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Objectives:

1. Apply accounting
manufacturing concepts to an actual product to solidify the learning process.

2. Learn how all the
numbers fit together.

3. Develop decision
making analysis techniques.

Manufacturing Questions Instructions:

1. This project should stand by itself. Include the questions with your

Identify all numbers. Points
will be deducted if I can’t understand what you are answering.
2. You may use Excel to complete tables and/or answer
questions.
Just make sure you label
your work and turn the Excel file in.
3. You may discuss this project with classmates. A discussion board is available to
discuss the project.
Try to get
help from classmates first.
Your
professor will only provide limited individual help, but will monitor the
discussion board to make sure advice is on the right path
4. You can also print, hand write the answers, and submit a
scanned copy

1. Your
company produces a fancy bag of potato chips . There are three main
processes used in the chips.
The
first process washes and peels the potatoes.
The second process slices and fries the
potatoes.
The third process seasons
and packages the chips.
The potato
chips are sold in 12 oz bags (1 bag is a unit)

1. Information
on the direct materials is listed in table 1. Consider this information
the standard.

1. Direct labor information
given in Table 2.
Consider this
information the standard.

allocated based direct labor hours.

Estimated annual direct labor hours are 15,000. Calculate a predetermined OH rate (round
to two decimal places if needed).

Use this rate when you need to apply OH.

1. Table 4 gives you the information for the last two months on
Use this
information to determine the fixed and variable portions of the cost.
(You will need this information to
complete Table 5). Machine hours have been determined as the best cost
driver for separating mixed cost into their fixed and variable portions.
It takes approximately 12 minutes of total machine time for each bag of
chips (or 1/5 a machine hour per bag of chips).

1. Table 5 is where you will list all your production cost,
separated into their fixed and variable components.

1. Cost-Volume-Profit (CVP) Relationships

a.
Selling Price: You sell a bag of chips for
\$7.55

b.
Breakeven point: Calculate the breakeven point. Be
sure to include the fixed component of mixed cost in your fixed costs and the
variable component in the variable cost.

Show your breakeven in Sales units and in Sales Dollars

c.
Profit Planning: Determine the number of
units you must sell to make an annual pre-tax profit using 3 assumptions
concerning your net income (profit), both in sales units and sales dollars.

i.
Aggressive Profit (\$150,000)

ii.
Conservative Profit (\$25,000)

iii.
Average Profit (\$78,900)

1. Budgeting:

a.
Create a sales budget using the
information for earning an average profit for the year.
You will break the budget down into the four
quarters for the year. (Sales tend to be consistent each quarter, you can only
sale a whole unit so round-up if necessary) Use table 6 to complete the sales
budget.

b.
Create a production budget for
each quarter of the year (keep it in quarters; you do not need to break it down
by month).
You desire to keep 10% of
next quarter’s sales in ending inventory.

Sales for Qtr 1 year 2 are expected to be 20,000 bags of chips. Beginning
finished inventory for Q1 is 0. Use table 7 to complete the production budget.

1. Running quarter two — Weighted-average process costing. Table 8 presents the information for the
packaging department.
Complete the
questions under table 8.

1. Actuals are in for quarter two.
You sold 20% more units than you budgeted for, but price per unit
was only \$7.45.

a.
Calculate revenue

b.
Compute the cost of goods sold
(total and per unit) before adjusting for actual OH cost.
All Q1 ending finished goods inventory was
sold in Q1.
All Q2 sales came from what
was produced in Q2.

1. Actual potato usage for quarter two was 123,700 pounds at a
price of \$0.48 per pound. Actual equivalent units of production (bags of
chips) completed through the first process (where the potatoes are added)
was 23,500.
Calculate the direct
materials variances for the potatoes (price, usage, and total) and
indicate if these variances are favorable or unfavorable.

1. Actual direct labor hours for the quarter were 4,780 at an
average rate of \$12.00 per hour.

For actual production you expected to use 4,700 direct labor hours. Calculate the direct labor variances
(rate, efficiency and total) and indicate if these variances are favorable
or unfavorable.

1. For next quarter you have been asked to supply a special order
of you potato chips.
The non-profit
organization requesting this order would like a custom bag (packaging)
that will cost \$0.40 instead of the normal \$0.30 per bag.
The request is for 1,000 bags of
chips.
you have the capacity for this order.

What is the minimum price per unit and total price you would be
willing to accept on this order?

(You cannot afford to take this offer at a loss, but you are fine
with accepting it at cost).

1. Determine over- or under-applied overhead and close to cost of
goods sold.
Actual OH cost are
given in table 14 (look at #12 for actual DL hours used to apply OH).
Determine the new cost of goods sold
amount.

Table 1: Direct
Materials

 Material Quantity per unit Cost Total per unit potatoes 5 lbs \$0.50 \$2.50 seasoning 1 ounce 0.05 0.05 packaging 1 bag 0.30 0.30 Total cost \$2.85

Table 2: Direct Labor

 Job description Hours per bag Rate Total cost Potato washer & peeler 0.1 \$11.70 \$1.1700 Slicer & Fryer 0.05 11.70 0.5850 Packager 0.05 11.70 0.5850 Total cost \$2.34

Table 3: YEARLY

 Cost description Amount Indirect material \$7,620 Indirect labor 60,600 Machine Maintenance 5,230 Electricity 7,350 Depreciation 7,500 Quality testing 9,200 Total \$97,500

Predetermined OH
rate:

Table 4 – Actual
Overhead cost for the last two months

 Month 1 Month 2 Indirect Material \$635 \$635 Indirect Labor 5,050 5,050 Machine Maintenance 390 465 Electricity 550 675 Depreciation 625 625 Quality testing 730 855 Machine Hours * 1,100 1,350

*12 minutes of machine time per bag of chips (1/5 hour
= 1 unit)

Complete any calculations here:

Table 5:
Variable and Fixed Costs

COSTS Description VARIABLE Cost per unit FIXED Cost per Year

 TOTAL

If a cost is mixed, put the fixed amount in
the fixed column and the variable amount in the variable column.

CVP Calculations:

Table 6 – Sales
Budget

 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total

Table 7 –
Production Budget

 Qtr 1 Qtr 2 Qtr 3 Qtr 4

Process Costing –
Packaging Department

Direct materials
are added 70% at the beginning of the process and the remaining 30% are added
when the chips are 50% complete with the packaging process.
throughout the process.

Table 8 – Unit and
cost information

 Cost Physical Units Transferred-in Direct Materials Direct Labor Overhead Beg WIP 1,300 (40% complete) \$6,799 \$65 507.80 169 Transferred In 24,000 \$120,713 End WIP 2,100 (30% complete)

Direct Materials — \$8569.50

Direct Labor – 1,200 hrs @ \$12.00 per hour

Overhead – OH is applied based on predetermined OH
rate and actual DL hours

1.Determine the number of units completed
during quarter 1.

2.Compute the equivalent units using the
weighted average method

3.Compute the cost per equivalent unit using
the weighted average method

4.Compute the cost of goods transferred to
finished goods inventory

5.Compute the ending balance in WIP,
Packaging

Table 10 – Actual Results (calculate
revenue and COGS)

 Units sold Sales Price Revenue Units sold Cost per unit COGS

Table 11 – DM Variances (potatoes only)

 Price Variance Usage Variance Total Variance

Calculations:

Table 12 – Direct Labor Variances

 Rate Variance Efficiency Variance Total Variance

Calculations:

#13 Calculations (Minimum price on special
order)

Table 14 – Actual OH cost for Quarter 1

 Description Cost Indirect Materials \$1,905 Indirect Labor \$15,150 Machine Maintenance \$1,546 Electricity \$3,150 Depreciation \$1,875 Quality Testing \$3,240

Amount of applied OH:

Amount of actual OH:

Under or Over- Applied Amount:

New COGS amount: