Accounting 505 Essay

Exercise 7–1
1. Total expected costs of the Maintenance Department:

Fixed costs $57,200 Variable costs ($0.75 × 22,000 maintenance hrs.) 16,500 Total costs $73,700

Single charging rate = $73,700/22,000 = $3.35 per maintenance hour

2. Charge based on actual usage = Charging rate × Actual maintenance hours

Assembly Department charge = $3.35 × 3,960 = $13,266 Fabricating Department charge = $3.35 × 6,800 = $22,780 Packaging Department charge = $3.35 × 10,000 = $33,500

Total amount charged = $13,266 + $22,780 + $33,500 = $69,546

3. Assembly Department charge = $3.35 × 4,000 = $13,400 Fabricating Department charge = $3.35 × 6,800 = $22,780 Packaging Department charge = $3.35 × 10,000 = $33,500

Total amount charged = $13,400 + $22,780 + $33,500 = $69,680

Exercise 7–8 1. Number Weight Weighted Number Allocated Grades of Pounds Factor of Pounds Percent Joint Cost

Grade A 1,500 3.0 4,500 0.1875 $1,125 Grade B 5,000 2.0 10,000 0.4167 2,500 Slices 8,000 0.5 4,000 0.1667 1,000 Applesauce 5,500 1.0 5,500 0.2292 1,375 Total 24,000 $6,000 2. If the Grade A weight factor is decreased to 2.0, then the weighted number of pounds would decrease by one-third and the Grade A apples would receive a relatively smaller amount of joint cost. However, the allocation of cost to all other grades will increase since the decreased weighted pounds for Grade A apples will impact all percentages. The following table shows what would happen:

Number Weight Weighted Number Allocated Grades of Pounds Factor of Pounds Percent Joint Cost

Grade A 1,500 2.0 3,000 0.1333 $ 800 Grade B 5,000 2.0 10,000 0.4444 2,666 Slices 8,000 0.5 4,000 0.1778 1,067 Applesauce 5,500 1.0 5,500 0.2444 1,467 Total 22,500 $6,000 *Adjust the $6,000 for rounding
Exercise 7–11
1. Total revenue: L-Ten ($2 × 3,500) $ 7,000 Triol ($5 × 4,000) 20,000 Pioze ($6 × 2,500) 15,000 $ 42,000 Further processing costs: L-Ten ($0.50 × 3,500) $ 1,750 Triol ($1.00 × 4,000) 4,000 Pioze ($1.50 × 2,500) 3,750 (9,500) Joint processing costs (12,900) Total gross margin $ 19,600

2. Gross margin percentage = Gross margin/Total revenue = $19,600/$42,000 = 0.4667, or 46.67% (rounded)

L-Ten Triol Pioze

Eventual market value $7,000 $ 20,000 $ 15,000 Less: Gross margin at 46.67% 3,267 9,334 7,001 Cost of goods sold $3,733 $ 10,666 $ 7,999 Less separable costs 1,750 4,000 3,750 Allocated joint cost $1,983 $ 6,666 $ 4,249

(Note: Allocated costs are rounded to the nearest dollar, so the allocated total is $12,898.) 3. An increase in the further processing cost of Triol will reduce the gross margin percentage and will decrease the joint cost allocated to Triol.

Total revenue $ 42,000 Further processing costs (13,500) Joint processing costs (12,900) Total gross margin $ 15,600

Gross margin percentage = $15,600/$42,000 = 0.3714, or 37.14% (rounded) L-Ten Triol Pioze Eventual market value $7,000 $ 20,000 $ 15,000 Less: Gross margin at 37.14% 2,600 7,428 5,571 Cost of goods sold $4,400 $ 12,572 $ 9,429 Less separable costs 1,750 8,000 3,750 Allocated joint cost $2,650 $ 4,572 $ 5,679

(Note: Allocated costs are rounded to the nearest dollar, so the allocated total is $12,901.)
Exercise 7–12 a. support f. support k. support b. producing g. support l. support c. support h. producing m. support d. producing i. producing n. support e. support j. producing o. support
Exercise 7–13 a. support e. producing i. producing b. support f. support j. support c.

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