Acc 349 Week 5 Individual

Topics: Costs, Total cost, Variable cost Pages: 5 (1327 words) Published: April 1, 2013
Week 5 Problems and questions
ACC 349

a.       Chapter 8 – Exercise E8-11
E8-11 Allied Company’s Small Motor Division manufactures a number of small motors used in household and office appliances. The Household Division of Allied then assembles and packages such items as blenders and juicers. Both divisions are free to buy and sell any of their components internally or externally. The following costs relate to small motor LN233 on a per unit basis. Fixed cost per unit \$ 5 Variable cost per unit 8 Selling price per unit 30 Instructions

(a) Assuming that the Small Motor Division has excess capacity, compute the minimum acceptable price for the transfer of small motor LN233 to the Household Division.

Cost per unit + Opportunity cost = minimum transfer price
\$13 + \$0 = \$13

(b) Assuming that the Small Motor Division does not have excess capacity, compute the minimum acceptable price for the transfer of the small motor to the Household Division.

Cost per unit + Opportunity cost = minimum transfer price

\$13 + \$17 = \$30

(c) Explain why the level of capacity in the Small Motor Division has an effect on the transfer price.
The reason the level of capacity in the small motor division has an effect on the transfer price is due to loss on profit margins selling to an outside customer when selling to an internal consumer. If a division of a company is operating at maximum capacity and are not able to produce more goods than they can sell to outside customers they would lose money selling their goods to another division of the same company for their cost to manufacture. However, if a company is able to produce more goods than they can sell to outside customers they will not actually lose any money selling at their cost to a different division of the same company.

b.       Chapter 9 – Brief Exercises BE9-6 and BE9-8 BE9-6 For Savage Inc. variable manufacturing overhead costs are expected to be \$20,000 in the first quarter of 2005 with \$2,000 increments in each of the remaining three quarters. Fixed overhead costs are estimated to be \$35,000 in each quarter. Prepare the manufacturing overhead budget by quarters and in total for the year.

Quarter| 1| 2| 3| 4| Total for year|
Variable manufacturing overhead| 20,000| 2,000| 2,000| 2,000| 26,000| Fixed cost| 35,000| 35,000| 35,000| 35,000| 140,000|
Total | 55,000| 37,000| 37,000| 37,000| 166,000|

BE9-8 Stoker Company has completed all of its operating budgets. The sales budget for the year shows 50,000 units and total sales of \$2,000,000. The total unit cost of making one unit of sales is \$24. Selling and administrative expenses are expected to be \$300,000. Income taxes are estimated to be \$150,000. Prepare a budgeted income statement for the year ending December 31, 2005.

Stoker CompanyBudgeted Income StatementFor the Year Ending December 31,2005Sales \$2,000,000 Cost of Goods Sold (\$24 x 50,000) 1,200,000 Gross Profit 800,000Selling and administrative expenses 300,000 Income before taxes 500,000Income tax expense 150,000Net income 350,000 |

c.       Chapter 11 – Questions 1, and 11
1. (a) “Standard costs are the...