Acct 2017 GRADED ACTIVITY 1

QUESTION 1

Part i

Fixed cost $450.00

Selling price - Variable cost = Contribution margin

$15.00 - $6.00 = $9.00

Therefore, breakeven point in sales Fixed cost = $450.00 = 50

Contribution margin $9

Part ii

Fixed cost $450.00

Selling price - Variable cost = Contribution margin

$15.00 - $5.00 = $10.00

Therefore, breakeven point in sales Fixed cost = $450.00 = 45

Contribution margin $10

QUESTION 2

Predetermined overhead rate = Budgeted manufacturing overhead cost

Budgeted amount of cost driver

= $997,500
75,000

= $13.30 per direct labour hour

PART II
Actual manufacturing overhead $1,002,000
Actual number of direct labour hours 80,000
Allocated manufacturing overheads 80,000 * $13,30
= $1,064,000

Manufacturing overhead allocated $1,064,000

Actual manufacturing overhead $1,002,000
Overapplied overhead $62,000

PART III
Journal Entry

Cost of sales 62,000

Manufacturing overhead 62,000

QUESTION 3

Part i

Raw materials beginning $71,000

Add: Raw materials purchased x
Less: Raw materials ending $81,000
Direct material used $326,000

$71,000 + x -$81,000 = $326,000

x = $326,000-$71,000+$81,000
x = $336,000

Cost of direct material used for the year is $326,000

Part ii
What was the direct- labour cost charged to production during the year.
Total manufacturing costs for Alek manufacturing Company is equal
Direct material $326,000 + Direct labour x + manufacturing overhead 60% * x
Working
326,000 + x + 60%* x
686,000

326,000 + x + 60% = 686,000

1.60x = 686,000 - 326,000
1.60 x = 360,000
x = 360,000/1.60
225000

Direct labour cost charged to product during the year =

$225.000

Part iii
Cost of good manufactured
Direct Material $326,000
Direct labour $225,000
Prime Cost $551,000
Manufacturing overheads $135,000
Add opening work in process $80,000
Less ending work in process -$30,000
Cost of good manufactured $736,000

Cost of goods sold for the year

Finished goods inventory $90,000
Add Cost of goods manufactured $736,000
Goods available for sale $826,000
Less Finished goods inventory, ending -$110,000
Cost of goods sold $716,000
QUESTION 4

Part i
Physical Direct Conversion

Units Material Cost

Work in process, beginning 0
Started during current period 152,000
To account for 152,000
Completed and transferred put during current period 120,000 120,000 120,000
Work in process ending 32,000 32,000 25,600
(32,000 x 100%, 32,000 x 80%)
Accounted for 152,000 152,000 145,600

Degree of completion direct materials 100% and conversion costs 60%

Part ii

Cost of the Ending WIP

Part ii
Direct Conversion
Material Cost
Cost added during October 145,900 204,000
Equivalent Units (EU) 152,000 145,600
Cost per Unit 0.96 1.40

Direct Material 32,000 *0.96 $30,720.00

Conversion Cost 25,640 * $1.40 $35,840.00
Total ending work in process $66,560.00
Part iii

Part iii

Direct material (120,000 *$ 0.96) $115,200.00

Conversion cost (120,000 * $1,40) $168,000.00
Total cost of goods completed $283,200.00

Part iv

The term equivalent full units refer to partially completed units that are made equivalent to a full unit.
An example occurs where a company has 1,000 partially completed units of 30%,
the units can be regarded as 300 full units.

QUESTION 5

Part i
Selling price per unit $20.00
variable cost = Direct material + Direct manufacturing labour + Manufacturing overhead + Selling cost
$4.00 + $1.60 + $0.40 + $2.00
$8.00

Contribution
margin Selling price - variable cost
$20 - $8
$12

Part ii

Selling price x Quantity of units sold - Variable Cost X Quantity of units sold - fixed cost = 0
($20 x X) - ($$8.00 x X) - $96,000 = 0
$20X - $8x - 96,000 = 0
12X = $96,000
x = 96,000/12
x=
8,000
8,000 units would have to be sold each year to break even.

Part iii

Selling price x Quantity of units sold - Variable Cost X Quantity of units sold - fixed cost = Target Income
($20 x X) - ($$8.00 x X) - $96,000 = $144,000
$20X - $8x - 96,000 =
$144,000
12X - $96,000 = $144.000
12x = $144,000 + $96,000
12x =$ 240,000
x = $240,000
12

x=
20,000

20,000 units would have to be sold to yield a profit of $144,000.