Apple Hilly Farma Production cost Report a. Compute total Apple Plo units to be accounted for Flow of production unite: Units to be accounted for: Beginning WIP inventory Unitg started in september Total units to be socounted for Units to be accounted tor Tota) transferred out Unles in Ending WiR inventory Total unite to oe apeounted for Phyeical unite \begin{tabular}{|l|} \hline \\ \hline \\ \hline \end{tabular} Equivalent Unite Matorials Converaion D. Computo total Applo Ple cooto to de accounted tor rotalconts Materials Converalon. Costr to be accounted pot costs in beginning Wi P invertion current pertod costs Total conte to be a seountes tor Costs per equvatent unit Matertas Conversion Coste acoounted tor Coste assigned to units transterned out Materials Conversion Total cosis of units transferted out Costs assigned to ending WIP Inventory: Materia is Conversion Totai costs of ending Wio inventory Total costs to be accounted for The variable costs associated with these inventories were as follows: And the conversion cost for the in-process pies is 50% completed and 100% for direct materials. (Use the paragraph above to calculate the units completed and transferred out for work-in-process pies) September was a success for the bakery: They didn't complete the special order but focused on normal sales and with some oivertime baked a few more pies. Here were the results for the actual sales and costs at the end of the month. (The actuals as presented below are only to be used for Problem 6.) 2 Fill Ilnit cnot nno...nit 3. 4. 5. Prime Cost ner IInit Apple Hilly Farms a. Total profit for the month of September b. Compute the welghted average contribution margin per unit Weights: Apple Ple8 Total 89108 Percentage (units) (unitg) Welght Weighted-average contribution margin per unit c. Compute breakeven: Apple Hilly Farms Budget Analyale a. Prepare Master Budget for september b. Caiculate variance Analyale Detween Actual vB. Flexible eudget ve. Master Budge 8. Applied overhead on the basis of 175% of direct labor costs, for this entry you will need to compute the amounts to be debited and credited. h. Paid for utilities, power, equipment maintenance, and other miscellaneous items for the bakerv totalling $36,800 i. Recognized depreciation of $15,150 on the bakery property, plant and equipment. 1. Book the over/under for manufacturing overhead to coGs. For this entry you will need to compute the amounts to be debited and credited. Problems 1. For Apple Pies only, compute the variable manufacturing costs per unit, full unit cost per unit, variable cost per unit, full absorption cost per unit, prime cost per unit, conversion cost per unit, profit margin per unit, contribution margin per unit, and gross margin per unit. 2. Calculate the total profit expected for September, compute the weighted average contribution margin, and compute the breakeven in units. 3. Calculate the labor hours needed for the special order, calculate the incremental profit/(loss) for the special order, calculate the capacity available for regular orders, compute the contribution margin per hour for regular orders, compute the contribution margin lost from regular sales orders, calculate the total contribution margin including the special order. 4. Prepare the journal entries as given on the excel workbook. 5. Using the Weighted-Average method create the Production Cost Report for Apple Pies only, to include computing the total Apple Pies to be accounted for, computing the total Apple Pie costs to be accounted for, and calculating any necessary adjustments. 6. Create a Budget Analysis Report for the month of September, to include creating a Master Budget, and calculating the variance analyses between Actuals versus the Flexible Budget and versus the Master Budget. Note those variances as either being Favorable (F) or Unfavorable (U). Analysis for Problems 1-6 \begin{tabular}{|l|c|c|} \hline 2 \\ 2 & \\ \hline \end{tabular} 3 4 5 E 1. What costs are excluded from the Gross Margin calculation? Why would we exclude these costs? 2. What does the mix of the weighted-average contribution margin tell us about the impact to profits of each product? 3. Should Apple Hilly Farms complete the Special Order? Explain your answer by using pricing terms from the textbook. 4. Was manufacturing overhead under or over applied? What does over or under applied overhead mean? 5. Why would Apple Hilly Farms use standard costing since actual costing gives the actual cost? Why would they not want to wait until the actual costs are known? 6. Explain the variances calculated for Apple Hilly Farms. Why was September a good or bad month for them? Apple Hilly Farms Journal Entries a. Purchased $45,360 of materials on account. b. Issued $4,300 of supplies in materials inventory into production department. c. Paid for materials purchased in (a) d. Issued $37,6250 in direct materials to the production department. e. Incurred total wage costs of $67,500 of which $11,200 was withheld for payroll taxes, to be paid next month. 1. Analyzed the Payroll Expense account and determined that 60% represented direct labor, 30% indirect labor, and 10% adminstrative and marketiog costs, For this entry you will need to comoute the amounts to be debited. a. Labor hours required for apeclal order b. Incremental pront/(los) on epeclat order If labor houre for the additional 8,000 unite combined, then regular production will nead to be reduced for the product with the lowest contribution marain c. Compute contribution margin per hour for reguiar ordere d. Compute contribution margin lost from regular ala 8 e. Total contribution margin with special order Regular production contribution margin Difference in pront with speciat order Ned Hilly ws an investment banker and worked in San Francisco at a large bank. As retirement got closer his wife, Sally, and he decided to spend their retirement up in the Sierra Nevada foothills by buying an apple farm in Apple Hill. All their kids were grown and their youngest daughter, Nikki, was finishing an accounting degree at Sac State, whom they were hoping would help them out with the books once she was done. A few years go by and the farm life is bustling. They had a U-Pick your own apples at the farm which cut down costs of running the farm, though they ended up with more apples than they could sell that first year. The second year, Sally came up with the idea of opening a bakery on the farm. She was an excellent baker; she makes the best apple pie west of the Mississippi, at least her family thought so. The bakery was a success that year, more so than expected. Sally made homemade apple pies and caramel apples with her special caramel sauce. In the following year, they expanded bakery operations to include more staff and extra space for baking. Ned wasn't too sure if the expansion was going to be profitable, he had an idea of the costs involved with apple pie and caramel apple production, but he couldn't pinpoint the details. Since Apple Hill is a seasonal business, he wanted to know how well his business did in the peak season to ensure that it made enough to cover the costs in the off-season. Luckily, Nikki just graduated in May, and she would be able to work with Ned to work out the details and come up with some possible advice and solutions to his questions. 7. Profit Marain ner IInit Nikki started by talking with ber parents about some of the estimated sales and costs that they thought would incur for the month of September. Here are some of those estimates: Additionally, Sally informed ber that the farm received a special order to sell their apple pies and caramel apples at the local county fair in September. Sally wanted to sell 3.500 ples and 4,500 caramel apples for a discounted price of $20.00 and $7.50, respectively. With, the number of staff and the size of the bakery, Nikd determined that the madimum capacity for the bakery is 4.200 labor hours a month. At the curnent projected sale amounts she expects that they Il need 3.550 bours to meet their regular sales volume. After review of the salarles of all the staff, Nikd determined that the arerage hourly wage vas $16.00. Ned was also concemed about how mach it cost to keep apple pie inventory on hand at the end of the month, carnmel apples should be sold within a couple das, so no inveatory is left at the end of the month. Since there is a limited shelf life for the apple ples, Ned and Sally try and keep the ending inventories in liae with nest month's pies Nectations, They estimated that they diane to sturt 10,000 apple pies in order to have 1,000 apple ples in-process at the end of the month and 500 finished ples. At the end of
