Grip 6 is an emerging company that manufactures and sells belts. Gary is the only employee of Grip 6, and his sole role is to make the belts. The belts include two parts: the belt buckle and the belt strap. To make a belt, the buckle is machined from metal, and then the belt strap is cut to length out of webbing. A completed belt is packaged in single-belt box (i.e. the Packaging Boxes are part of the manufacturing costs).

The belts are made in a warehouse that includes the necessary equipment to machine the belt buckles and cut the belt strap for $15,500 per year. That rent includes the utilities and use of the equipment. The warehouse will also store any materials for no additional charge.

Ghary did one production run in 2015. The Ending Balance of inventory at the end of the run was as follows:

In 2016, Ghary worked diligently to produce 3,050 additional belts and sold 2,500 belts. The revenue from the sales was $87,500. During 2016, Grip 6 incurred the following expenses:

1a. At the end of the year, Grip 6 realized that they had used more of the webbing than they had initially estimated. It turned out that the ending balance of the webbing was only $600 ($200 less than they had estimated). Assuming all else equal, how would this discovered error in the ending balance of webbing change the Cost of Goods Sold?

a: Increase COGS

b: Decrease COGS

cHave no affect.

d: I have no idea.

1b. Ghary is considering hiring a production manager while he, Ghary, becomes a residual claimant and does not draw a salary. The production manager has agreed to take on the job for a fixed salary of $45,000 a year plus a bonus if cost of goods manufactured per unit decreases by $1.00 compared with the cost of goods manufactured per unit in 2016. Assuming the cost per oz of metal, the cost per foot of webbing, the cost per box, and the rent remain the same, will the new production manager earn a bonus if she produces 3,050 belts?

Yes

No

1c.

Ghary is considering hiring a production manager while he, Ghary, becomes a residual claimant and does not draw a salary. The production manager has agreed to take on the job for a fixed salary of $45,000 a year plus a bonus if cost of goods manufactured per unit decreases by $1.00 compared with the cost of goods manufactured per unit in 2016. Assuming the cost per oz of metal, the cost per foot of webbing, the cost per box, and the rent remain the same, will the new production manager earn a bonus if she produces 3,250 belts?

Yes

No

Item Ending Amount Ending Balance ($) Metal 200 oz. $50 Webbing 400 ft $800 Packaging Boxes 500 $250 Belts in Process 150 $2,250 Finished Belts (in boxes) 50 $1,250 Item Expense ($) Wages to Ghary for Production $45,000 Rent for the Warehouse $15,500 Metal $7,775 Webbing $12,200 Packaging Boxes $1,375 Other General and Administrative Expenses $2500 Delivery Expenses (Shipping) $1000 Advertising Expenses $1000 The ending balance at the end of 2016 was as follows: Item Ending Amount Ending Balance ($) Metal 800 oz. $200 Webbing 400 ft $800 Packaging 200 $100 Belts in Process 150 $3,750 Finished Belts (in boxes) 600 $15,678 Please answer the following questions ignoring taxes and assuming that Grip 6 uses Full Absorption costing unless specified otherwise