Question
Stark, Inc., produces and sells a unique robot antenna. The company has just opened a new plant to manufacture the antenna, and the following cost
Stark, Inc., produces and sells a unique robot antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been reported for the first month of the new plant's operation:
Selling price | $108 |
Beginning inventory | 0 |
Units produced | 35,000 |
Units sold | 30,000 |
Selling price per unit | $50 |
Selling and Admin expenses: |
|
Variable per unit | $2 |
Fixed (total) | $360,000 |
Manufacturing costs: |
|
Direct material cost per unit | $9 |
Direct labour cost per unit | $8 |
Variable overhead cost per unit | $3 |
Fixed overhead cost (Total) | $525,000 |
Management is anxious to see how profitable the new antenna will be and has asked that an income statement be prepared for the month. Assume that direct labour is a variable cost.
Submission Instructions:
- Assuming that the company uses absorption costing, compute the unit product cost and prepare an income statement.
- Assuming that the company uses variable costing, compute the unit product cost and prepare an income statement.
- Explain the reason for any difference in the ending inventories under the two costing methods and the impact of this difference on reported operating income.
Question 3
- Time: 16 minutes
- Total: 10 marks
Tony Stark and Company has projected sales and production in units for the second quarter of the coming year as follows:
| April | May | June |
Sales | 50,000 | 40,000 | 60,000 |
Production | 60,000 | 50,000 | 50,000 |
Cash-related production costs are budgeted at $6 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $140,000 per month. The accounts payable balance on March 31 totals $240,000, which will be paid in April.
All units are sold on account for $15 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $800,000 ($100,000 from February's sales and the remainder from March).
Submission Instructions
- Prepare a schedule for each month showing budgeted cash disbursements for Clay Company.
- Prepare a schedule for each month showing budgeted cash receipts for Clay Company.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started