Variable Marketing Costs Assignment
Assignment 1 Question 1 Slopes Inc, manufactures and sells snowboards. Slopes manufacture a single model, the Pipex. In the summer of 218, Slopes management accountant gathered the following data to prepare budgets for 2019. Material and Labour requirements: Direct materials: Wood Fiberglass Direct labor 5 meters per snowboard 6 meters per snowboard 5 hours per snowboard Slopes' CEO expects to sell 1 000 snowboards during 2019 at an estimated retail price of R450 per snowboard. Further, the CEO expects 2019 beginning inventory of 100 snowboards and would like to end 2018 with 200 snowboards in stock Direct materials inventories Wood Fibreglass Beginning inventory 1/1/2019 2 000 meters 1 000 meters Ending inventory 31/12/2019 1 500 meters 2000 meters Variable manufacturing overhead is R7 per direct labor-hour. There are also R66 000 in fixed manufacturing overhead costs budgeted for 2019. Slopes combines both variable and fixed manufacturing overheads into a single rate based on direct labor-hours. Variable marketing costs are allocated at the rate of R250 per sales visit The marketing plan calls for 30 sales visits during 2019.
Finally, there are R30 000 in fixed non-manufacturing costs budgeted for 2019 Other data include the following: Wood Fiberglass Direct labor 2018 unit price R28 per meter R4.80 per meter R24 per hour 2 019 unit price R30 per meter R5 per meter R25 per hour The inventoriable unit cost for ending finished goods inventory on 31 December 2018 is R374.80 Budgeted balances at 31 December 2018 in the selected accounts are as follows: Cash R10 000 Property, plant, and equipment R850 000 Current liabilities R17 000 Long-term liabilities R178 000 Stockholders equity R800 000 You are required to prepare the following for 2019: b. C. Sales budget Production budget Direct materials purchases budget Direct labor budget Manufacturing overhead budget Calculate the budgeted manufacturing overhead rate Calculate the budgeted manufacturing overhead cost per unit Calculate the unit cost of a snowboard Ending inventory budget for both direct materials and finished goods Cost of goods sold budget Budgeted income statement Budgeted balance sheet Question 2 On 31 December 2018, the Itami Wholesale Co. is attempting to project cash receipts and disbursements through 31 January 2019. On this latter date, a note will be payable in the amount of R100 000. This amount was borrowed in September to carry the company through the seasonal peak in November and December Selected General Ledger balances on 1 December 2018 are as follows: Debit Credit Cash R88 000 Inventory R65 200 Accounts payable R136 000 Sales terms call for a 30% discount if payment is made within the first 10 days of the month after sales, with the balance due by the end of the month after sale. Experience has shown that 50% of the billings will be collected within the discount period, 30% by the end of the month after purchase, and 14% in the following month. The remaining 6% will be uncollectable. There are no cash sales. The average selling price of the company's products is R100 per unit. Actual and projected sales are as follows: R280 000 October actual R320 000 November actual December estimated R330 000 R250 000 January estimated R240 000 February estimated R2 400 000 Total estimated for the year ending 30 June 2019 All purchases are payable within 15 days. Approximately 60% of the purchases in a month are paid that month, and the rest the following month. The average unit purchase cost is R80. Target ending inventories are 500 units plus 10% of the month's unit sales Total budgeted marketing, distribution, and customer-service costs for the year are R600 000. of this amount, R120 000 are considered fixed (and include depreciation of R30 000). The remainder varies with sales. Both fixed and variable marketing, distribution and customer service costs are paid as incurred. Required: 2.1 Prepare a cash budget for December 2018 and January 2019. Supply supporting schedules for collections of receivable; payments for merchandise: and marketing, distribution and customer-service costs. Question 3 On 1 May 2018, Bovar Company began the manufacture of a new paging machine known as Dandy. The company installed a standard costing system to account for manufacturing costs. The standard costs for a unit of Dandy are: Direct material (3kg @ R5 per kg) Direct labor (1 hour @ R20 per hour) Manufacturing overhead (75% of direct labor costs) R15.00 R10.00 R 7.50 R32.50 Credit R125 000 R68 250 The following data were obtained from Bovar's records for the month of May Debit Revenues Accounts payable control (for May's purchases of direct materials) Direct materials price variance R3 250 R2 500 Direct materials efficiency variance R1 900 Direct labor rate variance Direct labor efficiency variance R2 000 Actual production in May was 4 000 units of Dandy, and actual sales for May were 2 500 units. The amount shown for direct materials price variance applies to materials purchased during May. There was no beginning inventory of materials on 1 May 2018 Required: 3.1 Calculate each of the following items for Bovar for the month of May. Show all your calculations: C. Standard direct labor hours allowed for actual output produced Actual direct labor hours worked Actual direct labor wage rate Standard quantity of direct materials allowed in kilograms) Actual quantity of direct materials used in kilograms) Actual quantity of direct materials purchased (in kilograms) Actual direct materials price per kilogram e. 3.2 Prepare journal entries for the purchasing and issuing of direct materials and the allocation of direct labor to production. Write off the variances to the cost of goods sold Question 4 Event budgets 18 000 machine hours for the production of computer chips in August 2018 The budgeted variable overhead rate is R6 per machine-hour. At the end of August, there is a R375 favorable spending variance for variable overhead and a R1 575 unfavorable spending variance for fixed overhead. For the computer chips produced, 14 850 machine hours are budgets and 15 000 machine-hours are actually used. Total actual overhead costs are R120 000 Required: 4.1 Calculate efficiency and total variance for Dvent's variable overhead in August 2018, 4.2 Calculate the production-volume variance and total variances for Dvent's fixed overhead for August 2018 NB: Indicate whether the variances are favorable or unfavorable. .