Adv. Managerial Accounting/Cost Accounting

Now were going to do deeper dive into cost accounting by production department using activity based costing. There are also 2 types of sunglasses produced and have different selling points.

Using volumes of 2018, please build a table calculating fixed and variable cost for the 3 production departments. Also, standard costs for the 2 product lines.

Week

5

-$15 per pair.

and Advertising Expense and

Expense can be ignored this week.

ions to yours and build for this week.
You had points off for not have some categories be

, the loan needs to come out and just let me know what loan interest method you are using. I

4 methods. I prefer the $

/ month amortization method.”)

and Travel expenses are allocated the same as Salaries

and Tools

are used only in the assembly area.

Pangea Corporation

Pangea manufactures sunglasses with various fashion frame options. Their sunglasses generally sell for $1

0

The frames are created in-house (molded), with the lenses and screws purchased from other companies.

Week 3 Assignment

1) Using your annual budget data from Week 3 (on the 2nd/3rd tab of this sheet) and the data provided, calculate the fixed and variable costs for the 3 production departments.

2) Using your annual budget data from Week 3 and the data provided, calculate the standard costs of the 2 product lines produced in your factory.

Note: You will be using activity based costing; the various cost drivers available are specified in the data

3) Using the budgeted sales data, calculate the standard gross margin for each of the 2 products – both per unit and total gross margin with budgeted volume.

Note: Present the standard gross margin in a contribution income statement format (per unit for each product line and total for each product line)

Note: Because we are costing products and only calculating through standard gross margin, Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper

Sales

Interest

4) Write a paragraph explaining the results and recommending which product line would be best to advertise to gain additional sales, and why you chose that product line.

(I asked professor if she wants me to use the format she had or what I submitted for as Week 3 data, she said “You should look at what I sent versus what had and make

correct

volume based

accepted

100,000

Plant Equipment

Pangea’s Delaware plant has 3 production departments: Mixing, Extruding, and Assembly

The Mixing department has 1 mixing tank (to mix the plastic), and the Extruding department has 2 extruders (that fill metal molds with plastic to form the sunglass frames).

Each of the three machines was purchased when the plant first started up, and they all had the same original cost and useful life.

Assembly does not use any production equipment.

Mixing uses 40% of the plant’s warehouse square footage as well as 40% of utilities costs.

Extruding use 40% of the plant’s warehouse square footage as well as 40% of utilities costs.

Assembly uses 20% of the plant’s warehouse square footage as well as 20% of utility costs (climate controlled area).

Other plant department information

20% of total Salaries are attributable to the mixing tank

30% of total Salaries are attributable to the extruding line

50% of total Salaries are attributable to the assembly area

Fringe Benefits

The contractors divide their time between the mixing tank and extruder areas (50% each).

Manufacturing supplies are use evenly by all production areas.

Parts

Cost Driver

The main cost driver is machine hours for the Mixing and Extruding Department, and Man Hours for the Assembly Department

The Mixing Department expects to run 40 hours per week for 50 weeks this year.

The Extruding Department expects to run 40 hours per week for 50 weeks this year – for each machine.

The 5 employees in the Assembly Department are expected to each work 40 hour weeks for 50 weeks this year.

Product Information

There are two different frame styles produced in Pangea’s Delaware manufacturing plant. Your budget from the prior weeks only included total volume.

Your budgeted volume will be divided by product as follows: 60% Rayz frames, and 40% Beamz frames

Rayz glasses sell for $11.50 each, and Beamz glasses sell for $14.00 each.

Purchased Material Costs

Each pair of sunglasses requires 2 lenses, 4 screws, and 0.5 gallons of plastic polymer (which gets made into frames)

Sunglass lenses cost $1.00 per lens, and screws cost $0.10 per screw.

Polymer costs $5.00 per gallon

Production of Sunglasses

Each batch of sunglasses makes 1000 pairs of sunglasses.

One batch of Rayz glasses takes 3 hours in the Mixing Department, 5 hours in the Extruding Department, and 12 hours in Assembly

One batch of Beamz glasses takes 3 hours in the Mixing Department, 8 hours in the Extruding Department, and 21 hours in Assembly

Week 3 (prof’s format)

Full Year

Sales

,500

Increase of 5% in sales from 2017. 2017 full year sales calculated above times 1.05

Fringe Benefits

annualized

100,000 annualized

volume based

) see savings below

60,000 40,000 volume based

rbamo: rbamo:
300,000/

=.4878

rbamo: rbamo:
220,000/4

= .4583

volume based

plus addition depr for mixing tank $65,000/10 years = $6500/12 times 4 months Sept-Dec

80,000 50,000 volume based

units = .104167 each

s

300,000 volume based

silent on method of growth or savings

615,000 480,000 664,721

12.50 12.50 12.50

5 5 5 5

based on based on

12 months 12 months

2016

Parts Utilities

102,705

0 0 0

615,000

664,721 697,957

480,000

case study

increase

	Data for Operating Budget
	2016		2017 August YTD	2017 full year	2018 Full year
	7,6	87		6,000,000	8,309,008	8,724,458		Increase of 5% in sales from 2017. 2017 full year sales calculated above times 1.05
	Purchased Raw Materials		3,075,000		2,	400,000	3,323,603	3,489,783
	Expense Category
	Salaries and Wages		775,000		485,667			annualized		728,500	750,355	Increase of 3% for cost of living for 2018
	372,000		242,833	50% of salary		364,250	375,178
	Travel & Entertainment				40,000		28,000	42,000	5%	increase	44,100	Taking the same 5% increase in T&E that occurred from 2016 to 2017 and carrying over to 2018
	Outside Contractors		145,000		1		50,000	3% increase	206,000	Increase of 3% for outside contractors = 154,500 / 3 = $51,500 per contractor X 4 people = 206,000
	Manufacturing Supplies		250,000	1		60,000	221,574	229,139	if full year would have been .3333 per unit, (221,574/		664,721
Parts and Tools	55,393	57,288	if full year would have been .08333 per unit, (55,393/664,721) see savings below
		Utilities				300,000			615,000		220,000		80,000	304,664	315,075	if full year would have been .4583 per unit, (304,664/664,721) see savings below
	Depreciation	150,000		110,000	new mix tank	167,167 rbamo: rbamo: month Depr 110,000/8= $13750*		12 months	4 month depr	171,500	New mixing tank purchased Sept 2017 – 4 months depreciation in 2017, full year in 2018
	Warehousing Costs	69,242 rbamo: rbamo: Thru August 50,000/			480,000	rbamo: rbamo: 300,000/615,000=.4878	rbamo: rbamo: 220,000/480,000= .4583	71,636	if full year would have been .1042 per unit, (69,242/664,721) see savings below
	Total Operating Expense		2,172,000		1,436,500	2,102,789	2,220,272
	Sales and Advertising Exp		450,000	415,450	436,223	volume based in 2017 – per unit cost .625,	case study
Interest expense	14,000	12,000	See accepted amortization methods
	Income from Operations		1,990,500		1,863,500	2,453,165	2,566,180
	Volume		697,957
			12.50
Notes:			based on
8 months
Units sold	2018 Volume based savings
2017 based on 2016	2017 annual	2018 Annual	Mfr supp	Warehouse
Jan-March		102,705	110,897	116,442
Oct-Dec	102,090	– 0	110,900	116,445	1164.33	291.10	1601.00	364.01
April- Sept	410,205	341,838	442,924	465,070	2325.12	581.31	3197.12	726.90
444,543	3489.45	872.41	4798.13	1090.91
2017 % increase in sales over 2016	7.976%	sales based on	Sales 5% higher
7.976% volume
assumption

Week 3 ( I submitted)

Data for Operating Budget

2017 August YTD

Sales 7,687,500 6,000,000

correct

Purchased Raw Materials 3,075,000 2,400,000

correct

Assumed to vary according to volume

Expense Category

Salaries and Wages 775,000 485,667 728,500

correct

Fringe Benefits 372,000 242,833 364,250

correct

Travel & Entertainment 40,000 28,000

correct

Varies annually by 5 percent

Outside Contractors 145,000 100,000

correct

Manufacturing Supplies 250,000

Varies according to volume

Parts and Tools 60,000 40,000

minus 1 Varies according to volume Varies according to volume missed 2nd half efficeincy measures

Utilities 300,000 220,000

correct Varies according to volume

Depreciation 150,000 110,000

correct

Warehousing Costs 80,000 50,000

minus 1 Varies according to volume Varies according to volume missed 2nd half efficeincy measures

400,000

Interest

accepted

Total Operating Expense 2,172,000 1,436,500

Sales and Advertising Exp 450,000 300,000

correct Assumed to vary according to volume Assumed to vary according to volume

Income from Operations 1,990,500 1,863,500

Volume 615,000 480,000

correct

0.36

87

Esra Surmen Case Study 1
2017 Full Year	2018 Full Year	Assumptions for 2017	Assumptions for 2018
8307692.5	8723077.13	Sales of materials based on 2016 selling price	Sales of materials based on 2016 selling price
3323077	3489230.85				Assumed to vary according to volume
750,355.00	Increased by 3 percent per annum of 2017 value
375,177.50	Varies according to wages	Assumed to be 50 percent of 2017’s total salaries and wages
42,000.00	44,100.00		Varies annually by 5 percent
150,000.00	200,000.00	Varies per month	The company hires four contractors	accepted 2017 over 2016 esculated 3% similar in 2018
160,000	240,000.00	252,000.00			minus 1							Varies according to volume			missed 2nd half efficeincy measures
55,384.62	58,153.85
304,615.39	319,846.16	Varies according to volume; volume related cost decreases by 3% for second half of 2018
165000	171500	Varies monthly	Net depreciation of 2017 +depreciation of new machine
69230.77	72692.31
Loan	800,000.0	minus 10	Paid at end of 2017	Paid at end of 2018	Loan payments are not expenses. Payments is on fixed asset
16000	32000	Interest computed on 1200000	Interest computed on 800000
2,534,981	3,075,824.8
415384.63	436153.86
2,034,250.1	1,721,867.6
664615.4	697846.17
0.41	0.33		0.36
Process
Sales estimation between August 2017 and September 2018
Let sales (in quantity) between October and March be X	Grade
Quantity of sales between April and September = 2X
Therefore;
Sales from January to August = 480,000
X/2+2X*5/6=480000
X= 221,538.5 units
Assuming uniform distribution of sales;
Demand for the month of September = 2X/6
Demand between October and December = (X/6)*3
Net demand = 2X/6+3X/6 =5X/6
=5 (221,538.5)/6
=184,615.4 units
For simple simplification assume the demand to be 185,000 units