Question
Le Ching Company makes a household appliance with model number Z100. The goal for 2022 is to reduce direct materials usage per unit. No defective
Le Ching Company makes a household appliance with model number Z100. The goal for 2022 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of Z100 units that can be produced. The industry market size for appliances increased 10% from 2021 to 2022. The following additional data are available for 2021 and 2022:
2021 2022
Units of Z100 produced and sold 10,000 11,000
Selling price P100 P95
Direct materials (square feet) 30,000 29,000
Direct material costs per square foot P10 P11
Manufacturing capacity for Z100 (units) 12,500 12,000
Total conversion costs P250,000 P240,000
Conversion costs per unit of capacity P20 P20
1. What is operating income for 2021?
P450,000
P750,000
P700,000
P1,000,000
2. What is operating income for 2022?
P486,000
P476,000
P726,000
P1,045,000
3. Overall, was Le Ching's strategy successful in 2022?
No, because the selling price per unit decreased
Yes, because less direct materials were used
Yes, because operating income increased
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Question text
Li Ze Company produces a number of chemical products, two of which are Product X1 and Product X2. The controller and environmental manager have identified the following environmental activities and costs associated with the two products:
Product X1 | Product X2 | |
Pounds produced | 400,000 | 1,000,000 |
Packaging materials (pounds) | 120,000 | 60,000 |
Energy usage (kilowatt hours) | 40,000 | 20,000 |
Toxic releases (pounds into air) | 100,000 | 20,000 |
Pollution control (machine hours) | 16,000 | 4,000 |
Costs of activities: | ||
Using packaging materials | P360,000 | |
Using energy | 96,000 | |
Releasing toxins (fines) | 48,000 | |
Operating pollution control equipment | 112,000 |
1. What is the energy usage cost per unit of Product X2?
P0.032
P0.064
P0.160
P0.096
2. What is the fines cost per unit for toxic releases of Product X1?
P0.100
P0.008
P0.080
P0.040
3. What is the pollution control cost per unit of Product X2?
P0.0896
P0.2240
P0.0224
P0.0560
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Advanced Accounting
Authors: Debra C. Jeter, Paul K. Chaney
7th edition
1119373204, 9781119373254 , 978-1119373209
