Apply accounting manufacturing concepts to an actual product to solidify the learning

Final ProjectDue: July 25, 2015Objectives:1.Apply accounting manufacturing concepts to an actual product to solidify the learningprocess.2.Learn how all the numbers fit together.3.Develop decision making analysis techniques.Manufacturing Questions Instructions:1. This project should stand by itself. Include the questions with your submission–not justthe answers. Identify all numbers. Points will be deducted if I can’t understand what youare answering.2. You may use Excel to complete tables and/or answer questions. Just make sure you labelyour work and turn the Excel file in.3. You may discuss this project with classmates. A discussion board will be set up for thisproject. Try to get help from classmates first. Your professor will only provide verylimited individual help. Treat this as a final exam.4. You can also print, hand write the answers, and submit a scanned copy1Your information:1. Your company produces a basic potato chip. There are three main processes used in thechips. The first process washes and peels the potatoes. The second process slices andfries the potatoes. The third process seasons and packages the chips. The potato chipsare sold in 12 oz bags (1 bag is a unit)2. Information on the direct materials is listed in table 1. Consider this information thestandard.3.Direct labor information given in Table 2. Consider this information the standard.4. Annual overhead information is given in Table 3. Overhead is allocated based directlabor hours. Estimated annual direct labor hours are 12,500. Calculate a predeterminedOH rate (round to two decimal places if needed). Use this rate when you need to applyOH.5. Table 4 gives you the information for the last two months on the overhead cost. Use thisinformation to determine the fixed and variable portions of the cost. (You will need thisinformation to complete Table 5). Machine hours have been determined as the best costdriver for separating mixed cost into their fixed and variable portions. It takesapproximately 12 minutes of total machine time for each bag of chips (or 1/5 a machinehour per bag of chips).6. Table 5 is where you will list all your production cost, separated into their fixed andvariable components.7. Cost-Volume-Profit (CVP) Relationshipsa. Selling Price: You sell a bag of chips for $4.15b. Breakeven point: Calculate the breakeven point. Be sure to include the fixedcomponent of mixed cost in your fixed costs and the variable component in thevariable cost. Show your breakeven in Sales units and in Sales Dollarsc. Profit Planning: Determine the number of units you must sell to make an annual pretax profit using 3 assumptions concerning your net income (profit), both in sales unitsand sales dollars.i. Aggressive Profit ($100,000)ii. Conservative Profit ($25,000)iii. Average Profit ($60,420)28. Budgeting:a.Create a sales budget using the information for earning an average profit forthe year. You will break the budget down into the four quarters for the year.(Sales tend to be consistent each quarter, you can only sale a whole unit soround-up if necessary) Use table 6 to complete the sales budget.b.Create a production budget for each quarter of the year (keep it in quarters;you do not need to break it down by month). You desire to keep 10% of nextquarter’s sales in ending inventory (round up to the next whole unit if you geta portion of a unit). Sales for Qtr 1 the following year are expected to be30,000 bags of chips. There is not any beginning finished goods inventory forquarter one. Use table 7 to complete the production budget.9. Running quarter one — Weighted-average process costing. Table 8 presents theinformation for the packaging department. Complete the questions under table 8.10. Actuals are in for quarter one. You sold 27,850 bags of chips, but price per unit was only$4.00.a.b.Calculate revenueCompute the cost of goods sold (total and per unit) before adjusting for actualOH cost11. Actual potato usage for quarter one was 68,000 pounds at a price of $0.45 per pound.Actual equivalent units of production (bags of chips) completed through the first process(where the potatoes are added) was 29,520. Calculate the direct materials variances forthe potatoes (price, usage, and total) and indicate if these variances are favorable orunfavorable.12. Actual direct labor hours for the quarter were 4,830 at an average rate of $8.10 per hour.For actual production you expected to use 4,200 direct labor hours. Calculate the directlabor variances (rate, efficiency and total) and indicate if these variances are favorable orunfavorable.13. For next quarter you have been asked to supply a special order of you potato chips. Thenon-profit organization requesting this order would like a special bag that will cost $0.20instead of the normal $0.11 per bag. The request is for 10,000 bags of chips. Based onyour projections you have the capacity for this order. What is the minimum price per unitand total price you would be willing to accept on this order? (You cannot afford to takethis offer at a loss, but you are fine with accepting it at cost).14. Determine over- or under-applied overhead and close to cost of goods sold. Actual OHcost are given in table 14 (look at #12 for actual DL hours used to apply OH). Determinethe new cost of goods sold amount.3Table 1: Direct MaterialsMaterialPotatoesSeasoningPackagingQuantityCostper unitTotal1.5 lbs0.1 ounces1 bag1/12 box$0.75$0.05$0.11$0.04$0.50$0.50$0.11$0.48TOTALper unit$0.95Table 2: Direct LaborJob DescriptionPotato Washer & PeelerHoursPer Bagof chips.1Slicer & FryerPackager.04.05TotalRate$8.00Total Cost$0.80$8.00$8.00$0.32$0.400.19$1.52Table 3: YEARLY OVERHEAD COSTSCost DescriptionTotal CostIndirect Materials$6,132Indirect Labor60,240Machine Maintenance4,040Electricity3,440Depreciation4,740Quality Testing10,160TOTAL$88,752Predetermined OH rate:4Table 4 – Actual Overhead cost for the last two monthsIndirect MaterialIndirect LaborMachine MaintenanceElectricityDepreciationQuality TestingMonth 1$511$5020$250$200$395$630Month 2$511$5020$290$240$395$730Machine Hours*10001200*12 minutes of machine time per bag of chips (1/5 hour = 1 unit)Complete any calculations here:5Table 5: Variable and Fixed CostsCOSTS DescriptionVARIABLE Cost per unitFIXED Cost per YearTOTALIf a cost is mixed, put the fixed amount in the fixed column and the variable amount in thevariable column.CVP Calculations:6Table 6 – Sales BudgetQtr 1Qtr 2Table 7 – Production BudgetQtr 1Qtr 2Qtr 3Qtr 4Qtr 3TotalQtr 47Process Costing – Packaging DepartmentDirect materials are added 70% at the beginning of the process and the remaining30% are added when the chips are 50% complete with the packaging process.Direct labor and overhead are added evenly throughout the process.Table 8 – Unit and cost informationBeg WIPTransferredInEnd WIPPhysicalTransferredUnitsin1,000 (40% $5,550complete)30,000$73,500CostDirectDirectMaterialsLabor$110.40$210Overhead$225.802,200 (30%complete)Added during Qtr 1:Direct Materials — $4,835.02Direct Labor – 1,580 hrs @ $8.10 per hourOverhead – OH is applied based on predetermined OH rate and actual DL hours1. Determine the number of units completed during quarter 1.2. Compute the equivalent units using the weighted average method83. Compute the cost per equivalent unit using the weighted average method4. Compute the cost of goods transferred to finished goods inventory5. Compute the ending balance in WIP, Packaging9Table 10 – Actual Results (calculate revenue and COGS)Units soldSales PriceRevenueUnits soldCost per unitCOGSTable 11 – DM Variances (potatoes only)Price VarianceUsage VarianceTotal VarianceCalculations:10Table 12 – Direct Labor VariancesRate VarianceEfficiency VarianceTotal VarianceCalculations:#13 Calculations (Minimum price on special order)11Table 14 – Actual OH cost for Quarter 1DescriptionCostIndirect Materials$1,950Indirect Labor$15,000Machine Maintenance$1,475Electricity$1,525Depreciation$1,050Quality Testing$4,815Amount of applied OH:Amount of actual OH:Under or Over- Applied Amount:New COGS amount:12