Cost Accounting Final
1. Cash budget 20 points
Sales for April, May, and June are expected to be $200,000, $180,000, and $220,000, respectively, for the Momo’s Donuts. All sales are on account (terms 2/15, net 30 days) and are collected 50 percent in the month of sale and 50 percent in the following month. One-half of all sales discounts are taken on the average. Materials are purchased one month before being needed, and all purchases and expenses are paid for as incurred. Activities for the quarter are expected to be:
April May June
$40,000 $36,000 $44,000
70,000 68,000 72,000
Maintenance and repairs
18,000 18,000 18,000
36,000 36,000 36,000
Utilities and other
14,000 14,000 14,000
-0- 10,000 -0-
Payment on bonds
8,000 8,000 8,000
Required: Using the given information, prepare a cash budget for May.
2. Material and labor variance 18 points
Brainerd Chemical Company manufactures 100-pound bags of chemicals that have the following unit standard costs for direct materials and direct labor:
Direct materials (100 lbs. @ $1.00 per lb.)
Direct labor (0.5 hours at $24 per hour)
Total standard direct cost per 100 lb. bag
The following activities were recorded for October:
• 1,000 bags were manufactured.
• 95,000 lbs. of materials costing $76,000 were purchased.
• 102,500 lbs. of materials were used.
• $12,000 was paid for 475 hours of direct labor.
There were no beginning or ending work-in-process inventories.
a. Compute the direct materials variances.
b. Compute the direct labor variances.
c. Give possible reasons for the occurrence of each of the preceding variances.
3. JIT and product cost 18 points
Spiratex Company used machine hours to assign maintenance costs to its three products of 3-inch, 5-inch, and 7-inch plastic tubing, then they installed a JIT system.
Maintenance costs $120,000/ year.
Machine hours used by each product and the quantity produced of each product are as follows:
Machine Hours Quantity Produced
1,000 400 rolls
1,500 450 rolls
2,500 1,250 rolls
After installing JIT, three manufacturing cells were created and the cell workers were trained to perform maintenance. Maintenance costs for the three cells still totaled $120,000; however, these costs are now traceable to each cell.
a. Compute the maintenance cost per roll for each type of tubing before JIT is installed.
b. Compute the maintenance cost per roll for each type of tubing after JIT is installed.
c. Explain why the JIT maintenance cost per roll is more accurate than the cost per roll using the
4. Cost report 30 points
Zebco, Inc., has developed ideal standards for four activities: labor, materials, inspection, and receiving.
Information is as follows:
Activity Activity Driver
SQ AQ SP
30,000 38,000 $11
110,000 160,000 10
Inspection Inspection hours
0 50,000 7
600 700 450
The actual prices paid per unit of each activity driver were equal to the standard prices.
Complete the following cost report:
Value-Added Non-value-Added Actual
5. Balanced Scorecard and Strategy 16 Points
Chico’s is a local clothing store in Tulsa. Chico’s has been experiencing increased competition from the national clothing chains. In an effort to improve performance, management intends to create a Balanced Scorecard. In a meeting, several measures were suggested by various managers.
Management has identified a key problem. Customers are taking too long to pay their department store’s charge card bills, and the company has an abnormal amount of bad debts. If this problem were solved, the company would have far more cash to invest in store improvements. Investigation has revealed that much of the problem with late payments and unpaid bills is apparently due to disputes about incorrect charges on the customer bills. Incorrect charges usually occur because sales clerks enter data incorrectly on the charge account slip.
The performance measures suggested by the managers are given below:
• Total sales revenue
• Sales per square foot of floor space
• Sales to inventory ratio
• Sales per employee
• Sales to total assets
• Customer satisfaction with accuracy of charge account bills from monthly customer survey
• Customer wait time for service
• Travel expenses for buyers’ trips
• Average age of accounts receivable
• Courtesy shown by junior staff members based on surveys of senior staff
• Unsold inventory at the end of the season as a percentage of total cost of sales
• Percentage of suppliers making just-in-time deliveries
• Quality of food in the staff cafeteria based on staff surveys
• Written-off accounts receivable as a percentage of sales
• Percentage of charge account bills containing errors
• Percentage of employees who have attended the city’s cultural diversity workshop
• Total profit
• Profit per employee
• Percentage of salesclerks trained to correctly enter data on charge account slips
a. Build an integrated Balanced Scorecard using only performance measures suggested by the
managers. You do not have to use all the measures, but build a Balanced Scorecard that reveals
a strategy for dealing with the problems with accounts receivable and unsold merchandise.
b. Construct a testable strategy by showing the causal links (with arrows) between measures in
the different perspectives, and show whether the performance measure should show an increase
c. Assume that the company adopts the Balanced Scorecard. After operating for a year, there are
improvements in some performance measures but not in others. What should management do
6. Contribution margin and break-even 24 points
TMA Systems had the following functional income statement for the month of November, 2017:
Sales ($20 × 20,000 units)
Costs of goods sold:
Variable factory overhead
Fixed factory overhead
Selling and administrative expenses:
There were no beginning and ending inventories.
a. Calculate the contribution margin per unit.
b. Calculate the contribution margin ratio.
c. What is the break-even point in units?
d. What is the amount of sales in dollars needed to obtain a before-tax profit of $40,000?
7. Contribution margin break-even and margin of safety 24 points
At a price of $48, the estimated monthly sales of a product are 18,000 units. Variable costs include manufacturing costs of $27 and distribution costs of $9. Fixed costs are $60,000 per month.
Determine each of the following values:
a. Unit contribution margin
b. Monthly break-even unit sales volume
c. Before-tax monthly profit
d. Monthly margin of safety in units