P8-2A Bolus Computer Parts Inc. is in the process of setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting department for a budgeted volume of 50,000 units. Per Unit Total Direct materials $50 Direct labor $25 Variable manufacturing overhead $20 Fixed manufacturing overhead $600,000 Variable se selling an and ad administrative ex expenses $18 Fixed selling and administrative expenses $400,000 Bolus Computer Parts management requests that the total cost per unit be used in costplus pricing its products. On this particular product, management also directs that the target price be set to provide a 25% return on investment (ROI) on invested assets of $1,200,000. Instructions
(Round all calculations to two decimal places.) (a) Compute the markup percentage and target selling price that will allow Bolus Computer parts to earn its desired ROI of 25% on this new component. (b) Assuming that the volume is 40,000 units, compute the markup percentage and target selling price that will allow Bolus Computer Parts to earn its desired ROI of 25% on this new component.
(a)
Di Direct materials Direct labor Variable manufacturing overhead Variable selling and admin expense Variable cost per unit
Per Unit $113 20 $133 6 $139
Variable cost Fixed cost Total cost Desired ROI Selling price per unit Markup Percentage Desired ROI per Unit $6
(b)
Di Direct materials
$50 25 20 18 $113
÷ ÷
4.51% Total unit cost $133
$50
Fixed manufacturing overhead Fixed selling and admin expenses Fixed cost per unit
Total Costs $600,000 400,000
÷
Budg Budget eted ed = Cost Cost Per Per Volume Unit 50,000 $12 50,000 $8 $20
ROI: 25% x $1,200,000 $300,000 Expected income ROI Per Unit: $300,000 / 50,0 $6.00
Target Selling Price Total unit cost + $133 + $133 +
$139 (Total unit cost x Markup %) ($133 x 4.51%) $6.00
Total
÷
Budg Budget eted ed = Cost Cost Per Per
P11-4A Crede Manufacturing Company uses a standard cost accounting system. In 2005, 33,000 units were produced. Each unit took several pounds of direct materials and 11»3 standard hours of direct labor at a standard hourly rate of $12.00. Normal capacity was 42,000 direct labor hours. During the year, 132,000 pounds of raw materials were purchased at $0.90 per pound. All pounds purchased were used during the year. Instructions
SH SR AQ AP
Actual units produced Direct labor standard hours Direct labor standard rate Capacity Materials purchased Material price per pound
$
$
33,000 1.3334 12.00 42,000 132,000 0.90
per hour direct labor hours pounds
(a) If the materials price variance was $3,960 unfavorable, what was the standard materials price per pound? AQ
*
AP
132,000 * $ 0.90 / 132,000 $ 0.90 - $ 0.90
-
SP
=
MPV
SP
= $ / = - $ = $
3,960.00 U 132,000 0.03 0.90 0.87 per pound
SP SP
(b) If the materials quantity variance was $2,871 favorable, what was the standard materials quantity per unit? SP
*
AQ
SQ
=
MQV
(g) What was the standard cost per unit of product?
Direct material Direct labor Manufacturing overhead
Standard Price $ 0.87 12.00 7.80 $ 20.67
Standard Units 4.10 Pounds 1.3334 Hours 1.3334 Hours
Standard Cost Per Unit 3.567 16.001 10.401 $ 29.968 Total standard cost p
(h) How much overhead was applied to production during the year? Manufacturing overhead rat $ Actual hours Overhead applied $
7.80 44,700 348,660
(i) If the standard fixed overhead rate was $2.50, what was the overhead volume variance? Fixed OHR $
* Capacity -
2.50 *
42,000 -
SH
=
OVV
44,000 = $
5,000 F
(j) If the overhead controllable variance was $3,000 favorable, what were the total variable overhead costs incurred? (Assume that the overhead controllable variance relates only to variable costs.)
Manufacturing overhead rate Less fixed overhead rate Variable overhead rate Standard hours Budgeted variable OH Less Controllable OH variance Total variable OH costs
$ x $ $
7.80 2.50 5.30 44,000 233,200 3,000 F 230,200
(k) Using selected answers above, what were the total costs assigned to work in process?