Problem $11$: Introduction Managerial $-$ Cost Classification and Cost Behavior

Heritage Company manufactures and sells desk sets with a wholesale price of $$275.$ The company has sold approximately $4,000$ desk sets in the previous and current year, but has the capacity to make more without adding another shift. Annual costs associated with making $4,000$ desks:

Wood, glass, brass, other materials

$ $430,000$

General office salaries

$ $110,000$

Factory supervision

$ $70,000$

Sales commissions

$ $60,000$

Depreciation, factory building

$ $105,000$

Depreciation, office equipment

$ $2,000$

Indirect materials, factory

$ $18,000$

Factory cutting and assembly labor

$ $90,000$

Advertising

$ $100,000$

Insurance, factory

$ $6,000$

General office billing supplies

$ $4,000$

Property taxes, factory

$ $20,000$

Utilities, factory

$ $45,000$

Required: Based on the above, classify costs based on:

GAAP Scheme: costs are:

Inventory$/$CGS related:

Direct Material

Direct Labor

Manufacturing Overhead

Operating Expenses:

Selling

General & administrative

$2.$ Managerial Scheme: costs are either variable or fixed REQUIREMENTS

A$.$ Develop an Excel spreadsheet that includes the content outlined below in items $1$ through $3---$ use solution example provided where item was assigned and discussed in class.

B$.$ The Excel Spreadsheet should be able to change variables for units produced and units sold:

a$.$ Base $-4000$ units produced and $4000$ units sold

b$.$ Change $1-4500$ units produced and $4,300$ units sold

c$.$ Change $2-4800$ units produced and $4,700$ units sold

The Spreadsheet should provide the following schedules and financial statements

$1.$ Basic Schedule of Cost of Goods Manufactured

DM

DL

MO

Total Manfacturing Costs

Total and Per Unit Cost Columns for each of the above.

$2.$ Balance Sheet $-$ Finished Goods Inventory Account only

# of units in FG Inventory

Total and Per Unit $ Amounts for FG Inventory

$3.$ Income Statement $-$ Contribution Approach

Sales

Less Variable Costs

$=$ Contribution Margin

Fixed Costs

$=$ Net Income

Total and Per Unit $Amounts for Sales, VC and CM

Total $ amounts for FC and NI

Create one sheet for each of the above scenarios $-$ Base, Change $1,$ Change $2$