Question;Case 1: BudgetingMuscat Sandals Company (MSC) makes a very popular cloth sandal in one style, but in Regular and Deluxe. TheRegular sandals have cloth soles and the Deluxe sandals have cloth covered wooden soles. MSC is preparing itsbudget for January 2013, and has estimated sales based on past experience.Other information for the month of January follows:Input PricesDirect materialsClothWoodDirect manufacturing labor$3.50 per yard$5.00 per board foot$10 per direct manufacturing labor-hourInput Quantities per Unit of Output (per pair of sandals)RegularDirect materialsCloth1.3 yardsWood0Direct manufacturing labor-hours (DMLH)5 hoursSetup-hours per batch2 hoursDeluxe1.5 yards2 board feet7 hours3 hoursInventory Information, Direct MaterialsClothWoodBeginning inventory610 yards800 b.f.Target ending inventory386 yards295 b.f.Cost of beginning inventory$2,146$4,040MSC accounts for direct materials using a FIFO cost flow assumption.Sales and Inventory Information, Finished GoodsRegularExpected sales in units (pairs of sandals)2,000Selling price$ 80Target ending inventory in units400Beginning inventory in units250Beginning inventory in dollars$15,500Deluxe3,000$ 130600650$61,750MSC uses a FIFO cost flow assumption for finished goods inventory.All the sandals are made in batches of 50 pairs of sandals. MSC incurs manufacturing overhead costs, marketing andgeneral administration, and shipping costs. Besides materials and labor, manufacturing costs include setup,processing, and inspection costs. MSC ships 40 pairs of sandals per shipment. MSC uses activity-based costing andhas classified all overhead costs for the month of January as shown in the following chart:Cost typeManufacturing:SetupProcessingInspectionNonmanufacturing:Marketing and general administrationShippingDenominator ActivityRateSetup-hoursDirect manufacturing labor-hoursNumber of pairs of sandals$12 per setup-hour$1.20 per DMLH$0.90 per pairSales revenueNumber of shipments8%$10 per shipment1ACCT6111Fall 2013Assignment 2Required:1. Prepare each of the following for January:a. Revenues budgetb. Production budget in unitsc. Direct material usage budget and direct material purchases budget in both units and dollars, round todollarsd. Direct manufacturing labor cost budgete. Manufacturing overhead cost budgets for processing and setup activitiesf. Budgeted unit cost of ending finished goods inventory and ending inventories budgetg. Cost of goods sold budgeth. Marketing and general administration costs budget2. MSCs balance sheet for December 31 follows. Use it and the following information to prepare a cash budgetfor MSC for January. Round to dollars.All sales are on account, 60% are collected in the month of the sale, 38% are collected the follow ingmonth, and 2% are never collected and written off as bad debts.All purchases of materials are on account. MSC pays for 80% of purchases in the month of purchase and20% in the following month.All other costs are paid in the month incurred, including the declaration and payment of a $10,000 cashdividend in January.MSC is making monthly interest payments of 0.5% (6% per year) on a $100,000 long term loan.MSC plans to pay the $7,200 of taxes owed as of December 31 in the month of January. Income taxexpense for January is zero.30% of processing and setup costs, and 10% of marketing and general administration costs aredepreciation.Balance Sheet as of December 31Prepare a budgeted income statement for January and a budgeted balance sheet for MSC as ofJanuary 31.2ACCT6111Fall 2013Assignment 2Case2: ABC Costing3ACCT6111Fall 2013Assignment 2Case 3: Product Cost FlowsSelected T-accounts for Muscat Company are given below for the just completed year:Required:1.What was the cost of raw materials put into production during the year?2.How much of the materials in (1) above consisted of indirect materials?3.How much of the factory labor cost for the year consisted of indirect labor?4.What was the cost of goods manufactured for the year?5.What was the cost of goods sold for the year (before considering underapplied or overappliedoverhead)?6.If overhead is applied to production on the basis of direct materials cost, what rate was in effectduring the year?7.Was manufacturing overhead underapplied or overapplied? By how much?8.Compute the ending balance in the Work in Process inventory account. Assume that this balanceconsists entirely of goods started during the year. If $32,000 of this balance is direct materials cost,how much of it is direct labor cost? Manufacturing overhead cost?
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