Apollo Manufacturing produces a basic cellphone as a contract manufacturer. Over
ID: 2421046 • Letter: A
Question
Apollo Manufacturing produces a basic cellphone as a contract manufacturer. Overhead is applied at a rate of $42 per direct labor hour. The direct labor rate is $18 per hour. In March, there was no beginning or ending work in process, and the assembly department produced 20,000 finished phones. The materials cost was $120,000, and there were 2,500 direct labor hours worked during the month. Actual overhead spending was $103,400 during the month.
Calculate the total cost of production in the month of March and the cost per unit for each phone produced. Determine if overhead was over applied or under applied and by what amount.
Mega Manufacturing produces wooden chairs. The cutting department produces all of the component parts and transfers the parts to the assembly department. The assembly department had no work in process at the beginning of the month and had two jobs started during the month. Since materials are transferred in, all materials are charged to each job at the beginning of the job. The materials cost is $17.50 per chair. Assembly time is 20 minutes per chair and the direct labor rate is $15 per hour. Overhead is charged to a job only when a job is completed and ready to transfer to finished goods. The overhead is applied on a per-chair basis at a rate of $6 per chair. Job No. 1 was for 1,000 chairs, and it was started and completed during the month. Job No. 2 was for 1,500 chairs, and it was 60% complete at month end.
Calculate the costs to complete Job No. 1 and the unit cost per chair. Calculate the costs charged as of month's end and the equivalent units of production for Job No. 2.
Problem 3
Presented below is an income statement, with the past two years' results presented:
2016 2015
Revenue $4,200,000 $4,000,000
Cost of goods sold $2,910,000 $2,800,000
Gross profit $1,290,000 $ 1,200,000
Selling cost $280,000 $250,000
Administrative cost $140,000 $120,000
Operating profit $870,000 $830,000
Interest expense $78,000 $80,000
Income before taxes $792,000 $750,000
Income taxes $277,200 $262,500
Net income $514,800 $487,500
Prepare a vertical analysis of both 2016 and 2015. Display percentages to 3 decimal places (.654 = 65.4%). Discuss any line items from the income statement that may warrant further investigation from management.
Explanation / Answer
The total cost of production for 20000 phones is $ 268400 (Material $120,000+Labour $ 45000(2500 hours x $18 per hour) + Actual overhead $103,400)
Cost per unit for each phone produced is $13.42 ($ 268400/20000)
Overhead was under applied by $1600 (2500hours x $42 per hour-$103400)
The cost of 1000 chairs is $28500 (Materials 1000x$17.5+Labour $15/3x1000+Overheads 1000x$6)
The unit cost per chair is $28.5 ($28500/1000)
The cost charges for the month for job 2 is $ 36150 (Materials 1500x$17.5+Labour $15/3x1500x60%+Overheads 1500x$6x6%)
Equivalent units of production for Job No. 2 are 900 (1500*60%)
Variance
Particulars
2016
2015
$
%
$
$
Revenue
4,200,000
4,000,000
200,000
4.762%
Cost of goods sold
2,910,000
2,800,000
110,000
3.780%
Gross profit
1,290,000
1,200,000
90,000
6.977%
Selling cost
280,000
250,000
30,000
10.714%
Administrative cost
140,000
120,000
20,000
14.286%
Operating profit
870,000
830,000
40,000
4.598%
Interest expense
78,000
80,000
(2,000)
-2.564%
Income before taxes
792,000
750,000
42,000
5.303%
Income before taxes
277,200
262,500
14,700
5.303%
Net income
514,800
487,500
27,300
5.303%
The selling cost need to be further investigated
Variance
Particulars
2016
2015
$
%
$
$
Revenue
4,200,000
4,000,000
200,000
4.762%
Cost of goods sold
2,910,000
2,800,000
110,000
3.780%
Gross profit
1,290,000
1,200,000
90,000
6.977%
Selling cost
280,000
250,000
30,000
10.714%
Administrative cost
140,000
120,000
20,000
14.286%
Operating profit
870,000
830,000
40,000
4.598%
Interest expense
78,000
80,000
(2,000)
-2.564%
Income before taxes
792,000
750,000
42,000
5.303%
Income before taxes
277,200
262,500
14,700
5.303%
Net income
514,800
487,500
27,300
5.303%
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