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4 . What was the Pen Division s operating income for 2 0 2 3 ? Use normal costing and adjust for mis - applied

4. What was the Pen Divisions operating income for 2023? Use normal costing and adjust for mis-applied MOH.
5. Use the 2023 actual monthly MOH information (see table C) to calculate annual estimates of cost behavior (fixed and variable components) for each MOH activity.
a. Use the High-Low method to separate variable and fixed costs. For this exercise use @VLOOKUP, @MAX, and @MIN excel functions.
b. Use the Regression function found under Data: Data Analysis in Excel. Place output on a separate sheet. Estimates from these regression results will be used for the 2024 budget.
A. Budget information assembled at the start of 2023
Basic Pen Customized Pen
Budgeted production 2,500,0001,000,000
Number of pens per batch 4,0002,000
Setup labor-hours per batch 4 hours 10 hours
Budgeted machine hours 10,000 hrs 8,000 hrs
Budgeted direct manufacturing labor 50,000 hrs 30,000 hrs
Budgeted plastic per pen casing 1/16 pound 1/8 pound
Budgeted cartridges per pen 11
Budgeted Manufacturing Operations Overhead Costs
Variable costs
Supplies $10,000
Indirect manuf. Labor 25,000
Power 30,000
Maintenance 20,000 $85,000
Fixed costs
Depreciation 150,000
Supervision 140,000
Power 65,000
Maintenance 100,000 $455,000
Budgeted Setup Overhead Costs
Variable costs
Inspection costs $80,000
Supplies 60,000
Indirect manuf. Labor 90,000
Power 30,000 $260,000
Fixed costs
Depreciation 95,000
Supervision 125,000
Power 85,000
Engineering costs 200,000 $
505,000
B. Actual information for 2023 that can be traced directly to each product:
Basic Pen Customized Pen
Direct material used (plastic & cartridge) $1,920,000 $1,300,000
Pen casings per pound of plastic 16 Casings 8 Casings
Plastic cost * $8 per pound
Plastic in inventory (12/31/2023)*15,000 pounds
Ink cartridge cost * $0.30 per unit
Ink cartridges in inventory (12/31/2023)*180,000 cartridges
Direct labor cost $720,000 $540,000
Direct labor hours 48,000 hours 30,000 hours
Machine hours used in total 9,600 hours 8,000 hours
Number of inspection hours in total 1,000 hours 2,000 hours
Pens per batch 4,0002,000
Number of batches 600500
Number of engineering changes 010
Setup labor hours 2,4005,000
Total sales commissions $176,000 $160,000
Units produced 2,400,0001,000,000
Units sold 2,200,0001,000,000
Pens in inventory (01/01/2023)200,000@$1.25 each 0
Sales revenue $3,850,000 $3,200,000
* The same plastic stock and ink cartridges are used for the Basic and Custom pens
C. Additionally, the pen division had the following actual costs in 2023 that were not directly traced to either product:
Actual Manufacturing Overhead Costs -2023
Month Machine-Hours Manufacturing Operations Overhead Cost Setup-Hours Setup Overhead Cost Direct Labor- Hours
Jan 900 $41,313401 $56,0005,340
Feb 1,100 $44,681426 $60,4524,440
Mar 952 $45,962500 $58,2613,460
Apr 1,752 $47,851499 $54,4446,180
May 1,436 $49,621567 $64,6464,260
Jun 1,569 $46,395600 $68,55511,240
Jul 1,648 $50,961686 $72,5227,420
Aug 2,052 $51,388702 $71,45610,542
Sep 1,896 $51,382925 $72,6548,880
Oct 1,530 $46,351862 $74,6618,283
Nov 1,348 $47,513605 $64,5004,750
Dec 1,417 $42,691627 $61,8883,205
Total 17,600 $566,1097,400 $780,03978,000
Actual Annual Period Costs 2023
Advertising expense $250,000
Sales department salaries $350,000
Selling and administration depreciation $50,000
D. Based on the information you have gathered you also make the following assumptions:
Because of past financial trouble in the division, all expenses must be paid in cash. No sales are made on account (all sales are cash sales).
Information for the 2024 budget is as follows:
o The budgeted unit input quantities for materials, labor and MOH (machine hours and setup labor hours) used in 2023 will also be used in the 2024 budget.
o The cost of plastic is expected to increase by 8% in 2024 over 2023 actual costs. The cost of cartridges is expected to increase by 6% in 2024 over 2023 actual costs.
o Budgeted labor rates in 2024 are expected to increase by 7% over 2023 actual rates for Basic pens and 12% over 2023 actual rates for Customized pens.
o Calculate 2024 budgeted variable moh rates and total fixed moh from 2023 actual monthly cost and activity data (Table C). Use Regression Analysis to determine estimates for variable and monthly fixed costs. Convert monthly estimates of fixed costs into annual costs (i.e., monthly estimate times 12).
o Assume non-cash (e.g., depreciation) MOH item amounts remain unchanged from budgeted 2023 data.
o Production and sales forecasts are within the relevant range.
o Budgeted variable period costs per unit and fixed costs in tota

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