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____ [38]
3 years ago
13

Are the materials costs and processing costs relevant in the choice between alternatives A and B?

Business
1 answer:
podryga [215]3 years ago
4 0

Answer:

Please see explanation.

Explanation:

Material Cost = A cost which is used to prepare a goods or services is termed as material cost.

Processing Cost = When a cost incurs to satisfy customers want from taking orders to ensuring product delivery, it is called processing cost. It includes taking order, tracking, keeping and maintaining inventories, manufacturing products, customer support, and product delivery.

When there are two alternatives including processing and material costs, we have to use three scenarios:

A) In both the alternatives, the material cost is $50,000 and $55,000. The processing cost is $40,000 and $45,000.

In that case, since material cost and processing cost vary from one alternative to another, both the cost are relevant.

B) In both the alternatives, the material cost is $50,000 and $50,000. The processing cost is $40,000 and $45,000.

In that case, since the cost for material in alternative A and B is similar while the processing cost is different, therefore, only processing cost is relevant.

C) In both the alternatives, the material cost is $50,000 and $55,000. The processing cost is $40,000 and $40,000.

In that case, since the cost for material in both the alternatives are different while the processing cost is similar, only material cost is relevant.

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$5400 Favorable

Explanation:

Standard 2 hour at $15 per hour

Standard hours 2 hour per unit * 2900 units = 5800 hours

Total Standard cost = 5800 hours * $15 per hour =  $87,000

Actual hours = 5100

Actual cost = $81600 / 5100 hours = $16 per hour

Variance = Standard - Actual

Labor hour Variance Favorable = 700 hours (5800 hours - 5100 hours)

Total Labor variance = $5400 ($87,000 - $81,600)

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A comparative balance sheet for Culver Corporation is presented as follows.
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Answer:

Increase in cash = $50,740

Explanation:

The statement of cash flows for 2020 can be prepared as follows:

Culver Corporation

Statement of Cash Flows

For December 31, 2020

<u>Particulars                                                               $                       $             </u>

Net income                                                        127,440

Adjustment to reconcile net income:

Depreciation expenses (w.1)                             26,740

(Increase) decrease in current assets:

Increase in accounts receivable (w.2)             (15,740)

Decrease in inventory (w.3)                                9,260

Increase (decrease) in current liabilities:

Decrease in accounts payable (w.4)             <u>  (13,260)  </u>

Net cash from operating activities                                          134,440

<u>Cash Flow from Investing Activities </u>

Sales of land (w.5)                                             39,260          

Purchase of equipment (w.6)                         <u> (59,740) </u>

Net cash from investing activities                                            20,480

<u>Cash Flow from Financing Activities</u>                                      

Cash dividends paid                                      <u>  (63,220)  </u>

Net cash from financing activities                                         <u>   63,220   </u>

Increase / (Decrease) in cash                                                     50,740

Beginning cash balance                                                           <u>   22,000  </u>

Ending cash balance                                                                <u>   72,740</u><u>  </u>

Workings:

w.1: Depreciation expenses = Accumulated Depreciation in 2020 -  Accumulated Depreciation in 2019 = $70,220 - $43,480 = $26,740

w.2: Increase in accounts receivable = Accounts receivable in 2020 - Accounts receivable in 2021 = $83,220 - $67,480 = $15,740

w.3: Decrease in inventory = Inventory in 2020 - Inventory in 2019 = 181220 190480 = -$9,260

w.4: Decrease in accounts payable = Accounts payable in 2020 - Accounts payable in 2019 = ($35,220 - $48,480) = $13,260

w.5: Sales of land = Land in 2019 - Land in 2020 = ($111,480 - $72,220) = $39,260

w.6: Purchase of equipment = Equipment in 2020 - Equipment in 2019 = $261,220- $201,480 = $59,740

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