Champs, Inc., manufactures women’s boating shoes

Question

(1)Champs, Inc., manufactures women’s boating shoes. Manufacturing overhead is assigned to production on a machine-hour basis. For 2010, it was estimated that manufacturing overhead would total $366,960 and that 27,110 machine hours would be used.

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(a)
Calculate the predetermined overhead application rate that will be used for absorption costing purposes during 2010. (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

Predetermined overhead application rate?

(b)
During May, 4,000 pairs of shoes were made. Raw materials costing $6,990 were used, and direct labor costs totaled $9,740. A total of 730 machine hours were worked during the month of May. Calculate the cost per pair of shoes made during May. (Round your intermediate calculations and final answer to 2 decimal places. Omit the “$” sign in your response.)

Cost per pair of shoes?

(c)
At the end of May, 1,040 pairs of shoes were in ending inventory. Calculate the cost of the ending inventory and the cost of the shoes sold during May. (Round your intermediate calculations and final answer to 2 decimal places. Omit the “$” sign in your response.)

Cost of shoes in inventory?
Cost of shoes sold?

(2)
Galvaset Indutries manufactures and sells custom-made windows. Its job costing system was designed using an activity-based costing approach. Direct materials and direct labor costs are accumulated separately, along with information concerning three manufacturing overhead cost drivers (activities). Assume that the direct labor rate is $11 per hour and that there were no beginning inventories. The following information was available for 2010, based on an expected production level of 48,600 units for the year, which will require 231,000 direct labor hours:

Activity
(Cost Driver) Budgeted
Costs for 2010 Cost Driver Used
as Allocation Base Cost
Allocation Rate
Materials handling $ 277,200 Number of parts used $ 0.28 per part
Cutting and lathe work 2,494,800 Number of parts used 1.45 per part
Assembly and inspection 4,158,000 Direct labor hours 18.00 per hour

The following production, costs, and activities occurred during the month of March:

Units
Produced Direct
Materials Costs Number
of Parts Used Direct
Labor Hours
3,050 $102,300 49,930 13,100

(a)
Calculate the total manufacturing costs and the cost per unit of the windows produced during the month of March (using the activity-based costing approach).

Total manufacturing cost ?
Cost per unit produced ?

(b)
Assume instead that Galvaset Industries applies manufacturing overhead on a direct labor hours basis (rather than using the activity-based costing system previously described). Calculate the total manufacturing cost and the cost per unit of the windows produced during the month of March. (Hint: You will need to calculate the predetermined overhead application rate using the total budgeted overhead costs for 2010.)
Total manufacturing cost?
Cost per unit produced?

(c)
Which approach do you think provides better information for manufacturing managers?
(4)Conolly, Inc., manufactures pocket calculators. Costs incurred in making 9,340 calculators in April included $29,400 of fixed manufacturing overhead. The total absorption cost per calculator was $10.3.

Required:
(a)
Calculate the variable cost per calculator.
Variable cost per calculator?

(b)
The ending inventory of pocket calculators was 840 units higher at the end of the month than at the beginning of the month. By how much and in what direction (higher or lower) would operating income for the month of April be different under variable costing than under absorption costing?
Operating income under variable costing will be $___________ , __________ than
under absorption costing.

(c)
Express the pocket calculator cost in a cost formula.
Total cost = $ ___________+___________ ($__________ / calculator × number of calculators)

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