COST ACCOUNTING FINAL EXAM-Your company produces a basic potato chip…

Your
company produces a basic potato chip. There are three main processes used
in the chips. The first process
washes and peels the potatoes. The
second process slices and fries the potatoes. The third process seasons and packages
the chips. The potato chips are
sold in 12 oz bags (1 bag is a unit)

Information
on the direct materials is listed in table 1. Consider this information
the standard.

Direct labor information
given in Table 2. Consider this
information the standard.

Annual overhead information is given in Table 3. Overhead is
allocated based direct labor hours.
Estimated annual direct labor hours are 12,500. Calculate a predetermined OH rate (round
to two decimal places if needed).
Use this rate when you need to apply OH.

Table 4 gives you the information for the last two months on
the overhead cost. Use this
information to determine the fixed and variable portions of the cost. (You will need this information to
complete Table 5). Machine hours have been determined as the best cost
driver for separating mixed cost into their fixed and variable portions.
It takes approximately 12 minutes of total machine time for each bag of
chips (or 1/5 a machine hour per bag of chips).

Table 5 is where you will list all your production cost,
separated into their fixed and variable components.

Cost-Volume-Profit (CVP) Relationships

a.
Selling Price: You sell a bag of chips for
$4.00

b.
Breakeven point: Calculate the breakeven point. Be
sure to include the fixed component of mixed cost in your fixed costs and the
variable component in the variable
cost. Show your breakeven in Sales units
and in Sales Dollars

c.
Profit Planning: Determine the number of
units you must sell to make an annual pre-tax profit using 3 assumptions
concerning your net income (profit), both in sales units and sales dollars.

i.
Aggressive Profit ($100,000)

ii.
Conservative Profit ($25,000)

iii.
Average Profit ($60,430)

Budgeting:

a.
Create a sales budget using the
information for earning an average profit for the year. You will break the budget down into the four
quarters for the year. (Sales tend to be consistent each quarter, you can only
sale a whole unit so round-up if necessary) Use table 6 to complete the sales
budget.
b.
Create a production budget for
each quarter of the year (keep it in quarters; you do not need to break it down
by month). You desire to keep 10% of
next quarter’s sales in ending inventory.
Sales for Qtr 1 the following year are expected to be 30,000 bags of
chips. There is not any beginning finished goods inventory for quarter one. Use
table 7 to complete the production budget.

Running quarter one — Weighted-average process costing. Table 8 presents the information for the
packaging department. Complete the
questions under table 8.

Actuals are in for quarter one.
You sold 25% more units than you budgeted for, but price per unit
was only $3.80.

a.
Calculate revenue
b.
Compute the cost of goods sold
(total and per unit) before adjusting for actual OH cost

Actual potato usage for quarter one was 68,000 pounds at a
price of $0.45 per pound. Actual equivalent units of production (bags of
chips) completed through the fist process (where the potatoes are added)
was 29,520. Calculate the direct
materials variances for the potatoes (price, usage, and total) and
indicate if these variances are favorable or unfavorable.

Actual direct labor hours for the quarter were 4,830 at an
average rate of $8.10 per hour. For
actual production you expected to use 4,200 direct labor hours. Calculate the direct labor variances
(rate, efficiency and total) and indicate if these variances are favorable
or unfavorable.

For next quarter you have been asked to supply a special order
of you potato chips. The non-profit
organization requesting this order would like a special bag that will cost
$0.20 instead of the normal $0.10 per bag.
The request is for 10,000 bags of chips. Based on your projections you have the
capacity for this order. What is
the minimum price per unit and total price you would be willing to accept
on this order? (You cannot afford
to take this offer at a loss, but you are fine with accepting it at cost).

Determine over- or under-applied overhead and close to cost of
goods sold. Actual OH cost are
given in table 14 (look at #12 for actual DL hours used to apply OH). Determine the new cost of goods sold
amount.

Table 1: Direct
Materials

Material Quantity Cost Total per unit per unit

Potatoes

1.5 lbs

$0.50

$0.75

Seasoning

0.1 ounces

$0.50

$0.05

Packaging

1 bag

$0.10

$0.10

1/12 box

$0.48

$0.04

TOTAL

$0.94

Table 2: Direct Labor

Hours

Per Bag
Job Description
of
chips Rate Total
Cost

Potato
Washer & Peeler

.1

$8.00

$0.80

Slicer &
Fryer

.04

$8.00

$0.32

Packager

.05

$8.00

$0.40

Total

0.14

$1.52

Table 3: YEARLY
OVERHEAD COSTS
Cost
Description Total Cost

Indirect
Materials

$6,000

Indirect Labor

60,010

Machine
Maintenance

4,040

Electricity

3,440

Depreciation

4,680

Quality Testing

10,160

TOTAL

$88,330

Predetermined OH
rate:
Table 4 – Actual
Overhead cost for the last two months

Month 1

Month 2

Indirect
Material

$500

$500

Indirect Labor

$5000.83

$5000.83

Machine
Maintenance

$250

$290

Electricity

$200

$240

Depreciation

$390

$390

Quality Testing

$630

$730

Machine Hours*

1000

1200

*12 minutes of machine time per bag of chips (1/5 hour
= 1 unit)

Complete any calculations here:

Table 5:
Variable and Fixed Costs

COSTS Description VARIABLE Cost per unit FIXED Cost per Year

TOTAL

If a cost is mixed, put the fixed amount in
the fixed column and the variable amount in the variable column.

CVP Calculations:

Table 6 – Sales
Budget

Qtr 1

Qtr 2

Qtr 3

Qtr 4

Total

Table 7 –
Production Budget

Qtr 1

Qtr 2

Qtr 3

Qtr 4

Process Costing –
Packaging Department

Direct materials
are added 70% at the beginning of the process and the remaining 30% are added
when the chips are 50% complete with the packaging process. Direct labor and overhead are added evenly
throughout the process.

Table 8 – Unit and
cost information

Cost

Physical Units

Transferred-in

Direct Materials

Direct Labor

Overhead

Beg WIP

1,000 (40%
complete)

$5,550

$110.40

$165

$141.44

Transferred In

30,000

$73,500

End WIP

2,200 (30%
complete)

Added during Qtr 1:
Direct Materials — $4,835.02
Direct Labor – 1,580 hrs @ $8.10 per hour
Overhead – OH is applied based on predetermined OH
rate and actual DL hours

1.Determine the number of units completed
during quarter 1.

2.Compute the equivalent units using the
weighted average method

3.Compute the cost per equivalent unit using
the weighted average method

4.Compute the cost of goods transferred to
finished goods inventory

5.Compute the ending balance in WIP,
Packaging

Table 10 – Actual Results (calculate revenue
and COGS)

Units sold

Sales Price

Revenue

Units sold

Cost per unit

COGS

Table 11 – DM Variances (potatoes only)

Price Variance

Usage Variance

Total Variance

Calculations:

Table 12 – Direct Labor Variances

Rate Variance

Efficiency Variance

Total Variance

Calculations:

#13 Calculations (Minimum price on special
order)

Table 14 – Actual OH cost for Quarter 1

Description

Cost

Indirect Materials

$1,750

Indirect Labor

$15,000

Machine Maintenance

$1,416.20

Electricity

$1,235.75

Depreciation

$1,050

Quality Testing

$4,615

Amount of applied OH:

Amount of actual OH:

Under or Over- Applied Amount:

New COGS amount: