Question 4 a) In the coming year, King Company expects to sell 28,700 units at RM32 each. King's controller provided the following information for the coming year. Units production 30,000 RM Unit direct materials 9.95 Unit direct labor 2.75 Unit variable overhead 1.65 Unit fixed overhead* 2.50 Unit selling expense (variable) 2.00 Total fixed selling expense 65,500 Total fixed administrative expense 231,000 * The unit fixed overhead is based on 30,000 units produced. Required: i. Calculate the cost of one unit of product under absorption costing. ii. Calculate the cost of one unit of product under variable costing. iii. Calculate operating income under absorption costing for next year. iv. Calculate operating income under variable costing for next year. b) The following information pertains to Chacon Inc. for last year: Beginning inventory in units Units produced Units sold 5,000 20,000 23,700 Costs per unit: Direct materials Direct labor Variable overhead Fixed overhead* Variable selling expenses Fixed selling and administrative expenses * Fixed overhead totals $83,000 per year. RM 8.00 4.00 1.50 4.15 3.00 24,300 Required: i. Calculate the cost of one unit of product under absorption costing. ii. Calculate the cost of one unit of product under variable costing. iii. How many units are in ending inventory? iv. Calculate the cost of ending inventory under absorption costing. v. Calculate the cost of ending inventory under variable costing. Question 1 a) Zee Manufacturing had always made its components in-house. However, Bryan Component Works had recently offered to supply one component, S6, at a price of RM25 each. Zee uses 10,000 units of component S6 each year. The cost per unit of this component is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total RM 12.00 8.25 4.50 2.00 26.75 Refer to the information for Zee Manufacturing above. The fixed overhead is an allocated expense; none of it would be eliminated if production of component S6 stopped. Required: i. What are the alternatives facing Zee Manufacturing with respect to production of component S6? ii. List the relevant costs for each alternative, if Zee decides to purchase the component from Bryan, by how much will operating income increase or decrease? iii. Which alternative is better? b) Refer to the information for Zee Manufacturing above. Assume that 75% of Zee Manufacturing's fixed overhead for component S6 would be eliminated if that component were no longer produced. Required: If Zee decides to purchase the component from Bryan, by how much will operating income increase or decrease? Which alternative is better? 2/5 Question 2 a) Nana Trading manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per unit price of RM7.00. the new customer is geographically separated from Nana Trading's other customers, and existing sales will not be affected. Nana Trading normally produces 82,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is RM12 per unit. Unit cost information is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total RM 3.10 2.25 1.15 1.80 8.30 Refer to the information above, if Nana Trading accepts the order, no fixed manufacturing activities will be affected because there is sufficient excess capacity. Required: i. What are the alternatives for Nana Trading? ii. Should Nana Trading accept the special order? By how much will profit increase or decrease if the order is accepted? b) Refer to the information for Nana Trading, suppose a customer wants to have its company logo affixed to each paperweight using a label. Nana would have to purchase a special logo labeling machine that will cost RM12,000. The machine will be able to label the 15,000 units and then it will be scrapped (with no further value). No other fixed overhead activities will be incurred. In addition, each special logo requires additional direct material of RM0.20. Required: Should Nana Trading accept the special order? By how much will profit increase or decrease if the order is accepted? Question 3 Koko Bowl owns two sports franchise - the Bladders (a hockey teams) and the Ballers (a basketball team). The following information was provided for the coming year. Items Sales Variable cost of goods sold Direct fixed overhead Bladders RM 80,000,000 10,000,000 20,000,000 Ballers RM 180,000,000 30,000,000 100,000,000 A sales commission of 5% of sales revenue is paid for each of the two sports franchises. Direct fixed selling and administrative expenses was estimated to be RM4,000,000 for the Bladders franchise and RM10,000,000 for the Bladders franchise. Common fixed overhead associated with owning the franchise was estimated to be RM18,000,000; common selling and administrative expenses was estimated to be RM8,000,000 Required: Prepare a segmented income statement for Koko Bowl for the coming year using variable costing. Question 5 a) Lala Company produces aluminium cans. Production of 12-ounce cans has a standard unit quantity of 4.5 ounces of aluminium per can. During the month of April, 300,000 cans were produced using 1,250,000 ounces of aluminium. The actual cost of aluminium was RM0.09 per ounce and the standard price was RM0.08 per ounce. There are no beginning or ending inventories of aluminium. Required: i. Calculate the total variance for aluminium for the month of April. ii. Calculate the materials price and usage variances. b) Fan Trading produces plastic bottles. Each bottle has a standard labor requirement of 0.025 hours. During the month of April, 750,000 bottles were produced using 21,000 labor hours @ RM10.00. The standard wage rate is RM 9.50 per hour. Required: i. Calculate the total variance for aluminium for the month of April. ii. Calculate the labor rate and efficiency variances. c) Sunshine Designs rebuilds defective units of its S12L7 Kicker speaker model. During the year, Sunshine rebuilt 7,500 units. Materials and labor standards for performing the repairs are as follows: Direct materials (1 recon kit @ $150) RM150.00 Direct materials (1 cabinet @ $50) 50.00 Direct labor (5 hrs. @ $12) 60.00 Required: i. Compute the standard hours allowed for a volume of 7,500 rebuilt units. ii. Compute the standard number of kits and cabinets allowed for a volume of 7,500 rebuilt units. iii. Suppose that during the first month of the year, 3,750 standard hours were allowed for the units rebuilt. How many units were rebuilt during the first month