Management Accounting

PROBLEM 2-18 Schedule of Cost of Goods Manufactured; Income Statement; Cost Behavior (L02, LO3, L04, LO5, L06] Various cost and sales data for Meriwell Company for the just completed year appear in the work- sheet below: excel Microsoft Excel Ele Edit View Irsest Format Tools Date Window Hep 100% X2R E17 -A. fo 1 Finished goods inventory, beginning 2 Finished goods inventory, ending 3 Administrative expenses 4 Manufacturing overhead 5 Purchases of raw materials 6 Raw materials inventory, beginning 7 Raw materials inventory, ending 8 Direct labor 9 Work in process inventory, beginning 10 Work in process inventory, ending 11 Sales 12 Selling expenses 13 ** \Sheet1 Sheet2 Sheet3 / B $20,000 $40,000 $110,000 $105,000 $125,000 $9,000 $6,000 $70,000 $17,000 $30,000 $500,000 $80,000 Of the $105,000 of manufacturing overhead, $15,000 is variable and $90,000 is fixed. Required: 1. Prepare a schedule of cost of goods manufactured. 2. Prepare an income statement. 3. Assume that the company produced the equivalent of 10,000 units of product during the year just completed. What was the average cost per unit for direct materials? What was the average cost per unit for fixed manufacturing overhead? 4. Assume that the company expects to produce 15,000 units of product during the coming year. What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity? For fixed manufacturing overhead? Assume that direct materials is a variable cost. 5. As the manager responsible for production costs, explain to the president any difference in the average costs per unit between (3) and (4) above. PROBLEM 2-21 Schedule of Cost of Goods Manufactured; Income Statement; Cost Behavior [LO2, LO3, LO4, LO5, L06] Selected account balances for the year ended December 31 are provided below for Superior Company: $110,000 $290,000 Selling and administrative salaries Purchases of raw materials Direct labor Advertising expense Manufacturing overhead Sales commissions $80,000 $270,000 $50,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process. Finished goods Beginning of the Year $40,000 ? $50,000 End of the Year $10,000 $35,000 ? The total manufacturing costs for the year were $683,000; the goods available for sale totaled $740.000; and the cost of goods sold totaled $660.000. Required: 1. Prepare a schedule of cost of goods manufactured and the cost of goods sold section of the company's income statement for the year. 2. Assume that the dollar amounts given above are for the equivalent of 40,000 units produced during the year. Compute the average cost per unit for direct materials used and the average cost per unit for manufacturing overhead. 3. Assume that in the following year the company expects to produce 50,000 units and manufac- turing overhead is fixed. What average cost per unit and total cost would you expect to be in- curred for direct materials? For manufacturing overhead? (Assume that direct materials is a variable cost.) As the manager in charge of production costs, explain to the president the reason for any dif- ference in average cost per unit between (2) and (3) above. 4