= $448,000 (30 Minutes) Cost Concepts: Emporia Precision Parts. a. $87,000. Prime costs = Direct materials used + Direct labor costs Direct materials used = Prime costs – Direct labor costs = $147,000 – $60,000 = $87,000 b. $18,000. Direct materials used = Beginning inventory + purchases – ending inventory Direct materials, beginning inventory = Direct materials used – purchases + ending inventory $87,000 – $84,000 + $15,000 = $18,000 c. $180,000. Total manufacturing costs = Prime costs + Conversion costs – Direct labor cost Conversion cost = manufacturing costs – Prime costs + Direct labor cost = $267,000 – $147,000 + $60,000 = $180,000 d. $6,000. Work-in-process, ending = Work-in-process, beginning + Total manufacturing costs – Cost of goods manufactured $9,000 + $267,000 – $270,000 = $6,000 e. $120,000. Conversion cost = Direct costs + Manufacturing overhead Manufacturing overhead = Conversion costs – Direct labor costs = $180,000 – $60,000 = $120,000
Allocation of student-related costsa $1,350,000 $900,000 $2,250,000 Allocation of credit-hour costsb 803,250 981,750 1,785,000 Allocations $2,153,250 $1,881,750 $4,035,000 a $1,350,000 = 60% x $2,250,000; $900,000 = 40% x $2,250,000. b $803,250 = 45% x $1,785,000; $981,750 = 55% x $1,785,000. 2-58. (continued) b. a 45% = 13,500 credit hours ÷ (13,500 credit hours + 16,500 credit hours) b 55% = 16,500 students ÷ (13,500 credit hours + 16,500 credit hours) c 60% = 900 students ÷ (900 students + 600 students) d 40% = 600 students ÷ (900 students + 600 students) (40 Min.) Find the Unknown Information. a. Finished goods beginning inventory + Cost of goods manufactured – Cost of goods sold = Finished goods ending inventory Finished goods beginning inventory + $88,800 – $87,040 = $14,080 Finished goods beginning inventory = $ 12,320 (= $14,080 – $88,800 + $87,040) b. Direct materials used + Direct labor + Manufacturing overhead = Total manufacturing costs Direct materials used + $ 12,160 + $23,040 = $77,600 Direct materials used = $42,400 (= $77,600 – $12,160 – $23,040) Alternative solution
Direct materials used = Beginning inventory + Materials purchased – Ending inventory Direct materials used = $16,000 + $38,400 – $12,000 Direct materials used = $42,400 c. Sales revenue – Cost of sold = Gross margin Sales revenue – $87,040 = $52,480 Rearranging, Sales revenue = $139,520 (= $52,480 + $87,040) Gross margin % = $52,480 ÷ $139,520 = 37.6% (40 Min.) Find the Unknown Information. a. Cost of goods sold = Finished goods beginning inventory + Cost of goods manufactured – Finished goods ending inventory = $22,320 + $598,400 – $25,520 Cost of goods sold = $595,200 b. manufacturing costs = Direct materials used + Direct labor + Manufacturing overhead $612,320 = Direct materials used + $270,400 + $225,000 Direct materials used = $116,920 (= $612,320 – $270,400 – $225,000) c. Direct materials used = Beginning inventory + Materials purchased – Ending inventory $116,920 = $2,520 + Materials purchased – $2,088
Then, Operating profit = Sales revenue – Cost of goods sold – Selling, general, and administrative costs = Sales revenue – Full costs $55,200 = $414,000 – Full costs Full = $414,000 — $55,200 = $358,800 Full costs = Units sold x Full cost per unit $358,800 = sold x $39.00 Units sold = $358,800 ÷ $39.00 = 9,200 units sold d. Sales revenue = Selling price per unit x Units sold $414,000 = Selling price per unit x 9,200 units sold Selling price per unit = $414,000 ÷ 9,200 = $45.00 e. Finished goods ending (units) = Finished goods beginning (units) + Units produced – Units sold 400 = + Units produced — 9,200 Units produced = 9,200 + 400 = 9,600 f. Direct labor cost incurred = Direct-labor hours worked x Wage rate per hour Direct cost incurred = Units produced x Direct labor cost per unit = 9,600 x $6.25 = $60,000 $60,000 = Direct-labor hours worked x $20.00 Direct-labor hours worked = $60,000 ÷ $20.00 = 3,000 direct-labor hours Solutions to Integrative Case (30 min.) Analyze the Impact of a Decision on Income Statements:
Tunes2Go. a. This year’s income statement: Baseline (Status Quo) Rent Equipment Difference Sales revenue $4,800,000 $4,800,000 Operating costs: Variable (600,000) (600,000) 0 Fixed (cash expenditures) (2,250,000) (2,250,000) 0 Equipment depreciation (450,000) (450,000) 0 Other depreciation (375,000) (375,000) 0 Loss from equipment 0 (2,550,000) a $2,550,000 lower Operating profit (before $1,125,000 $2,550,000 lower a Equipment write-off = $3 million cost – $450,000 accumulated depreciation for one year (equipment was purchased on January 1 of the year). b. Next year’s income statement: Baseline (Status Quo) Rent Equipment Difference Sales revenue $4,800,000 $5,136,000 a $336,000 higher Operating costs: Equipment rental 0 (690,000) 690,000 higher Variable (600,000) (600,000) 0 cash expenditures (2,250,000) (2,115,000) b 135,000 lower Equipment depreciation (450,000) 0 450,000 Other depreciation (375,000) (375,000) 0 Operating profit $1,125,000 $1,356,000 $231,000 higher a $5,136,000 = 1.07 $4,800,000 b $2,115,000 = (1.00 – 0.06) $2,250,000 c. Despite the effect on next year’s income statement, the company should not rent the new machine because net cash inflow as a result of installing the new machine ($336,000 + $135,000) does not cash outflow for equipment rental ($690,000).