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Amiraneli [1.4K]
3 years ago
6

Hadley, Inc. manufactures a product that uses $18 in direct materials and $5 in direct labor per unit. Under the traditional cos

ting system Hadley uses, manufacturing overhead applied to each unit is $13. However, Hadley is considering switching to an ABC system. Under the ABC system, the total activity cost would be $30. What is the total manufacturing cost per unit for Hadley under the ABC system
Business
1 answer:
Rama09 [41]3 years ago
6 0

Answer:

Total Manufacturing cost per unit is $53

Explanation:

Manufacturing cost is the cost used to manufacture a product, both direct and indirect cost incurred in manufacturing process are included. It is the total value of material cost, labor cost and overhead cost.

Direct Material Cost = $18

Direct Labor cost  = $5 per hour

Manufacturing overhead applied = $13 per unit

Total Activity rate = $30

Activity based costing is the method of allocation of overhead to the products / department / projects on the basis of uses of activity by each one.As we know that calculating an activity rate which is similar to predetermined overhead rate.

Total Manufacturing Cost = Direct material cost + Direct Labor cost + Manufacturing overhead cost

As we know that calculating an activity rate which is similar to predetermined overhead rate. so the activity rate will be used for overhead expense.

Total Manufacturing Cost = $18 + $5 + $30 = $53 per unit

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3 years ago
True Tomato Inc. makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To
Amanda [17]

Answer:

The answer is: Physical asset specificity

Explanation:

In a business to business relationship, physical asset specificity refers to an asset, or product or service designed to fit a particular or specialized customer's need.

In this case, True Tomato needs a very specific type of bottle that probably no other ketchup manufacturer may use or want to use. So their bottle supplier specifically manufactures the tomato shaped bottle to meet True Tomato's specific requirements.

3 0
2 years ago
Erin Shelton, Inc., wants to earn a target profit of $960,000 this year. The company’s fixed costs are expected to be $1,320,000
kipiarov [429]

Answer:

1. Break-even sales = $2,200,000

2. Net Income = $0

3. Sales = $3,800,000

4. See explanation section

5. Margin of safety = $1,600,000

Margin of safety (%) = 42.11%

Explanation:

Requirement 1.

We know,

Break-even sales = Fixed expense ÷ Contribution Margin Ratio

Given,

Expected Fixed expense = $1,320,000

Contribution Margin Ratio = Contribution Margin ÷ Sales Revenue

As we do not have contribution margin and Sales Revenue, we have to use variable costs that is expected to be 40% of sales. Therefore,

Contribution Margin Ratio = Sales (%) - variable costs (%) = 100% - 40% = 60%

Therefore, Break-even sales = $1,320,000 ÷ 60%

Break-even sales = $1,320,000 ÷ 60%

Therefore, Break-even sales = $2,200,000

Requirement 2.

                         Erin Shelton, Inc.

Contribution Margin Income Statement format

For the year ended, December 31, Current year

Sales Revenue                                          $2,200,000 (<em>Requirement 1</em>)

<u>Less: Variable expense (40% of sales)         880,000</u>

Contribution Margin                                  $1,320,000

<u>Less: Fixed Expense                                   1,320,000</u>

Net operating Income                                        0

In break-even sales, total fixed expense = total contribution margin, therefore, no income or loss.

Requirement 3.

We know,

This year, To attain profit, sales = (Fixed expense + Target Profit) ÷ Contribution Margin Ratio

Given,

Expected Fixed expense = $1,320,000

Target Profit = $960,000

Contribution Margin Ratio = Contribution Margin ÷ Sales Revenue

As we do not have contribution margin and Sales Revenue, we have to use variable costs that is expected to be 40% of sales. Therefore,

Contribution Margin Ratio = Sales (%) - variable costs (%) = 100% - 40% = 60%

Therefore, To attain profit, sales = ($1,320,000 + $960,000) ÷ 60%

To attain profit, sales = $2,280,000 ÷ 60%

Therefore, To attain profit, sales = $3,800,000

Requirement 4.

Using To attain profit, sales = $3,800,000 (From Requirement 3) to find the net operating income

                          Erin Shelton, Inc.

Contribution Margin Income Statement format

For the year ended, December 31, Current year

Sales Revenue                                          $3,800,000 (<em>Requirement 3</em>)

<u>Less: Variable expense (40% of sales)        1520,000</u>

Contribution Margin                                  $2,280,000

<u>Less: Fixed Expense                                   1,320,000</u>

Net operating Income                                $960,000

Requirement 5.

We know,

Margin of safety = (Current sales - Break-even sales)

<em>From Requirement 1, we get, Break-even sales = $2,200,000</em>

<em>From Requirement 3, we get, Current sales = $3,800,000</em>

Margin of safety = $3,800,000 - $2,200,000

Therefore, Margin of safety = $1,600,000

Margin of safety as percentage = [(Current sales - Break-even sales) ÷ Current sales] × 100

Margin of safety = ($1,600,000 ÷ $3,800,000) × 100

or, Margin of safety = 0.42105 × 100

Margin of safety = 42.11%

8 0
3 years ago
Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2018, 150 share
amid [387]

Answer and Explanation:

The journal entries are shown below:

On Mar 1

Cash (2,200 × $17) $37,400  

  To Common Stock (2,200 × $1)  $2,200

  To Paid in capital in excess of par - Common stock (2,200 × $16)  $35,200

(Being the issuance of the common stock is recorded)  

On April 1

Cash (150 × $32) $4,800  

       To  Preferred stock (150 × $10)  $1,500

        To Paid in capital in excess of par - Preferred stock (150 × $22)  $3,300

(Being the issuance of  the preferred stock is recorded)  

O Jun 1

Dividends    $2,820  

   Dividends payable  $2,820

(Being the dividends declared is recorded)

 

On June 30

Dividends payable $2,820  

         To    Cash  $2,820

(Being the dividends paid is recorded)  

On Aug 1

Treasury stock (250 × $14) $3,500  

      To Cash  $3,500

(Being the treasury stock is recorded)  

On Oct 1

Cash (150 × $16) $2,400  

  To Treasury stock (150 × $14)  $2,100

  To Paid in capital in excess of par -Treasury stock (150 × $2)  $300

(Being the reissue of treasury stock is recorded)  

The computation of the dividend is shown below:

For common stock

= (2,200 + 2,200) × $0.60

= 4,400 × $0.60

= $2,640

For  preferred stock

= (150 + 150) × $0.60

= $180

Total dividends is

= $2,640 +$180

= $2,820

4 0
3 years ago
Allegheny Company ended 2015 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $58,000 and $2,700, res
Nady [450]

Answer:

$6,500

Explanation:

Allowance for doubtful accounts is a reduction in the total amount of accounts receivable given in the company´s balance sheet. Such an allowance is actually and estimate from the management of the accounts receivables that it doesn´t expect to receive.

Ecuation:

Adjustment =  - Beginning balance + Write offs + Ending balance

Adjustment = ($2,700) + $4,800 + $4,400

Adjustment =  $6,500

The estimation of the write off from the previous year must be discounted, the added the write off registered during the year plus the estimate at the end of the period.

6 0
2 years ago
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