Question 3

[The following information applies to the questions displayed below.) Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $516 each. Costs 1. Plastic for casing-$19,000 2. Wages of assembly workers--$90,000 3. Property taxes on factory-$7,000 4. Accounting staff salaries-$33,000 5. Drum stands (1.000 stands purchased)-$35,000 6. Rent cost of equipment for sales staff-$36.000 7. Upper management salaries-$170,000 8. Annual flat fee for factory maintenance service--$16,000 9. Sales commissions-$25 per unit 10. Machinery depreciation, straight-line-$42,000 1) Summarize the information for TrueBeat from Q9 & 10 of HW 1.1 assuming they produce and sell 1,000 drum sets during the year. Remember to use 2 decimals for "per unit" values. Total Dollars TrueBeat - Summarized connect given data Average Cost per Unit Direct materials Direct labor $ Variable manufacturing overhead 35 Fixed manufacturing overhead $ Fixed selling & administrative expense $ Variable selling & administrative expense 25 269,000 7000+ 16000+ 42 33,000+ 36000 Sales price per unit 516 2) Assume, due to the significant success of the drum sets, TrueBeat has obtained a contract to provide drum sets to a national merchandising chain. This contract is expected to increase TrueBeat's sales over the next 3 years. Current operations have a relevant range of 500 to 1,800 drum sets. TrueBeat's anticipates selling 3,000 units in Year 2, 5,000 units in Year 3 and 6,000 units in Year 4. Making the following cost changes, TrueBeat will increase their relevant range of production to between 4,000 and 8,000 drum sets. This significant increase to production will stair-step some of their costs. Specifically, the company will have to purchase additional equipment that will increase their machinery depreciation expense by 50% (Fixed overhead. The new equipment will allow TrueBeat to produce up to 10,000 drum sets a year. With increased production levels, TrueBeat will need to pay shift premium to assembly workers such that the average Direct labor will increase by $18 a unit. Additionally, production supervisor will be hired for $120,000 (fixed overhead). . Additionally, the company providing factory maintenance services has agreed to a new contract. The new contract will include a fixed component (overhead) equal to half of the original flat fee and a variable component (overhead) that will be $0.25 per assembly wage dollars . The company needs to increase its sales staff. Rather than paying their sales staff commission only, TrueBeat will pay sales staff a flat salary (fixed S&A) equal to twice the amount paid in Year 1 and a reduced commission per drum set equal to 50% of the previous commission rate. All other costs are considered consistent and within relevant range for production of 4,000 to 8,000 units. Use the information provided above to adjust amounts from the table in 1). Include the adjusted amounts in the table below. TrueBeat adjusted summarized data for production 4,000 to 8,000 units Adjust summarized data Average Cost Total Dollars Direct materials Direct labor 08 Variable manufacturing overhead Fixed manufacturing overhead 190.000 7000 + DD 63.00 110.000 Fixed selling & administrative expense 27500 17,00 33,00 72.00 Variable selling & administrative expense 12.5 per Unit Sales price per unit Note: The table above may be submitted early for verification. Upload it to the "submission" drop box on D2L, email or text a photo or PDF to Teri and she will look at it before you continue with the project. 3) TrucBeat's management will need to produce 4,000 units in Years 2 and 3 (to meet relevant range) and 6,000 units in Year 4. However, they anticipate selling only 3,000 units in Year 2 but 5,000 units in Years 3 and 6,000 units in Year 4. They will have to carry inventory produced in Year 2 until it is sold in Year 3. Note: Net Operating Income, or NOI, for this course is essentially Income before interest or tax expense and represents the operationally controlled components of Net Income. a) Using variable costing and contribution margin income statement format, prepare predictive income statements for Years 2, 3 and 4 below. TrueBeat Income Statement (Variable Costing) For Years ending December 31 Year 2 Year 3 Year 4 Sales revenue Variable production costs Variable S&A expenses Contribution Margin Fixed Overhead Fixed S&A expenses Net Operating Income b) Using absorption costing, prepare an absorption costing income statements for TrucBcat for Years 2, 3 and 4. TrueBeat Income Statement(Absorption Costing) For Years ending December 31 Year 2 Year 3 Year 4 Sales revenus Cost of Goods Sold Gross Margin S&A expenses NetOncrating Income c) Do you think TrueBeat's decision to maintain drum sets inventory from year 2 until they are sold in year 3 was a good decision? Use complete sentences and 30 to 50 words in your