Posted: April 7th, 2016

Before Starling’s fiscal year begins, determine the cost-minimizing (standard) quantities of magna45 and zelon per batch of zurtan.?

The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods:

Current assets as of December 31:
Cash $ 6,000
Accounts receivable $36,000
Inventory $9,800
Buildings and equipment, net $110,885
Accounts payable $32,550
Capital stock $100,000
Retained earnings $30,135

a. The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.)
b. Actual and budgeted sales data are as follows:

December (actual) $60,000
January $70,000
February $80,000
March $85,000
April $55,000

c. Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales.
d. Each month’s ending inventory should equal 20% of the following month’s budgeted cost of goods sold.
e. One-quarter of a month’s inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory.
f. Monthly expenses are as follows: commissions, $12,000; rent, $1,800; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter.
g. Equipment will be acquired for cash: $3,000 in January and $8,000 in February.
h. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Using the data above:
1. Complete the following schedule: Schedule of Expected Cash Collections
2. Complete the following:
Merchandise Purchases Budget
Schedule of Expected Cash Disbursements Merchandise Purchases
3. Complete the following schedule:
Schedule of Expected Cash Disbursements Selling and Administrative Expenses
4. Complete the following:
Cash budget:
5. Prepare an absorption costing income statement for the quarter ended March 31.
6. Prepare a balance sheet as of March 31.

Can you explain how you get each answer for the Schedule of Expected Cash Disbursements Merchandise Purchases, Schedule of Expected Cash Disbursements Selling and Administrative Expenses, and The Cash Budget?
20
Sep
Labor cost per hour
Categories: Business
Comments Off on Labor cost per hour

A computer manufacturer produces three types of devices: mobile phones, tablets, and computers. For the production of these three devices you have the following information:
Phone Tablet Computer
Material cost per unit £90 £140 £315
Direct labor hours per unit 2 2.5 4
Budgeted units 1,500,000 900,000 1,200,000

Labor cost per hour £8

Overhead costs per annum
Utilities £20,000,000
Rent £15,000,000
Audit and legal £5,000,000
Administrative staff £40,000,000
Total £80,000,000
ABC analysis suggested that overhead costs are distributed to the three products according to the table below:
Overheads Phone Tablet Computer
Utilities £8,000,000 £5,000,000 £7,000,000
Rent £8,250,000 £2,250,000 £4,500,000
Audit and legal £2,900,000 £1,250,000 £850,000
Administrative staff £23,200,000 £6,000,000 £10,800,000
For each of the three products, the company aims at a different percentage for profit. Under the full absorption costing method and the targeted profit percentage, the prices of the three products should be:
Phone Tablet Computer
Full costing price £170.69 £233.87 £435.67
1. Calculate the aimed profit percentages for the three products and under the full absorption costing method, with overhead costs absorbed on the basis of direct labour hours.
2. Use the profit percentages that you derived in (1) and calculate the prices of the three products under the ABC system.
3. Recommend a cost system and include any changes that you would suggest to the pricing strategy of the computer company.
20
Sep
Starling Coating produces weatherproofing
Categories: Business
Comments Off on Starling Coating produces weatherproofing

Starling Coating produces weatherproofing coatings that protect metal from oxidation. One of Starling’s patented coatings, zurtan, is composed of two inputs, magna45 and zelon. While both inputs are required, they can be substituted for each other. The following table describes how many P gallons of magna45 and zelon are required to produce a single batch of Zurtan.

Gallons of Magna45 and Zelon needed to make one batch of Zurtan
Magna 45 Zelon
1 30.00
2 15.00
3 10.00
4 7.50
5 6.00
6 5.00
7 4.30
8 3.75
9 3.33
10 3.00

In other words, one batch of zurtan can be produced using one gallon of magna45 and 30 gallons of zelon, or 2 gallons of magna45 and 15 gallons of zelon, or 3 gallons of magna45 and 10 gallons of zelon, and so forth. Starling has a long-term contract with a defense contractor to supply a fixed quantity of zurtan at a fixed price, neither of which can be altered. The price of zurtan is far above its manufacturing cost. Starling uses a standard cost system and at the beginning of the year establishes the standard quantities of the various raw materials used to manufacture its coatings.

Before Starling’s fiscal year begins, management estimates that magna45 will have a standard price of $4 per gallon and zelon will have a standard price of $5 per gallon.

The manager in charge of producing zurtan has decision-making authority to alter the mix of magna45 and zelon used to produce zurtan and is evaluated and rewarded based on two criteria: meeting delivery schedules of zurtan (including quantities and quality specifications) and materials quantity variances of magna45 and zelon.

Required:
a. Before Starling’s fiscal year begins, determine the cost-minimizing (standard) quantities of magna45 and zelon per batch of zurtan.
b. Soon after the fiscal year begins, the price of magna45 falls to $3 per gallon and the price of zelon rises to $7 per gallon. What are the efficient (cost-minimizing) quantities of magna45 and zelon that Starling should use to produce a batch of zurtan?
c. Starling has a policy of never changing standards during the year. Standard prices and standard quantities are changed only before the next fiscal year begins. What quantities of magna45 and zelon will the zurtan production manager choose after the price of magna45 falls to $3 per gallon and zelon rises to $7 per gallon?
d. Why doesn’t Starling its policy of never changing standards after the fiscal year begins?
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