Question
1. Below are the processing costs of Darnell Products observed over the last 10 months: Month Units Produced Processing Cost 1 7,500 $44,000 2 11,000
1. Below are the processing costs of Darnell Products observed over the last 10 months:
Month | Units Produced | Processing Cost |
1 | 7,500 | $44,000 |
2 | 11,000 | 60,000 |
3 | 14,500 | 59,870 |
4 | 5,500 | 20,000 |
5 | 9,000 | 47,000 |
6 | 8,500 | 52,000 |
7 | 3,500 | 25,000 |
8 | 7,000 | 41,000 |
9 | 11,500 | 52,000 |
10 | 6,000 | 41,000 |
a. Use the high low method to determine the variable cost per unit and fixed cost per month. Express your results in the form of a linear equation y = a + bx.
b.Predict the total processing cost if 16,000 units are produced.
2.The Mandeep Corporation uses a standard costing system in the creation of awards and trophies. The Manufacturing overhead costs are applied to products based on machine time.
Unfortunately, due to accounting glitches in the software, several numbers and labels have been omitted from the analysis of fixed overhead below. Supplying the missing 5 items will help to answer the questions:
Actual Fixed Overhead Cost | Flexible Budget Overhead Cost | Fixed Overhead Cost Applied to Work in Process |
(a) | (b) | 305,000 MH x $1.12 = (c) |
Budget variance, $1,330 F | (d) (e) | |
Total variance, $5,600 F |
a. Assume that 6 minutes of machine time is standard per unit of production. How many units were produced in the situation above?
b. Assume that 6 minutes of machine time is standard per unit of production. How many units of production were assumed when the predetermined application rate for fixed overhead was established?
3. You have just learned that you are a beneficiary in the will of your late Aunt Susan. The executrix of her estate has given you three options as to how you may receive your inheritance:
a. You may receive $50,000 immediately.
b. You may receive $80,000 at the end of six years.
c. You may receive $12,000 at the end of each year for six years (a total of $72,000).
If you can invest money at a 12% return, which option would you prefer?
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