MICRO-Q. (Required) Newark Manufacturieg produces

Q. (Required) Newark Manufacturieg produces LCD touch skeen products. The cempuny reposts the following information at Doxenber 31. 2014; \begin{tabular}{|c|c|c|c|c|c|} \hline \multicolumn{2}{|c|}{ Materials inventory } & \multicolumn{2}{|c|}{ Work in process inventory } & \multicolumn{2}{|c|}{ Finishsd goods inventory } \\ \hline 47,000 & 31,460 & \begin{tabular}{l} 28,000 \\ 62,000 \\ 53,500 \end{tabular} & 123,000 & 123,000 & 109,900 \\ \hline \end{tabular} 1. What is the amsunt of cost of goods manufuctured foe the year? 2. What is the arnesunt of cont of geode sold bor the yau'? Ex 2-11 (1* edition Ex 2-11) Maven Cempany

Answer

The amount of cost of goods manufactured for the year is $176,960.

Solution

a

Calculation of total manufacturing costs: Total manufacturing costs include direct materials used, direct labor, and manufacturing overhead

b

Direct materials used: This is calculated by adding the beginning materials inventory to the purchases during the year and then subtracting the ending materials inventory. Since we do not have the purchases information, we assume it to be zero. Thus, Direct materials used = Beginning materials inventory + Purchases - Ending materials inventory =

47,000 +

0 -

31,460 =

15,540

c

Total manufacturing costs: Since we do not have separate figures for direct labor and manufacturing overhead, we assume that the work in process inventory change reflects these costs. Thus, Total manufacturing costs = Direct materials used + Change in work in process inventory =

15,540 + (

123,000 -

28,000) =

15,540 +

95,000 =

110,540

d

Cost of goods manufactured: This is calculated by adding the total manufacturing costs to the beginning work in process inventory and then subtracting the ending work in process inventory. Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory - Ending work in process inventory =

110,540 +

28,000 -

62,000 =

176,960

Key Concept

Cost of Goods Manufactured

Explanation

The cost of goods manufactured is the total cost incurred by a company to produce goods during a specific period. It includes direct materials, direct labor, and manufacturing overhead costs.

Answer

The amount of cost of goods sold for the year is $190,060.

Solution

a

Calculation of cost of goods sold: Cost of goods sold (COGS) is calculated by adding the beginning finished goods inventory to the cost of goods manufactured and then subtracting the ending finished goods inventory

b

COGS: COGS = Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory =

53,500 +

176,960 -

109,900 =

120,560 +

176,960 -

109,900 = $190,060

Key Concept

Cost of Goods Sold (COGS)

Explanation

The cost of goods sold is the cost attributed to the production of the products that were actually sold by the company. It is a key figure for understanding the company's gross profit.

Q. (Required) Kelly owas a machies shop. Ia reviewing his etility bill for the last 12 meaths, be machine bours. His lowest utility bill of

\$ 2,600

accurred in December when his machises worked 900 machane heurs. 1) Slsow the equation for detertaining the botal utility cost for Kelly's. 2) If Kelly's anticiputes using 1,200 muchine hours in Jasuary, prodict his tocal utility bill using the equation frees Requirement 1. Q. At a volume of 8,000 units, Pwerson Company iscuned

\$ 32,000

in factory overhead costs, including

\$ 12,000

is fixed costs. If volume iscreases to 9,000 units and both 8,000 enits and 9,000 units are within the relovent cange, then the coempany would expoet to iscur total factory oscthead cests of:

A

Key Concept

Fixed and Variable Costs

Explanation

To determine the total utility cost, we need to establish the variable cost per machine hour and the fixed cost. The variable cost per machine hour can be found by subtracting the fixed cost from the total cost and then dividing by the number of machine hours. The fixed cost remains constant regardless of the number of machine hours.

C

Key Concept

Variable Cost Behavior

Explanation

When volume increases within the relevant range, total variable costs increase in direct proportion to the increase in volume, while total fixed costs remain unchanged. Therefore, the total factory overhead costs at 9,000 units would be the sum of the fixed costs and the variable costs for the additional 1,000 units.

Kelly owns a machine shop. In reviewing his utility bill for the last 12 months, he found that his highest bill of

2,800 occurred in August when his machines worked 1,400 machine hours. His lowest utility bill of

2,600 occurred in December when his machines worked 900 machine hours. 1) Show the equation for determining the total utility cost for Kelly’s. 2) If Kelly’s anticipates using 1,200 machine hours in January, predict his total utility bill using the equation from Requirement 1.

Answer

The total utility cost for Kelly's machine shop can be predicted using the equation

TC = a + b(Q)

, where

TC

is the total cost,

a

is the fixed cost,

b

is the variable cost per machine hour, and

Q

is the quantity of machine hours. For January, with 1,200 machine hours, the predicted total utility bill is $2,700.

Solution

a

Identifying Fixed and Variable Costs: We need to determine the fixed cost (FC) and the variable cost per machine hour (VC) to create the total cost (TC) equation

b

Using the High-Low Method: We calculate the variable cost per machine hour by taking the difference in total costs and dividing it by the difference in machine hours.

VC = \frac{TC_{high} - TC_{low}}{Q_{high} - Q_{low}}

c

Calculating Variable Cost per Machine Hour:

VC = \frac{2800 - 2600}{1400 - 900} = \frac{200}{500} = 0.4

dollars per machine hour

d

Calculating Fixed Cost: We can use either the high or low point to calculate the fixed cost.

FC = TC_{high} - (VC \times Q_{high})

e

Fixed Cost Calculation:

FC = 2800 - (0.4 \times 1400) = 2800 - 560 = 2240

dollars

f

Total Cost Equation: The total cost equation is

TC = FC + VC(Q)

, which simplifies to

TC = 2240 + 0.4(Q)

g

Predicting January's Utility Bill: Substitute 1,200 machine hours into the total cost equation.

TC = 2240 + 0.4(1200)

h

January's Utility Bill Calculation:

TC = 2240 + 480 = 2720

dollars

Key Concept

The high-low method is used to separate fixed and variable components of a mixed cost for cost prediction purposes.

Explanation

By using the highest and lowest activity levels and their associated costs, we can determine the variable cost per unit of activity and the fixed cost, which allows us to create an equation to predict future costs based on expected activity levels.

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