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13 Jan 2019

A finance manager has to select one of the four different suppliers of raw materials. The total cost functions under the four options are given below. Assume the quality of the raw material to be the same, which of the following is preferred by the finance manager?

a. y = 200 + 5.50x

b. y = 200 + 6.50x

c. y = 200 + 4x +2xâ

d. y = 200 + 5x

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14 Jan 2019

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Gourmet Specialty Coffee Company (GSCC) is a distributor andprocessor of different blends of coffee. The company buys coffeebeans from around the world and roasts, blends, and packages themfor resale. GSCC currently has 12 different coffees that it offersto gourmet shops in one-pound bags. The major cost is rawmaterials; however, there is a substantial amount of manufacturingoverhead in the predominantly automated roasting and packingprocess. The company uses relatively little direct labor. Some ofthe coffees are very popular and sell in large volumes, while a fewof the newer blends have very low volumes. GSCC prices its coffeeat full product cost, including allocated overhead, plus a markupof 30 percent. If prices for certain coffees are significantlyhigher than market, adjustments are made. The company competesprimarily on the quality of its products, but customers areprice-conscious as well. Data for the 20x5 budget includemanufacturing overhead of $12,000,000, which has been allocated onthe basis of each productï¿½s direct-labor cost. The budgeteddirect-labor cost for 20x5 totals $1,200,000. Based on the salesbudget and raw-material budget, purchases and use of raw materials(mostly coffee beans) will total $5,800,000.

The expected prime costs for one-poundbags of two of the companyï¿½s products are as follows:

Jamaican/Colombian

Direct material.........................................................................................................$2.90/ $3.90

Direct labor..............................................................................................................40/ .40

GSCCï¿½s controller believes thetraditional product-costing system may be providing misleading

cost information. She has developed ananalysis of the 20x5 budgeted manufacturing-overhead costs

shown in the following chart.

Activity /Cost Driver/Budgeted Activity /Budgeted Cost

Purchasing ........................Purchase orders ................ 2,316 ................... $2,316,000

Material handling ...............Setups .............................. 3,600 ...................2,880,000

Quality control ...................Batches ............................. 1,440 ...................576,000

Roasting ............................Roasting hours .................. 192,200 ...................3,844,000

Blending ............................Blending hours .................. 67,200 ...................1,344,000

Packaging .........................Packaging hours ................ 52,000 ...................1,040,000

Total manufacturing-overhead cost...............................................................................................$12,000,000

Data regarding the 20x5 production ofJamaican and Colombian coffee are shown in the following

table. There will be no raw-materialinventory for either of these coffees at the beginning of the

year.

Jamaican/Colombian

Budgeted sales...............................................................................2,000 lb. 100,000 lb.

Batch size......................................................................................500 lb. 20,000 lb.

Setups...........................................................................................3 per batch 3 per batch

Purchase order size........................................................................500 lb. 50,000 lb.

Roasting time.................................................................................1 hr. per 200 lb. 1 hr. per 200 lb.

Blending time..................................................................................5 hr. per 200 lb. .5 hr. per 200 lb.

Packaging time................................................................................1 hr. per 200 lb. .1 hr. per 200 lb.

Required:

1. Using GSCCï¿½s currentproduct-costing system:

a. Determine the companyï¿½spredetermined overhead rate using direct-labor cost as thesingle

cost driver.

b. Determine the full productcosts and selling prices of one pound of Jamaican coffee andone

pound of Colombian coffee.

2. Develop a new product cost,using an activity-based costing approach, for one pound ofJamaican

coffee and one pound of Colombiancoffee.

3. What are the implications ofthe activity-based costing system with respect to:

a. The use of direct labor as abasis for applying overhead to products?

b. The use of the existingproduct-costing system as the basis for pricing?

maroonmammoth467

Foster Company has determined a raw materials cost of $0.10 perpound; their loaded labor rate is $15 per hour. The Controller forFoster Company has established the following overhead cost poolsand cost drivers:

Overhead Cost Pool	Budgeted Overhead Cost	Cost Driver
Machine setups	$150,000	Number of setups
Material handling	52,500	Pounds of raw material
Quality control inspection	37,500	Number of inspections
Other overhead costs	90,000	Machine hours
Total	$330,000

Overhead Cost Pool	Budgeted Level for Cost Driver	Compute ABC Overhead Rate
Machine setups	100 setups
Material handling	50,000 pounds
Quality control	1,000 inspections
Other overhead	15,000 machine hours
Order no. 610 has been received for 1,000 units of product. Ithas the following production requirements:
Direct Labor	20 hours
Machine setups	5 setups
Raw material	10,000 pounds
Inspections	12 inspections
Machine hours	600 machine hours

Required:

A. Compute the activity-based costing (ABC) rates for each ofthe four cost drivers; write answers in the table above. (4points)

B. Compute the total overhead that should be assigned to orderno. 610 by using activity-based costing. (4 points)

C. Suppose that Foster were to use a single, predeterminedoverhead rate based on machine hours. Compute the rate per hour andthe total overhead assigned to order no. 610. (4 points)

D. Compute the total product cost of one unitfor order no. 610, using activity-based costing rates. (4points

ivoryzebra335

Winter Manufacturing has four categories of overhead: Maintenance Â£275,000; Materials handling 125,000; Setups 30,000 and Inspection 105,000. The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent. Estimates for the proposed job are as follows: Direct materials Â£15,000; Direct labour (8,000 hours) Â£12,000; Number of material moves 100; Number of inspections 120; Number of setups 24; Number of machine hours 4,000. The plant manager has heard of a new way of applying overhead that uses cost pools and activity cost drivers. Expected activity for the four activity drivers that would be used are: Machine hours 60,000; Material moves 20,000; Setups 3,000; Quality inspections 12,000 and Direct labor hours 50,000. If Winter Manufacturing uses Machine hours as its only activity driver, the total cost of the proposed job is

Select one:

a. Â£62,667

b. Â£63,445

c. Â£31,221

d. Cannot be determined.

e. Â£34,900

This solution was posted over an hour ago and I think it will be irrelevant to me if it arrives later. So Sad.