USA: +1 (725) 712-1730 
Sign in
For a traditional Up a. Budgeted costs for the mainterlll c. The costs of resources are traced to activities and then to products d. e purchasing department is set up as a responsibility center Activities are identified and listed maintenance department The maintenance department manager receives a bonus fo standard for a product’s material usage cost is set and compared ag actual materials usage cost against the product e. ctirvities are categorized as adding or not adding value to the organizatio als handling cost. price set h cost of performing an activity is tracked over time. oves is identified as the cause of materials handling i. The distance between n purchasing agent is rewarded for buying parts below the standard plan activity is reduced dramatically by redesigning the company The cost of the materials handling roduction k. l. An investigation is undertaken to find out why the actual labor cost for the product m. The percentage of defective units is calculated and tracked over time n. Engineering has been given the charge to find a way to reduce setup time by 75 percen o. The manager of the receiving department lays off two receiving clerks so thattent 1.000 units is greater than the labor standard allowed quarter budget can be met. Required Classify the preceding actions as belonging to either an activity-based operational control systen or a traditional control system. Explain why you classified each action as you did 4 Problem 2.32 Income Statement, Cost of Goods Manufactured Spencer Company produced 200,000 cases of sports drinks during the past calendar year case of I-liter bottles sells for $36. Spencer had 2,500 cases of sports drinks in finished goods in- ventory at the beginning of the year. At the end of the year, there were l 1,500 cases of sports drinks in finished goods inventory. Spencer’s accounting records provide the following information: . Each Purchases of direct materials Direct materials inventory, January 1 Direct materials inventory, December 31 Direct labor Indirect labor Depreciation, factory building Depreciation, factory equipment Property taxes on factory Utilities, factory Insurance on factory Salary, sales supervisor Commissions, salespersons S2,350,000 290,000 112,000 1,100,000 334.000 525,000 416,000 65,000 200,000 85,000 216,000 General administration Work-in-process inventory. January l Work-in-process inventory, December 31 Finished goods inventory, January 1 Finished goods inventory, December 31 390,000 750,000 107,500 488,750
Expert Answer
Problem 2.32
Solution:
1) Statement of Cost of Goods Sold
| Spemcer Company | ||
| Statement of Cost of Goods Sold | ||
| Amount | ||
| Direct Material inventory, Jan 1 | $290,000 | |
| Plus: Purchases of direct materials | $2,350,000 | |
| Less: Direct material inventory, Dec 31 | -$112,000 | |
| Cost of Direct Material used in production | $2,528,000 | |
| Direct Labor | $1,100,000 | |
| Manufacturing Overheads: | ||
| Indirect Labor | $334,000 | |
| Depreciation, factory building | $525,000 | |
| Depreciation, factory equipment | $416,000 | |
| Property taxes on factory | $65,000 | |
| Utilities Factory | $150,000 | |
| Insurance on factory | $200,000 | |
| Total Manufacturing Overheads | $1,690,000 | |
| Total Manufacturing Cost | $5,318,000 | |
| Plus: Work in process inventory, Jan 1 | $450,000 | |
| Less: Work In Process Inventory, Dec 31 | -$750,000 | |
| Cost of Goods Manufactured | $5,018,000 | |
| Add: Finished Goods Inventory, Jan 1 | $107,500 | |
| Goods Available for Sale | $5,125,500 | |
| Less: Finished Goods Inventory, Dec 31 | -$488,750 | |
| Cost of Goods Sold | $4,636,750 | |
2) Cost of Producing One case of sports drink
Total Produced Unit Last Year = 200,000 Cases
Total Cost of Goods Manufactured (as calculated above) = $5,018,000
Cost of Production One Case of Sports Drink = Total Cost of Goods Manufactured $5,018,000 / Total Unit Produced 200,000 Cases
= $25.09 Per Case or $25.10 Per Case
3) Income Statement (Absorption Costing)
First of all we need to find out the number of units sold during the year..
| Units Produced during the year | 200,000 Units |
| Add: Ending Finished Goods Inventory | 11,500 Units |
| Less: Beginning Finished Goods Inventory | (2,500) Units |
| Units Sold during the year | 209,000 Units |
Here is the income statement
| Income Statement (Using Absorption Costing) | ||
| Year 1 | % | |
| Sales Revenue (209,000 Units x $36) | $7,524,000 | 100.00% |
| Cost of Goods Sold: | ||
| Cost of Direct material used in production | $2,528,000 | 33.60% |
| Direct Labor | $1,100,000 | 14.62% |
| Manufacturing Overheads | $1,690,000 | 22.46% |
| Total Manufacturing Cost | $5,318,000 | 70.68% |
| Add: Beginning Inventory WIP, Jan 1 | $450,000 | 5.98% |
| Less: Work In Process Inventory, Dec 31 | ($750,000) | -9.97% |
| Cost of Goods Manufactured | $5,018,000 | 66.69% |
| Add: Finished Goods Inventory, Jan 1 | $107,500 | 1.43% |
| Goods Available for Sale | $5,125,500 | 68.12% |
| Less: Finished Goods Inventory, Dec 31 | ($488,750) | -6.50% |
| Cost of Goods Sold | $4,636,750 | 61.63% |
| Gross Profit (Sales – Cost of Goods Sold) | $2,887,250 | 38.37% |
| Selling and Administrative Expense: | 0.00% | |
| Salary, sales supervisor | $85,000 | 1.13% |
| Commission, salesperson | $216,000 | 2.87% |
| Advertising | $500,000 | 6.65% |
| General administrattion | $390,000 | 5.18% |
| Total Selling and Administrative Expense | $1,191,000 | 15.83% |
| Income from Operation (Gross Profit – S&A Expense) | $1,696,250 | 22.54% |
