CASE 1. SHANG YIN COMPANY Shang Yin Company is a manufacturer of top-of-the-line fabric made of Hymenoptera silk. The company was established in the middle of 2015 and begun its operations on January 3, 2016. In its first three years of operation, the company presented the following income statements: Information relevant to the company's operations during the past three years are described below: a. Shang Yin sells its fabric to different customers in bundles. Each bundle is sold by the company for 250 . b. Bundles produced and sold by the company during the three-year period are given below: Produced Sold c. Factory overhead is applied by the entity at 35 per bundle based on a 50,000 bundle capacity. This 50,000-bundle capacity is considered by the entity as its normal capacity; while the 35 is a mixed rate for variable and fixed overhead. d. Actual fixed costs incurred coincide with the fixed costs budgeted by the company. The under- (over-) applied overhead represents the amount of difference between the applied cost of fixed overhead in the company's books and the actual fixed overhead cost incurred. e. There are no beginning and ending work-in-process at any given year. All goods placed into process are finished by the end of the year. f. Relevant range of production activity is from 40,000 to 60,000 bundles per annum. Shang Yin is currently making its plans for 2019. It estimates that in 2019, demand for the fabric will again rise by 5,000 bundles. However, the company wishes to cut back its production and only produce enough bundles to cover the expected demand. Cost structure and actual fixed costs are expected to remain constant, and no additional purchase of property and equipment is expected to be made on the following year. REQUIRED : 1. Using the method of least squares, determine the actual variable and fixed component of the following costs: (10 pts.) a. Factory overhead; and b. Marketing and Administrative Expenses 2. Estimate the (a) total expected actual cost of production and (b) total marketing and administrative expense for 2019, assuming that the conditions provided in the last paragraph of the case pushes through. (10 pts.) CASE 1. SHANG YIN COMPANY Shang Yin Company is a manufacturer of top-of-the-line fabric made of Hymenoptera silk. The company was established in the middle of 2015 and begun its operations on January 3, 2016. In its first three years of operation, the company presented the following income statements: Information relevant to the company's operations during the past three years are described below: a. Shang Yin sells its fabric to different customers in bundles. Each bundle is sold by the company for 250 . b. Bundles produced and sold by the company during the three-year period are given below: Produced Sold c. Factory overhead is applied by the entity at 35 per bundle based on a 50,000 bundle capacity. This 50,000-bundle capacity is considered by the entity as its normal capacity; while the 35 is a mixed rate for variable and fixed overhead. d. Actual fixed costs incurred coincide with the fixed costs budgeted by the company. The under- (over-) applied overhead represents the amount of difference between the applied cost of fixed overhead in the company's books and the actual fixed overhead cost incurred. e. There are no beginning and ending work-in-process at any given year. All goods placed into process are finished by the end of the year. f. Relevant range of production activity is from 40,000 to 60,000 bundles per annum. Shang Yin is currently making its plans for 2019. It estimates that in 2019, demand for the fabric will again rise by 5,000 bundles. However, the company wishes to cut back its production and only produce enough bundles to cover the expected demand. Cost structure and actual fixed costs are expected to remain constant, and no additional purchase of property and equipment is expected to be made on the following year. REQUIRED : 1. Using the method of least squares, determine the actual variable and fixed component of the following costs: (10 pts.) a. Factory overhead; and b. Marketing and Administrative Expenses 2. Estimate the (a) total expected actual cost of production and (b) total marketing and administrative expense for 2019, assuming that the conditions provided in the last paragraph of the case pushes through. (10 pts.)