Final Project

Due: December 5, 2014

Objectives:

1. Apply accounting manufacturing concepts to an actual product to solidify the learning process.

2. Learn how all the numbers fit together.

3. Develop decision making analysis techniques.

Manufacturing Questions Instructions:

This project should stand by itself. Include the questions with your submission--not just the answers. Identify all numbers. Points will be deducted if I can't understand what you are answering.

You may use Excel to complete tables and/or answer questions. Just make sure you label your work and turn the Excel file in.

You may discuss this project with classmates. A discussion board will be set up for this project. Try to get help from classmates first. Your professor will only provide limited individual help.

Your information:

Your company produces a basic potato chip. There are three main processes used in the chips. The first process washes and peels the potatoes. The second process slices and fries the potatoes. The third process seasons and packages the chips. The potato chips are sold in 12 oz bags (1 bag is a unit)

Information on the direct materials is listed in table 1. Consider this information the standard.

Direct labor information given in Table 2. Consider this information the standard.

Annual overhead information is given in Table 3. Overhead is allocated based direct labor hours. Estimated annual direct labor hours are 12,500. Calculate a predetermined OH rate (round to two decimal places if needed). Use this rate when you need to apply OH.

Table 4 gives you the information for the last two months on the overhead cost. Use this information to determine the fixed and variable portions of the cost. (You will need this information to complete Table 5). Machine hours have been determined as the best cost driver for separating mixed cost into their fixed and variable portions. It takes approximately 12 minutes of total machine time for each bag of chips (or 1/5 a machine hour per bag of chips).

Table 5 is where you will list all your production cost, separated into their fixed and variable components.

Cost-Volume-Profit (CVP) Relationships

a.Selling Price: You sell a bag of chips for $4.00

b.Breakeven point: Calculate the breakeven point. Be sure to include the fixed component of mixed cost in your fixed costs and the variable component in the variable cost. Show your breakeven in Sales units and in Sales Dollars

c.Profit Planning: Determine the number of units you must sell to make an annual pre-tax profit using 3 assumptions concerning your net income (profit), both in sales units and sales dollars.

i.Aggressive Profit ($100,000)

ii.Conservative Profit ($25,000)

iii.Average Profit ($60,430)

Budgeting:

a.Create a sales budget using the information for earning an average profit for the year. You will break the budget down into the four quarters for the year. (Sales tend to be consistent each quarter, you can only sale a whole unit so round-up if necessary) Use table 6 to complete the sales budget.

b.Create a production budget for each quarter of the year (keep it in quarters; you do not need to break it down by month). You desire to keep 10% of next quarter