ACCT 2242 Summer ONE 2019Use MS WORD or EXCEL or both
Question # 1 (40 marks)
Ersatz, Inc., manufactures a single.
ERSATZ, INC
Income Statement
Activity Level
1,000 units
1,500 units
$100,000
$150,000
Mfg @ $40
40,000
60,000
Selling @ $10
10,000
15,000
6,000
9,000
Sales @ $100
Less variable expenses
Administration @ $6
Contribution Margin (CM)
$ 44,000
$ 66,000
Mfg
10,000
10,000
Selling
11,000
11,000
Administration
20,000
20,000
Less fixed expenses
Net income
$ 3,000
$ 25,000
Required:
•
•
•
•
•
•
At an activity level of 1,000 units, what is Ersatz’s gross profit?
What is the break-even point in units (BEP)?
If the company wants to sell 1,300, what will net income be?
Explain why net income increases by more than 800% when sales increase by just 50%?
Hint: Calculate OL at the activity level of 1,000 units.
Management expects that variable costs and selling prices will rise by 6%, but fixed costs
will not change. What is the new BEP? Explain
Management is considering changing the structure of selling costs. At present selling cost
is given by what function? (It is given by $11,000 + $10 per unit). Management wants to
•
replace the selling cost function with a simple $25 per unit cost. At what level of sales
will it make no difference which cost function is used?
Which of the two cost functions in (f) will minimize selling expenses above the level of
sales at which it makes no difference?
Question # 2 (50 marks)
•
•
E5-31A (22 marks)
P5-65B (28 marks)
6. What is the cost of goods sold (before adjusting for any under- or overallocated
4. What is the cost of inull
5. What is the cost of goods manufactured?
manufacturing overhead)?
7. What is the actual manufacturing overhead?
8. How much manufacturing overhead was allocated to jobs?
9. What is the predetermined manufacturing overhead rate as a percentage of direct
labour cost?
10. Is manufacturing overhead underallocated or overallocated? By how much?
3-31A Prepare journal entries (Learning Objectives 2, 3, & 6)
Record the following transactions in Micro Speakers’ general journal.
a. Received bill for website expenses, $3,400.
b. Incurred manufacturing wages, $15,000, 70% of which was direct labour and 30%
of which was indirect labour.
c. Purchased materials on account, $14,750.
d. Used in production: direct materials, $7,000; indirect materials, $3,000.
e. Recorded manufacturing overhead: depreciation on plant, $13,000; prepaid plant
insurance expired, $1,700; plant property tax, $4,200 (credit Property Tax Payable).
f. Allocated manufacturing overhead to jobs, 200% of direct labour costs.
g. Cost of jobs completed during the month: $33,000.
h. Sold all jobs (on account) completed during the month for $52,000. Assume a per-
petual inventory system.
32A Record completion and sale of jobs (Learning Objectives 2 & 6)
September production generated the following activity in Digital Connection’s work in
process inventory:
CAPSTONE APPLICATION PROBLEMS
APPLICATION QUESTION
A3-65 Analyze issues with cost of job (Learning Objectives 2, 3, & 4)
for private parties and corporate promotions. Each order contains a selection of choco
Hegy Chocolate is located in Montreal. The company prepares gift boxes of chocolates
tions. Accordingly, Hegy Chocolate uses a job cost system and allocates manufacturing
lates determined by the customer, and the box is designed to the customer’s specifica-
overhead based on direct labour cost.
organization sends chocolates to its clients each Christmas and also provides them to
One of Hegy Chocolate’s largest customers is the Bailey and Choi law firm. This
placed the client gift order in September for 500 boxes of cream-filled dark chocolates.
employees at the firm’s gatherings. The law firm’s managing partner, Genevieve Bailey,
November. This order was for an additional 100 boxes of chocolates identical to the ones
But Bailey and Choi did not place its December staff party order until the last week of
Hegy Chocolate budgeted the cost per box for the original 500-box order as follows:
$14.00
to be distributed to clients.
2.00
1.00
$17.00
Chocolate, filling, wrappers, box ….
Employee time to fill and wrap the box (10 min………
Manufacturing overhead……….
Total manufacturing cost..
Estephan Hegy, president of Hegy Chocolate, priced the order at $20 per box.
In the past few months, Hegy Chocolate has experienced price increases for
both dark chocolate and direct labour. All other costs have remained the same.
Hegy budgeted the cost per box for the second order as follows:
…..
$15.00
2.20
Chocolate, filling, wrappers, box ……
Employee time to fill and wrap the box (10 min.)……..
Manufacturing overhead…………….
Total manufacturing cost.
1.10
$18.30
Requirements
1. Do you agree with the cost analysis for the second order? Explain your answer.
2. Should the two orders be accounted for as one or two jobs in Hegy Chocolate’s
system?
3. What sales price per box should Hegy set for the second order? What are the
advantages and disadvantages of this price?
A3-66 Analyze issues with the manufar
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
