NEED ANSWERS FOR A THRU F Please Spencer Electronics produces a wireless home li
ID: 2370588 • Letter: N
Question
NEED ANSWERS FOR A THRU F Please
Spencer Electronics produces a wireless home lighting device that allows consumers to turn on home lights from their cars and light a safe path into and through their homes. Information on the first three years of business is as follows:
2011 2012 2013 total
Units Sold 15,000 15,000 15,000 45,000
Units produced 15,000 20,000 10,000 45,000
Fixed production costs $750,000 $750,000 $750,000
Variable production cost per unit $150 $150 $150
Selling price per unit $250 $250 $250
Fixed selling and
administrative expense $220,000 $220,000 $220,000
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REQUIRED:
A) Calculate profit and the value of ending inventory for each year using full cost.
B) Explain why profit fluctuates from year to year even though the number of units sold, the selling price, and the cost structure remain constant.
C) Calculate profit and the value of ending inventory for each year using variable costing.
D) Explain why, using variable costing, profit does not fluctuate from year to year.
Marvin company has three service departments, S1, S2, and S3, and two production departments, P1 and P2. The following data relate to marvin's allocation of service department costs:
Budgeted Costs Number of Employees
S1 $4,000,000 80
S2 3,000,000 60
S3 2,000,000 30
P1 200
P2 300
Service department costs are allocated by the direct method. The number of employees is used as the allocation base for all service department costs.
REQUIRED:
E) Allocate service department costs to production departments.
F) Calculate the total service department cost allocated to each production department.
Explanation / Answer
A.
PRODUCTION COST = FIXED PRODUCTION COST+VARIABLE PRODUCTION COST+FIXED SELLING AND ADMIN EXPENSES
Using Full costs
Sales
3750000
3750000
3750000
Production cost
3220000
3970000
2470000
Ending inventory
0
750000
0
Profit
530000
-220000
1280000
B. profit fluctuates from year to year even though the number of units sold, the selling price, and the cost structure remain constant becuase the production cost is variable as the number of units produced vary.
C.
Using Variable Costing
Sales
3750000
3750000
3750000
Production cost=
(production+ending inventory)
3220000
3970000
2470000+750000
=3220000
Ending inventory
0
750000
0
Profit=(sales-Production+ending inventory)
530000
530000
530000
D.
Using Variable costing the Profit doesn't fluctuate from year to year as the ending inventory is carried forward to the production cost of the next financial year and these products are sold in the next financial year.
E.
Total Employees =670
% employees in P1= 200/670 = 29.85
%employees in P2=300/670 = 44.77
Calcluation of service department cost to production cost =
% of employees x expenses incurred by service department.
Results are given below
P1
S1
1194000
S2
895500
S3
597000
P2
S1
1790800
S2
1343100
S3
895400
F) Calculate the total service department cost allocated to each production department.
Total Service department cost allocated to P1 = S1+S2+S3=119400+895500+597000= 2686000
Total Service department cost allocated to P2 = S1+S2+S3=1790800+134100+895400=4029300
Using Full costs
Sales
3750000
3750000
3750000
Production cost
3220000
3970000
2470000
Ending inventory
0
750000
0
Profit
530000
-220000
1280000
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