Communication The controller of New Wave Sounds Inc. prepared the following prod
ID: 2402243 • Letter: C
Question
Communication
The controller of New Wave Sounds Inc. prepared the following product profitability report for management, using activity-based costing methods for allocating both the factory overhead and the marketing expenses. As such, the controller has confidence in the accuracy of this report.
In addition, the controller interviewed the vice president of marketing, who provided the following insight into the company's three products:
The home theater speakers are an older product that is highly recognized in the marketplace.
The wireless speakers are a new product that was just recently launched.
The wireless headphones are a new technology that has no competition in the marketplace, and it is hoped that they will become an important future addition to the company's product portfolio. Initial indications are that the product is well received by customers.
The controller believes that the manufacturing costs for all three products are in line with expectations.
Based on the information provided:
1-Calculate the ratio of gross profit to sales and the ratio of income from operations to sales for each product.
ll MetroPCS LTE 12:45 PM Done work 2.docx Work in Process Account Data for Two Months; Cost of Production Pittsburgh Aluminum Company uses a process cost system to record the costs of manufacturing rolled aluminum, which consists of the smelting and rolling processes. Materials are entered from smelting at the beginning of the rolling process. The inventory of Work in Process Rolling on September 1 and debits to the account during September were as follows: During September, 800 units in process on September 1 were completed, and of the 18,320 units entering the department, all were completed except 1 ,700 units that were 60% completed. Charges to Work in Process -Rolling for October were as follows: During October, the units in process at the beginning of the month were completed, and of the 21,100 units entering the department, all were completed except 1,000 units that were 90% completed. Required 1. Enter the balance as of September 1 in a four-column account for Work in Process Rolling. Record the debits and the credits in the account for September. Construct a cost of production report and present computations for determining (a) equivalent units of production for materials and conversion, (b) costs per equivalent unit, (c) cost of goods finished, differentiating between units started in the prior period and units started and finished in September, and (d) work in process inventory. If an amount box does not require an entry, leave it blank If an amount is zero, enter in a zero "O". Round cost per unit answers to the nearest cent.Explanation / Answer
The general formula for calculating gross profit ratio is given below;
Gross profit ratio = (gross profit ÷ net sales) x 100
Gross profit = $450,000
Net sales = $1,500,000,
Gross profit ratio = ($450,000 ÷$ 1,500,000) x 100
= 0.3 x 100
= 30%
Gross profit =$ 480,000
Net sales =$ 1,200,000
Gross profit ratio = ($ 480,000 ÷ $ 1,200,000) x 100
=0.4 x 100
=40%
Gross profit = $90,000
Net sales = $900,000
Gross profit ratio = ($90000 ÷$900000) x 100
= 0.1 x 100
= 10%
The general formula for calculating the ratio of income from operations to sales is given below;
Ratio of income from operation to sales = (operating income ÷net sales ) x 100
Operating income = $150000
Net sales =$1,500,000
Income from operations to sales ratio = ($150,000 ÷ 1,500,000) x100
= 0.1 x 100
= 10%
Ratio of income from operation to sales = (operating income ÷net sales) x 100
Operating income = $360,000
Net sales =$1,200,000
Income from operations to sales ratio = ($360,000 ÷ 1,200,000) x100
= 0.3 x 100
= 30%
3. Calculation of ratio of net income for operations to sales for wireless headphones
Ratio of income from operation to sales = (operating income ÷net sales) x 100
Operating income = $18,000
Net sales =$900,000
Income from operations to sales ratio = ($18,000 ÷ 900,000) x100
= 0.02 x 100
= 2 %
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