BUS FPX 4064 Assessment 1 Cost Data for Managerial Purposes

Student Name

Capella University

BUS-FPX4064 Cost Accounting for Planning and Control

Prof. Name

Date

Cost Data for Managerial Purposes

Scenario

T-Rex Company operates with two divisions, East and West. West Division’s managers receive compensation based on their division’s financial performance. While West normally sells to external customers, it occasionally sells to East Division, adhering to corporate policy dictating a cost plus 15 percent pricing strategy. West Division received an order from East for 600 units, exceeding its planned output of 2,640 units before the order. West’s capacity is 3,300 units annually. Costs for producing 2,640 units include:

Production Costs for 2,640 Units

	TOTAL	PER UNIT
Materials	$528,000.00	$200.00
Direct Labor Cost	$253,440.00	$96.00
Other Costs Varying
with Output	$168,960.00	$64.00
Fixed Costs	$2,217,600.00	$840.00
Total Costs	$3,168,000.00	$1,200.00

Problem Description

The controller of West Division included per unit fixed costs in the additional production cost, neglecting differential costs for interdivision sales. Options available are:

A. Use full per unit cost for normal production (2,640 units). B. Use only differential costs. C. Use differential costs plus a share of fixed costs based on actual production volume (3,300 units with East’s order).

Costs

	A	B	C
Direct materials (variable)	$200.00	$200.00	$200.00
Direct labor (variable)	$96.00	$96.00	$96.00
Other variable costs	$64.00	$64.00	$64.00
Fixed costs	$840.00	$672.00	$672.00
Per unit cost	$1,200.00	$360.00	$1,032.00
Cost plus 15%	$1,380.00	$414.00	$1,186.00
Total price (600 units)	$828,000.00	$248,400.00	$712,080.00

REQUIRED

a. As the manager of West Division, ask East Division to pay Unit A cost, considering maximum revenue and fixed costs.

b. As the manager of East Division, argue for Unit B cost, which minimizes costs for the division.

c. Recommend Unit A cost for interdivision sales due to its accuracy compared to Unit B or Unit C.

Cost Concepts and Financial Statements (SOLUTION)

Scenario

Joplin Products sold 990 units in June, with the following data:

Sales price (per unit) $492.80 Manufacturing Costs:


Fixed overhead (for the month)	$55,440.00
Direct labor (per unit)	$38.50
Direct materials (per unit)	$123.20
Variable overhead (per unit)	$77.00
Marketing and administrative costs:
Fixed costs (for the month)	$74,250.00
Variable costs (per unit)	$15.40

BUS FPX 4064 Assessment 1 Cost Data for Managerial Purposes

REQUIRED

Compute: a. Variable manufacturing cost per unit. b. Full cost per unit. c. Prime cost per unit. d. Conversion cost. e. Profit margin. f. Contribution margin per unit. g. Gross margin per unit.

Analyze the impact of increasing production to 1,320 units.

Prepare Statements for a Manufacturing Company

Scenario

Idaho Tool & Die’s accounting records for the last year show various costs and revenues:


Administrative costs	$10,560
Building and machine depreciation (75% for factory)	$5,940
Building utilities (90% for factory)	$8,250
Direct labor	$5,544
Direct materials inventory, Dec 31	$84
Direct materials inventory, Jan 1	$72
Direct materials purchases	$24,090
Factory supervision	$3,234
Finished goods inventory, Dec 31	$390
Finished goods inventory, Jan 1	$324
Indirect factory labor	$5,472
Indirect materials and supplies	$4,110
Marketing costs	$5,226
Property taxes on building (80% for factory)	$5,040
Sales revenue	$85,602
Work-in-process inventory, Dec 31	$174
Work-in-process inventory, Jan 1	$192

REQUIRED

Prepare an income statement with a supporting cost of goods sold statement.

CVP Analysis and Price Changes

Scenario

Toronto Partners faces inflationary challenges. With current sales of 66,000 units at $30 each, variable costs at $15 per unit, and fixed costs of $770,000, management anticipates labor and materials costs to rise by 15% and 10%, respectively. Variable overhead costs are expected to increase by 20%, while prices cannot increase by more than 10%.

REQUIRED

Compute the volume and dollar sales level to maintain present profit with maximum price increase. Determine sales volume and dollar sales level to achieve a 6% profit increase with maximum price increase. Calculate the required price increase for a 6% profit increase with sales remaining at 66,000 units.

Closing a Plant

Scenario

Chase Corporation operates in various locations with projections for the next year. Considering marginal performance, Chase plans to close its Colorado factory and explore alternatives.

REQUIRED

Compute estimated operating profit for three options: A) Expanding Kansas factory, B) Long-term contract with competitor, C) Shutting down Colorado operations. Determine the best option and justify the choice.

BUS FPX 4064 Assessment 1 Cost Data for Managerial Purposes