Problem 3 Nurally Inc. manufactures a single product. Selected data from the company's cost records for two recent months are given below: LEVEL OF ACTIVITY October-High July - Low 12,000 $390,000 22,000 15,000 15 6 ? 9,000 $285,000 14,000 25,000 Number of units produced Cost of goods manufactured Work in process inventory, beginning Work in process inventory, ending Direct materials cost per unit Direct labour cost per unit Manufacturing overhead cost, total 15 6 7 The company's manufacturing overhead cost consists of both variable and fixed cost elements. To have data available for planning, management wants to determine how much of the overhead cost is variable with units produced and how much of it is fixed per year. Required: 1. For both July and October, estimate the amount of manufacturing overhead cost added to production. The company had no under-applied or over-applied overhead in either month. (Hint: Construct a schedule of cost of goods manufactured.) 2. Using the high-low method, estimate a cost formula for manufacturing overhead. Express the variable portion of the formula in terms of a variable rate per unit of product 3. If 9,500 units are produced during a month, what will the cost of goods manufactured be? (Assume that the company's beginning work in process inventory for the month is $16,000 and that it's ending work in process inventory is $19,000. Also assume that there is no under-applied or over-applied overhead cost for the month.) QUESTION 1 Cost Behaviour; High-Low Method Prompt Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the company's cost analyst has determined that if a truck is driven 120.000 kilometres during a year, the average operating cost is 11.6 cents ($0.116) per kilometre. If a truck is driven only 80,000 kilometres during a year, the averager operating cost increases to 13.6 cents ($0.136) per kilometre. Required: 1. Using the high-low method, estimate the variable and foxed cost elements of the annual cost of truck operation 2. Express the variable and foxed costs in the form Y a+ bx. 3. If a truck was driven 100,000 kilometres during a year, what total cost would you expect to be incurred? Problem 2 Haaki Shop Inc. is a large retailer of surfboards. The company assembled the information shown below for the quarter ended May 31: Amount $800,000 400 50 20 Total sales revenue Selling price per surfboard Variable selling expense per surfboard Variable administrative expense per surfboard Total fixed selling expense Total fixed administrative expense Merchandise inventory, beginning balance Merchandise inventory, ending balance Merchandise purchases 150,000 120,000 80,000 100,000 320,000 1. Prepare a traditional income statement for the quarter ended May 31 2. Prepare a contribution format income statement for the quarter ended May 31. 3. What is the contribution toward fixed expenses and profits for each surfboard sold during the quarter? (State this figure in a single dollar amount per surfboard). Matose