I\'m in my second semester of Fin/Mgr Accounting and it\'s a difficult subject f

ID: 2562688 • Letter: I

Question

I'm in my second semester of Fin/Mgr Accounting and it's a difficult subject for me. I just want to say up front that during that entire time I've found help on Chegg with every single assignment I've had difficulty with, until now.

I have a very large, complicated bonus assignment in Managerial Accounting and I can't do it. It's huge and while I could possibly figure it out on my own given enough time, there's not that much time left in the semester. I'd really like to get those points, if I can I'll be in "A" territory.

What I've done is to put all the instructions and questions into 2 MS Word 2013 docs, I used MS Word because I had to copy & paste the information and it will retain most of the tables and answer fields.

My question is how do I go about posting all of this information to the "Ask an Expert" area? I've never asked an expert before so I'm uncertain about how a request moves through the system and gets to an expert. I'm hoping the expert communicates with the requester because I'll have to send you the .doc files and even then they may have questions.

So if there's a bored Accounting guru out there or if you're just looking for a challenge to spice up your weekend then I've got your solution.

Thank you for taking the time to read this and thanks in advance for what I'm sure will be a symphony of accounting brilliance.

Seriously, thank you very much.

Cliff

Genuine Spice Inc. began operations on January 1, 2016. The company produces eight- ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January direct materials, direct labor, and factory overhead costs are as follows DIRECT MATERIALS Cost Behavio Variable Variable Variable Units per Case 100 ozs. 30 ozs. 12 bottles Cost per Unit $0.02 0.30 0.50 Direct Materials Cost per Case 2.00 9.00 6.00 $17.00 Cream base Natural oils Bottle (8-oz.) DIRECT LABOR Labor Rate per Hour $18.00 14.40 Direct Labor Cost per Case $6.00 1.20 $7.20 Cost epartment ixing illing Behavior Variable Variable Time per Case 20 min 5 25 min FACTORY OVERHEAD Utilities Facility lease Equipment depreciation Supplies Cost Behavior Mixed Fixed Fixed Fixed Total Cost $ 600 14,000 4,300 660 $19,560

Explanation / Answer

1. Calculation of Fixed and variable portion of Utilities:

Total Utilities Cost = Fixed Utilites cost + Variable Utilties Cost

Variable Utilities Cost per unit is calculated by dividing the change in Total Utilities cost by number of additional units produced. Because when the production units increases fixed cost remains the same but variable portion increases. Therefore,

Variable Utilities cost per case = Increase in Utilities cost / Increase in production Units

Referring to last six months operation Table we get:

Change in Utilities Cost = $660 - $600 = $60

Change in production of units = 800 - 500 Units

Variable Cost per case = $60 / 300 = $0.2 per case

Variable Utilities Cost = $0.2 x 500 units produced = $100

Fixed Utilities Cost = Total Utilities Cost - Variable Utilities Cost

= $600 - $100 = $500

Note: Same can be verified by taking any number of units given in the table.

2. Contribution Margin per Case.

Particulars

Amount (In $)

Sale price per case

100

Less: Sales Commission (See Note 1)

(20)

Net Sales

Less: Direct Material cost per case

(17)

Less: Direct Labor cost per case

(7.20)

Less: Variable Utilities cost per case (Calculated in part1)

(0.20)

Contribution Margin per case

55.60

Note 1: Sales commission is always deducted from the Sales and not considered under Selling & Administration expenses.

3. Calculation of Fixed Cost per month

Fixed Cost per month = Fixed Utilities Cost + Facility lease + Equipment Depreciation + Supplies

= $500 + $14,000 + $4,300 + $660 = $19,460

4. Break Even numberof units.

Break even units means a point where the company is in a situation of no profit no loss. Break even can be calculated by divinding the Total fixed cost by Contribution per unit.

Break Even number of units = Total Fixed cost / Contribution per unit

= $19,460 / $55.6 = 350 units.

At production level of 350 units the company is at break even point. The same can be checked by multiplying the 350 units by $55.6 and then subtracting total fixed cost. The answer will be $0 profit.