Acc301 Essentials of Accounting: Week 3 Assignment (E5-16, P5-1A, BYP5-6, E6-4, P6-2A, BYP6-3)

Acc301 Essentials of Accounting
Week 3 Assignments

E5-16
An analysis of the accounts of Chamberlin Manufacturing reveals the following manufacturing cost data for the month ended June 30, 2008.
Inventories Beginning Ending
Raw materials 9,000 13,100
Work in process 5,000 7,000
Finished goods 9,000 6,000
Costs incurred: Raw materials purchases $54,000, direct labor $57,000, manufacturing overhead $19,900.
The specific overhead costs were: indirect labor $5,500, factory insurance $4,000, machinery depreciation $4,000, machinery repairs $1,800, factory utilities $3,100, miscellaneous factory costs $1,500. Assume that all raw materials used were direct materials.
Instructions
(a) Prepare the cost of goods manufactured schedule for the month ended June 30, 2008.
(b) Show the presentation of the ending inventories on the June 30, 2008, balance sheet.

P5-1A
Bjerg Company specializes in manufacturing a unique model of bicycle helmet. The model is well accepted by consumers, and the company has enough orders to keep the factory production at 10,000 helmets per month (80% of its full capacity). Bjerg's monthly manufacturing cost and other expense data are as follows.
Rent on factory equipment 7,000
Insurance on factory building 1,500
Raw materials (plastics, polystyrene, etc.) 75,000
Utility costs for factory 900
Supplies for general office 300
Wages for assembly line workers 43,000
Depreciation on office equipment 800
Miscellaneous materials (glue, thread, etc.) 1,100
Factory manager's salary 5,700
Property taxes on factory building 400
Advertising for helmets 14,000
Sales commissions 7,000
Depreciation on factory building 1,500
Instructions
(a) Prepare an answer sheet with the following column headings. Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. Total the dollar amounts in each of the columns.
(b) Compute the cost to produce one helmet

BYP5-6
Wayne Terrago, controller for Robbin Industries, was reviewing production cost reports for the year. One amount in these reports continued to bother him-advertising. During the year, the company had instituted an expensive advertising campaign to sell some of its slower-moving products. It was still too early to tell whether the advertising campaign was successful.
There had been much internal debate as how to report advertising cost. The vice president of finance argued that advertising costs should be reported as a cost of production, just like direct materials and direct labor. He therefore recommended that this cost be identified as manufacturing overhead and reported as part of inventory costs until sold. Others disagreed. Terrago believed that this cost should be reported as an expense of the current period, based on the conservatism principle. Others argued that it should be reported as Prepaid Advertising and reported as a current asset.
The president finally had to decide the issue. He argued that these costs should be reported as inventory. His arguments were practical ones. He noted that the company was experiencing financial difficulty and expensing this amount in the current period might jeopardize a planned bond offering. Also, by reporting the advertising costs as inventory rather than as prepaid advertising, less attention would be directed to it by the financial community.
Instructions
1. Who are the stakeholders in this situation?
2. What are the ethical issues involved in this situation?
3. What would you do if you were Wayne Terrago?

E6-4
Black Brothers Furniture Corporation incurred the following costs.
Instructions
Identify the costs above as variable, fixed, or mixed.
1. Wood used in the production of furniture.
2. Fuel used in delivery trucks.
3. Straight-line depreciation on factory building.
4. Screws used in the production of furniture.
5. Sales staff salaries.
6. Sales commissions.
7. Property taxes.
8. Insurance on buildings.
9. Hourly wages of furniture craftsmen.
10. Salaries of factory supervisors.
11. Utilities expense.
12. Telephone bill.

P6-2A
Utech Company bottles and distributes Livit, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2010, management estimates the following revenues and costs.
Net sales 1,800,000 Selling expenses-variable 70,000
Direct materials 430,000 Selling expenses-fixed 65,000
Direct labor 352,000 Administrative expenses-variable 20,000
Manufacturing overhead-variable 316,000 Administrative expenses-fixed 60,000
Manufacturing overhead-fixed 283,000
Instructions:
a) Prepare a CVP income statement for 2008 based on management's estimates.
b) Compute the break-even point in (1) units and (2) dollars.
c) Compute the contribution margin ratio and the margin of safety ratio.
d) Determine the sales dollars required to earn net income of $238,000.

BYP 6-3
The Coca-cola Company hardly needs an introduction. A line taken from the cover of a recent annual report says it all: if you measured time in servings of Coca-Cola, “a billion Coca-cola’s ago was yesterday morning.” On average, everyU.S.citizen dinks 363 8-ounce servings of Coca-cola products each year. Coca-Cola’s primary line of business is the making and selling of syrup to bottlers. These bottlers then sell the finished bottles and cans of Coca-Cola to the consumer. In the annual repot of Coca-Cola, the following information was provided.
THE COCA-COLA COMPANY
Management Discussion
Our gross margin declined to 61 percent this year from 62 percent in the prior yearr, primarily due to costs for materials such as sweeteners and packaging.
The increases [in selling expenses] in the last two years were primarily due to higher marketing expenditures in support of our Company’s volume growth.
We measure our sales volume in two ways: (1) gallon shipment of concentrates and syrups and (2) cases of finished product (bottles and cans of Code sold by bottlers).
Instructions
Answer the following questions.
a. Are sweeteners and packaging a variable cost or a fixed cost? What is the impact on the contribution margin of an increase in the per unit cost of sweeteners or packaging? What are the implications for profitability?
b. in your opinion, are marketing expenditures a fixed cost, variable cost, or mixed cost
c. Which of the two measures cited for measuring volume represents the activity index as defined in this chapter? Why might Coca-Cola use two different measures?
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