Week 3 Discussions and Assignment Ashford University

Please refer to attachment for work

ACC206 Week 3 Assignment: Chapter 4 and 5 Problems

Please complete the following 7 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.

Chapter 4 Exercise 7

7. Overhead application: Working backward

The Towson Manufacturing Corporation applies overhead on the basis of machine hours. The following divisional information is presented for your review:

?

?

?

?

?

Division A	Division B
Actual machine hours	22,500						?
Estimated machine hours	20,000
Overhead application rate	$4.50	$5.00
Actual overhead	$110,000
Estimated overhead	$90,000
Applied overhead	$86,000
Over- (under-) applied overhead	$6,500

Find the unknowns for each of the divisions.

Chapter 4 Problem 2

2. Computations using a job order system

General Corporation employs a job order cost system. On May 1 the following balances were extracted from the general ledger;

Work in process $ 35,200

Finished goods 86,900

Cost of goods sold 128,700

Work in Process consisted of two jobs, no. 101 ($20,400) and no. 103 ($14,800). During May, direct materials requisitioned from the storeroom amounted to $96,500, and direct labor incurred totaled $114,500. These figures are subdivided as follows:

Direct Materials Direct Labor Job No. Amount Job No. Amount 101 $5,000 101 $7,800 115 19,500 103 20,800 116 36,200 115 42,000 Other 35,800 116 18,000 $96,500 Other 25,900 $114,500

Job no. 115 was the only job in process at the end of the month. Job no. 101 and three “other” jobs were sold during May at a profit of 20% of cost. The “other” jobs contained material and labor charges of $21,000 and $17,400, respectively.

General applies overhead daily at the rate of 150% of direct labor cost as labor summaries are posted to job orders. The firm’s fiscal year ends on May 31.

Instructions:

a. Compute the total overhead applied to production during May.

b. Compute the cost of the ending work in process inventory.

c.

Compute the cost of jobs completed during May.

d. Compute the cost of goods sold for the year ended May 31.

Chapter 5 Exercise 1

1. High-low method
The following cost data pertain to 20X6 operations of Heritage Products:

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Shipping costs

$58,200

$58,620

$60,125

$59,400

Orders shipped

120

140

175

150

The company uses the high-low method to analyze costs.

a. Determine the variable cost per order shipped.

b. Determine the fixed shipping costs per quarter.

c. If present cost behavior patterns continue, determine total shipping costs for 20X7 if activity amounts to 570 orders.

Chapter 5 Exercise 3

3. Break-even and other CVP relationships

Cedars Hospital has average revenue of $180 per patient day. Variable costs are $45 per patient day; fixed costs total $4,320,000 per year.

a. How many patient days does the hospital need to break even?

b. What level of revenue is needed to earn a target income of $540,000?

c. If variable costs drop to $36 per patient day, what increase in fixed costs can be tolerated without changing the break-even point as determined in part (a)?

Chapter 5 Problem 6

6. Direct and absorption costing

The information that follows pertains to Consumer Products for the year ended December 31, 20X6.

Inventory, 1/1/X6

24,000 units

Units manufactured

80,000

Units sold

82,000

Inventory, 12/31/X6

? units

Manufacturing costs:

Direct materials

$3 per unit

Direct labor

$5 per unit

Variable factory overhead

$9 per unit

Fixed factory overhead

$280,000

Selling & administrative expenses:

Variable

$2 per unit

Fixed

$136,000

The unit selling price is $26. Assume that costs have been stable in recent years.

Instructions:

a. Compute the number of units in the ending inventory.

b. Calculate the cost of a unit assuming use of:

1. Direct costing.

2. Absorption costing.

c. Prepare an income statement for the year ended December 31, 20X6, by using direct costing.

d. Prepare an income statement for the year ended December 31, 20X6, by using absorption costing.

Week 3 Discussions 1&2 Please write in APA format As these are discussion questions.

1) Issues in Costing

Describe three issues/problems that a company could encounter when trying to determine the actual cost of a good or service to be used in the cost of goods sold. For each of your issues, provide an example of a company or industry where these issues could be present.

2) CVP and the Airline Industry

We’ve all experienced (or heard about) the challenges that the airlines have been facing. Read the Zacks Investment Research article, “

Airline Industry Stock Outlook – August 2012

” Identify three factors that are affecting airline company’s ability to break even. For each of your factors, discuss how these have an impact on the breakeven (contribution margin, fixed costs, variable costs, a combination, etc.), and what happens if these factors increase or decrease.

Research, Z. E.

(n.d.). Airline Industry Stock Outlook – August 2012 – Zacks.com. Zacks Investment Research – Proven Stock Ratings Research Recommendations. Retrieved October 9, 2012, from http://www.zacks.com/stock/news/81160/airline-industry-stock-outlook-august-2012