Apple Hilly Farms Ned Hilly was an investment banker and worked in San Francisco at a large bank As retirement got closer his wife, Sally, and him decided to spend their retirement up in the Sierra Nevada foothills by buying an apple farm in Apple Hill All their kids were grown and their youngest daughter, Nikki, was finishing an accounting degree at Sac State, whom they were hoping would help them out with the books once she was done A few years go by and the farm life is bustling They had a U Pick your own apples at the farm which cut down costs of running the farm, though they ended up with more apples than they could sell that first year The second year, Sally came up with the idea of opening a bakery on the farm She was an excellent baker she makes the best apple pie west of the Mississippi, at least her family thought so The bakery was a success that year, more so than expected Sally made homemade apple pies and caramel apples with her special caramel sauce In the following year, they expanded bakery operations to include more staff and an extra space for baking Ned wasn't too sure if the expansion was going to be profitable, he had an idea of the costs involved with apple pie and caramel apple production, but he couldn't pinpoint the details Since Apple Hill is a seasonal business he wanted to know how well his business did in the peak season to ensure that it made enough to cover the costs in the off season Luckily, Nikki just graduated in May and she would be able to work with Ned to work out the details and come up with some possible advice and solutions to his questions Nikki started by talking with her parents about some of the estimated sales and costs that they thought would incur for the month of September Here are some of those estimates Total Sales price (per unit) Expected sales units (for September) Apple Pies $22 00 6,000 Caramel Apples $8 00 9,000 15,000 Total $20,150 00 Expected Manufacturing costs Fixed OH (per month) Direct labor (per unit) Direct materials (per unit) Variable OH (per unit) Apple Pies $16,500 00 $3 50 $2 50 $2 00 Caramel Apples $3,650 00 $2 10 $1 75 $0 75 Expected Marketing and admin costs Fixed costs (per month) Variable costs (per unit) $5,750 00 $4,500 00 $1 25 $1,250 00 $0 25 Additionally, Sally informed her that the farm received a special order to sell their apple pies and caramel apples at the local county fair in September Sally wanted to sell 3,250 pies and 4,250 caramel apples for a discounted price of $18 00 and $6 50, respectively With, the amount of staff and the size of the bakery, Nikki determined that the maximum capacity for the bakery is 3,700 labor hours a month At the current projected sale amounts she expects that they'll need 2,850 hours to meet their regular sales volume After review of the salaries of all the staff, Nikki determined that the average hourly wage was $14 00 Ned was also concerned about how much it cost to keep apple pie inventory on hand at the end of the month, caramel apples should be sold within a couple days so no inventory is left at the end of the month Since there is a limited shelf life for the apple pies, Ned and Sally try and keep the ending inventories in line with next month's expectations They estimated that they'd have to start 7,000 apple pies in order to have 1,000 apple pies in process at the end of the month and 500 finished pies At the end of August there were 500 pies that were in process and no finished pies The variable costs associated with these inventories were as follows Beginning WIP inventory September costs DM $1,400 $17,500 Conversion $3,350 $38,500 And the conversion cost for the in process pies is 50 completed and 100 for direct materials (Use the expected for September Apple Pie Sales for determining units started and units completed and transferred out) September was a success for the bakery They were able to complete the special order and with some overtime baked a few more pies Here were the results for the actual sales and costs at the end of the month (The actuals as presented below are only to be use for Problem 6 ) Caramel Apple Pies Apples Actual Sales price (per unit) $22 50 $7 00 Actual sales units 17,750 7,250 10,500 Actual variable manufacturing OH $81,625 Actual variable marketing and admin cost $15,125 Actual fixed manufacturing costs $18,000 Actual marketing and admin costs $5,000 Total Problem Analysis 1 What costs are excluded from the Gross Margin calculation Why would we exclude these costs 2 What does the mix of the weighted average contribution margin tell us about the impact to profits of each product 3 Should Apple Hilly Farms complete the Special Order Explain your answer by using pricing terms from the textbook 4 Was manufacturing overhead under or over applied What does over or under applied overhead mean 5 Why would Apple Hilly Farms use standard costing since actual costing gives the actual cost Why would they not want to wait until the actual costs are known 6 Explain the variances calculated for Apple Hilly Farms Why was September a good or bad month for them D C C Production Cost Report a Compute total Apple Pie units to be accounted for Equivalent Units Flow of production units Physical Units Materials Conversion Units to be accounted for Beginning WIP inventory Units started in September Total units to be accounted for Units to be accounted for Total transferred out Units in Ending WIP inventory Total units to be accounted for b Compute total Apple Pie costs to be accounted for 3 5 5 2 3 3 Total Costs Materials Conversion Costs to be accounted for Costs in beginning WIP inventory Current period costs Total costs to be accounted for Costs per equivalent unit Materials Conversion 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 20 Costs accounted for Costs assigned to units transferred out Materials Conversion Total costs of units transferred out Costs assigned to ending WIP inventory Materials Conversion Total costs of ending WIP inventory Total costs to be accounted for Prob 1 Prob 2 Prob 3 Prob 4 Prob 5 Prob 6 Analysis Type here to search O A E F G H Budget Analysis a Prepare Master Budget for September Master Budget 5 Sales volume (in units) 1 1 Sales revenue Vanable costs Manufacturing Marketing and admin Contribution margin Fixed costs Manufacturing Marketing and admin Operating profit b Calculate Variance Analysis between Actual vs Flexible Budget vs Master Budget 5 3 Cost variances FI U Sales price variances FI U Sales activity variance Flexible Budget Actual FI U Master Budget Sales volume Sales revenue Variable costs Manufacturing Marketing and admin Contribution margin Fixed costs Manufacturing Marketing and admin Operating profit Prob 1 Prob 2 Prob 3 Prob 4 Prob 5 Prob 6 Analysis

Question

Apple Hilly Farms Ned Hilly was an investment banker and worked in San Francisco at a large bank  As retirement got closer his wife, Sally, and him decided to spend their retirement up in the Sierra Nevada foothills by buying an apple farm in Apple Hill  All their kids were grown and their youngest daughter, Nikki, was finishing an accounting degree at Sac State, whom they were hoping would help them out with the books once she was done  A few years go by and the farm life is bustling  They had a U Pick your own apples at the farm which cut down costs of running the farm, though they ended up with more apples than they could sell that first year  The second year, Sally came up with the idea of opening a bakery on the farm  She was an excellent baker  she makes the best apple pie west of the Mississippi, at least her family thought so  The bakery was a success that year, more so than expected  Sally made homemade apple pies and caramel apples with her special caramel sauce  In the following year, they expanded bakery operations to include more staff and an extra space for baking  Ned wasn't too sure if the expansion was going to be profitable, he had an idea of the costs involved with apple pie and caramel apple production, but he couldn't pinpoint the details  Since Apple Hill is a seasonal business he wanted to know how well his business did in the peak season to ensure that it made enough to cover the costs in the off season  Luckily, Nikki just graduated in May and she would be able to work with Ned to work out the details and come up with some possible advice and solutions to his questions  Nikki started by talking with her parents about some of the estimated sales and costs that they thought would incur for the month of September  Here are some of those estimates  Total Sales price (per unit) Expected sales units (for September) Apple Pies $22 00 6,000 Caramel Apples $8 00 9,000 15,000 Total $20,150 00 Expected Manufacturing costs  Fixed OH (per month) Direct labor (per unit) Direct materials (per unit) Variable OH (per unit) Apple Pies $16,500 00 $3 50 $2 50 $2 00 Caramel Apples $3,650 00 $2 10 $1 75 $0 75 Expected Marketing and admin costs  Fixed costs (per month) Variable costs (per unit) $5,750 00 $4,500 00 $1 25 $1,250 00 $0 25 Additionally, Sally informed her that the farm received a special order to sell their apple pies and caramel apples at the local county fair in September  Sally wanted to sell 3,250 pies and 4,250 caramel apples for a discounted price of $18 00 and $6 50, respectively  With, the amount of staff and the size of the bakery, Nikki determined that the maximum capacity for the bakery is 3,700 labor hours a month  At the current projected sale amounts she expects that they'll need 2,850 hours to meet their regular sales volume  After review of the salaries of all the staff, Nikki determined that the average hourly wage was $14 00  Ned was also concerned about how much it cost to keep apple pie inventory on hand at the end of the month, caramel apples should be sold within a couple days so no inventory is left at the end of the month  Since there is a limited shelf life for the apple pies, Ned and Sally try and keep the ending inventories in line with next month's expectations  They estimated that they'd have to start 7,000 apple pies in order to have 1,000 apple pies in process at the end of the month and 500 finished pies  At the end of August there were 500 pies that were in process and no finished pies  The variable costs associated with these inventories were as follows  Beginning WIP inventory September costs DM $1,400 $17,500 Conversion $3,350 $38,500 And the conversion cost for the in process pies is 50  completed and 100  for direct materials  (Use the expected for September Apple Pie Sales for determining units started and units completed and transferred out) September was a success for the bakery  They were able to complete the special order and with some overtime baked a few more pies  Here were the results for the actual sales and costs at the end of the month  (The actuals as presented below are only to be use for Problem 6 ) Caramel Apple Pies Apples Actual Sales price (per unit) $22 50 $7 00 Actual sales units 17,750 7,250 10,500 Actual variable manufacturing OH $81,625 Actual variable marketing and admin cost $15,125 Actual fixed manufacturing costs $18,000 Actual marketing and admin costs $5,000 Total Problem Analysis 1  What costs are excluded from the Gross Margin calculation  Why would we exclude these costs  2  What does the mix of the weighted average contribution margin tell us about the impact to profits of each product  3  Should Apple Hilly Farms complete the Special Order  Explain your answer by using pricing terms from the textbook  4  Was manufacturing overhead under or over applied  What does over or under applied overhead mean  5  Why would Apple Hilly Farms use standard costing since actual costing gives the actual cost  Why would they not want to wait until the actual costs are known  6  Explain the variances calculated for Apple Hilly Farms  Why was September a good or bad month for them  D C C Production Cost Report a  Compute total Apple Pie units to be accounted for Equivalent Units Flow of production units  Physical Units Materials Conversion Units to be accounted for Beginning WIP inventory Units started in September Total units to be accounted for Units to be accounted for Total transferred out Units in Ending WIP inventory Total units to be accounted for b  Compute total Apple Pie costs to be accounted for 3 5 5 2 3 3 Total Costs Materials Conversion Costs to be accounted for  Costs in beginning WIP inventory Current period costs Total costs to be accounted for Costs per equivalent unit Materials Conversion 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8  9 20 Costs accounted for Costs assigned to units transferred out Materials Conversion Total costs of units transferred out Costs assigned to ending WIP inventory Materials Conversion Total costs of ending WIP inventory Total costs to be accounted for Prob 1 Prob 2 Prob 3 Prob 4 Prob 5 Prob 6 Analysis Type here to search O A E F G H Budget Analysis a  Prepare Master Budget for September Master Budget 5   Sales volume (in units)   1 1 Sales revenue Vanable costs Manufacturing Marketing and admin Contribution margin Fixed costs Manufacturing Marketing and admin Operating profit b  Calculate Variance Analysis between Actual vs  Flexible Budget vs  Master Budget 5 3 Cost variances FI U Sales price variances FI U Sales activity variance Flexible Budget Actual FI U Master Budget Sales volume Sales revenue Variable costs Manufacturing Marketing and admin Contribution margin Fixed costs Manufacturing Marketing and admin Operating profit Prob 1 Prob 2 Prob 3 Prob 4 Prob 5 Prob 6 Analysis

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Apple Hilly Farms Ned Hilly was an investment banker and worked in San Francisco at a large bank. As retirement got closer his wife, Sally,

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