Description

Managerial Accounting focuses heavily on finding solutions to numerical problems.  With that in mind, most units will include a number of problems. For each problem, you will need to provide more than a simple numerical response. Your solutions should thoroughly address the issue and present the findings in a meaningful format similar to those developed within the chapters and as part of the review exercises solutions. Part value may be assigned for incorrect responses.

Question 1: (40 marks)

Stark and Company would like to evaluate one of the product lines that they sell to the defense department. Every month the Stark and Company produce an identical number of units, although the sales in units differ from month to month.

Selling price

$105

Units in beginning inventory

110

Units produced

6,400

Units sold

6,100

Units in ending inventory

600

Variable costs per unit:

Direct materials

$62

Direct labour

$48

Variable manufacturing overhead

$3

Variable selling and administrative

$7

Fixed costs:

Fixed manufacturing overhead

$64,000

Fixed selling and administrative

$35,600

Required: 

1)     Under variable costing, identify the unit product cost for the month.

2)     What is the unit product cost for the month under absorption costing?

3)     Prepare an income statement for the month using the contribution format and the variable costing method.

4)     Prepare an income statement for the month using the absorption costing method.

Question 2: (12 marks)

The following information pertains to Death Star Corporation for a period:

Selling price per unit

49

Standard fixed manufacturing costs per unit

24

Variable selling and administrative costs per unit

3

Fixed selling and administrative cost per unit

14900

Beginning inventories:

     Units

?

     Standard fixed manufacturing cost

36,900

     Standard variable manufacturing cost

18,700

     Units produced

8,900

     Units sold

8,600

Required:

1)     Assume the unit standard costs data for the beginning and ending inventories remained constant during the period. What was the total standard cost of the ending inventory under absorption costing?

Question 3: (30 marks)

DC and Marvel would like to evaluate one of the product lines that they sell to defense department. Every month the Stark and Company produce an identical number of units, although the sales in units differ from month to month.

Selling price

$111

109

Units in beginning inventory

400

360

Units produced

8,800

6900

Units sold

8,900

7200

Variable costs per unit:

     Direct materials

$34

29

     Direct labour

$37

31

     Variable manufacturing overhead

$3

2

     Variable selling and administrative

$9

7

Fixed costs:

     Fixed manufacturing overhead

$61,600

53,500

     Fixed selling and administrative

$169,100

145,000

Required:

1)     Compute the total Contribution Margin.

2)     Compute the Operating Income under Variable Costing.

3)     Prepare a reconciliation from your Variable Costing Operating Income to compute Operating Income under absorption costing. 

Question 4: (18 marks)

Stark and Company’s has following cost data:

Systems development

$29,000

Final product testing and inspection

$1 2,000

Quality data gathering, analysis, and reporting

$ 9,000

Net cost of scrap

$58,000

Returns arising from quality problems

$56,000

Amortization of test equipment

$53,000

Rework labour and overhead

$16,000

Test and inspection of incoming materials

$38,000

Product recalls

$33,000

Required:

1)     Determine the prevention cost?

2)     Determine Total appraisal cost?

3)     Determine the total internal failure?