absorption 2 Theincome stater aa 4 ($4.50 * 210. ,000)) Sh 9.100 meee oe ne = Se ae Ses able costing is a5 follows: oe ‘Sales (55.50 * 90,000) + ($4.50 * 210,000) a oes sold ((83.45 * 90,000) + ($2.62 * 210,000)] ea 709 abciees 38 ‘Contribution margin oa “= ic = roe 234,300 —e rae Less variable expenses, ‘Variable cost of goods sold 310,500 Variable selling expenses _ 30,000 ‘Costnibution margin 3154, 500 Less direct fined expendes: ‘Direct fixed overhead 90,000 Direct selling expenses 75,000 Segment margin 324,300 Less common fixed expenses ‘Common fixed overhead es «noon Operating income 3300 I. Inventory Costs, EO, Reorder Point [A local TV repair shop uses 36,000 units ofa part each year (aii average of 100 units pet work ing day). It costs $20 to place and receive an order. The shop orders in lots of 400 units. It co¥S 's of 400 units. It $4 to carry one unit per year in inventory. Required: 1. Calculate the total annual ordering cost, 2. Calculate the total annual carrying cost. 3. Calculate the total annual inventory cost ‘Scanned with CamScannerChapter 8 Absorpoon and Variable Costing, and Inventory Management 4 Calculate the EOQ. § Calculate the total annual inventory cost using the EOQ inventory policy. & How much is saved per year using the EOQ versus an order size of 400 units? +. Compute the reorder point, assuming the lead time is three days. ‘Suppose that the usage of the part can be as much as 110 units per day. Calculate the safety stock and the new reorder point. Solution: 1, Ordering Cost = Cost of Placing an Order x (Demand in Units/Number of Units in One Order) = $20 x 36,000/400 = $1,800 2 Camying Cost = (Carrying Cost per Unit x Average Units in Inventory)/2 = $4 x 400/2 = $800 3. Total Cost = Ordering Cost + Carrying Cost = $1,800 + $800 = $2,600 4 £09 = v2x CO x DICE = 2X $20 % 36,000/4 = 360,000 = 600 units 4. Total Annual Inventory Cost = (Cost per Order x Total Units, Units per Order) + (Carrying Cost x Units per Order/2) ($20 x 36,000)/600) + [($4 x 600)/2] = $1,200 + $1,200 = $2.400 5 Savings — $2,600 — $2,400 = $200 Reorder Point = 100 x 3 = 300 units : Safety Stock = (110 — 100)3 = 30 units Reorder Point = {10 3 = 330 units or 300+ 30 = 330 units ‘Scanned with CamScanner