Scot Company plans to sell 400 000 units of finished product in July of 20x4. Management
anticipates a growth rate in sales of 5 per cent per month. The desired monthly ending
inventory in units of finished product is 80 per cent of the next month's .estimated sales.
There are 300 000 finished units in the inventory on 30 June 20x4. Each unit of finished
product requires 4 kg of direct material at a cost of R1 ,50 per kg. There are 1 600 000 kg
of direct material in the inventory on 30 June 20x4.
Required:
2.1 Calculate Scot Company's production requirement in units of finished product for
the three-month period ending 30 September 20x4. (7)
2.2. Independent of your answer to Requirement 2.1, assume the company plans to
produce 1 200 000 units of finished product in the three-month period ending 30
September 20x4. The firm will have direct materials inventory at the end of the
three-month period equal to 25 per cent of the direct material used during that
period. Calculate the estimated cost of direct materials purchases for the three month
period ending 30 September 20x4. (4)
Scot Company plans to sell 400 000 units of finished product in July of 20x4. Management
anticipates a growth rate in sales of 5 per cent per month. The desired monthly ending
inventory in units of finished product is 80 per cent of the next month's .estimated sales.
There are 300 000 finished units in the inventory on 30 June 20x4. Each unit of finished
product requires 4 kg of direct material at a cost of R1 ,50 per kg. There are 1 600 000 kg
of direct material in the inventory on 30 June 20x4.
Required:
2.1 Calculate Scot Company's production requirement in units of finished product for
the three-month period ending 30 September 20x4. (7)
2.2. Independent of your answer to Requirement 2.1, assume the company plans to
produce 1 200 000 units of finished product in the three-month period ending 30
September 20x4. The firm will have direct materials inventory at the end of the
three-month period equal to 25 per cent of the direct material used during that
period. Calculate the estimated cost of direct materials purchases for the three month
period ending 30 September 20x4. (4)
Related questions
| Outback, Ltd., manufactures tactical LED flashlights in Melbourne, Australia. The firm uses an absorption-costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding planned and actual operations for 20x4 follow: |
|
| Budgeted Costs | ||||||||
|
| |||||||||
| Per Unit | Total | Actual Costs | |||||||
| Direct material | $ | 12.20 | $ | 1,634,800 | $ | 1,512,800 | |||
| Direct labor | 9.30 | 1,246,200 | 1,153,200 | ||||||
| Variable manufacturing overhead | 4.30 | 576,200 | 533,200 | ||||||
| Fixed manufacturing overhead | 4.50 | 603,000 | 613,000 | ||||||
| Variable selling expenses | 7.50 | 1,005,000 | 877,500 | ||||||
| Fixed selling expenses | 7.80 | 1,045,200 | 1,045,200 | ||||||
| Variable administrative expenses | 2.80 | 375,200 | 327,600 | ||||||
| Fixed administrative expenses | 2.80 | 375,200 | 384,200 | ||||||
|
| |||||||||
| Total | $ | 51.20 | $ | 6,860,800 | $ | 6,446,700 | |||
|
| |||||||||
| Planned Activity | Actual Activity | |||
| Sales in units | 134,000 | 117,000 | ||
| Production in units | 134,000 | 124,000 | ||
| Beginning finished-goods inventory in units | 43,000 | 43,000 | ||
| The budgeted per-unit cost figures were based on the company producing and selling 134,000 units in 20x4. Outback uses a predetermined overhead rate for applying manufacturing overhead to its product. A total manufacturing overhead rate of $8.80 per unit was employed for absorption costing purposes in 20x4. Any overapplied or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the year. The 20x4 beginning finished-goods inventory for absorption costing purposes was valued at the 20x3 budgeted unit manufacturing cost, which was the same as the 20x4 budgeted unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for 20x4 was $72.00 per unit. |
| Required: |
| 1. | Compute the value of Outbackâs 20x4 ending finished-goods inventory under absorption costing. (Do not round intermediate calculations.) |
| 2. | Compute the value of Outbackâs 20x4 ending finished-goods inventory under variable costing. (Do not round intermediate calculations.) |
| 3. | Compute the difference between Outbackâs 20x4 reported operating income calculated under absorption costing and calculated under variable costing. (Do not round intermediate calculations.) |
PLEASE SHOW WORK
On January 1, 2014, the Hardin Company budget committee hasreached agreement on the following data for the 6 months endingJune 30, 2014.
| Sales units: | First quarter 5,000; second quarter 6,000; third quarter7,000 | |
| Ending raw materials inventory: | 40% of the next quarterâs production requirements | |
| Ending finished goods inventory: | 25% of the next quarterâs expected sales units | |
| Third-quarter production: | 7,200 units |
The ending raw materials and finished goods inventories at December31, 2013, follow the same percentage relationships to productionand sales that occur in 2014. 3 pounds of raw materials arerequired to make each unit of finished goods. Raw materialspurchased are expected to cost $4 per pound.
1quarter 2quarter
Expected Unit Sales: ___________________________________________
Add Desired Ending Finished GoodsUnit:____________________ _______________________
Total Required Units: ___________________________________________
Less Begining Finished Goods Unit: ___________________________________________
Required Production Units: ___________________________________________
Prepare a direct materials budget by quarters for the 6-monthperiod ended June 30, 2014.
Units to be Produced: ___________________________________________
Direct Materials per unit: ___________________________________________
Total Pounds Needed for Production: ___________________________________________
Add: Desired Ending Direct Materials____________________ _______________________
Total Materials Required: ___________________________________________
Less Beginning Direct Materials: ___________________________________________
Direct Materials Purchases: ___________________________________________
Cost Per Pound: ___________________________________________
Total Cost of Direct Materials Purchases:____________________ _______________________
