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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
What was the Pen Divisions operating income for Use normal costing and adjust for misapplied MOH.
Use the 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 HighLow 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 budget.
A Budget information assembled at the start of
Basic Pen Customized Pen
Budgeted production
Number of pens per batch
Setup laborhours per batch hours hours
Budgeted machine hours hrs hrs
Budgeted direct manufacturing labor hrs hrs
Budgeted plastic per pen casing pound pound
Budgeted cartridges per pen
Budgeted Manufacturing Operations Overhead Costs
Variable costs
Supplies $
Indirect manuf. Labor
Power
Maintenance $
Fixed costs
Depreciation
Supervision
Power
Maintenance $
Budgeted Setup Overhead Costs
Variable costs
Inspection costs $
Supplies
Indirect manuf. Labor
Power $
Fixed costs
Depreciation
Supervision
Power
Engineering costs $
B Actual information for that can be traced directly to each product:
Basic Pen Customized Pen
Direct material used plastic & cartridge $ $
Pen casings per pound of plastic Casings Casings
Plastic cost $ per pound
Plastic in inventory pounds
Ink cartridge cost $ per unit
Ink cartridges in inventory cartridges
Direct labor cost $ $
Direct labor hours hours hours
Machine hours used in total hours hours
Number of inspection hours in total hours hours
Pens per batch
Number of batches
Number of engineering changes
Setup labor hours
Total sales commissions $ $
Units produced
Units sold
Pens in inventory @$ each
Sales revenue $ $
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 that were not directly traced to either product:
Actual Manufacturing Overhead Costs
Month MachineHours Manufacturing Operations Overhead Cost SetupHours Setup Overhead Cost Direct Labor Hours
Jan $ $
Feb $ $
Mar $ $
Apr $ $
May $ $
Jun $ $
Jul $ $
Aug $ $
Sep $ $
Oct $ $
Nov $ $
Dec $ $
Total $ $
Actual Annual Period Costs
Advertising expense $
Sales department salaries $
Selling and administration depreciation $
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 budget is as follows:
o The budgeted unit input quantities for materials, labor and MOH machine hours and setup labor hours used in will also be used in the budget.
o The cost of plastic is expected to increase by in over actual costs. The cost of cartridges is expected to increase by in over actual costs.
o Budgeted labor rates in are expected to increase by over actual rates for Basic pens and over actual rates for Customized pens.
o Calculate budgeted variable moh rates and total fixed moh from 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 ie monthly estimate times
o Assume noncash eg depreciation MOH item amounts remain unchanged from budgeted 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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