Problem 2.

28
1 Direct materials used in production for last year
Beginning Balance, raw material $124,000
Add: Raw Materials Purchases $250,000
Raw Materials Available for use $374,000
Deduct: Ending Balance, raw material $102,000
Direct materials used $272,000

2 Prime Cost
Direct material $272,000
Add: Direct Labor $140,000
Total Prime Cost $412,000

3 Conversion Cost
Direct Labor $140,000
Add: Factory Overhead
- Depreciation on factory equipment $45,000
- Depreciation on factory building $30,000
- Factory insurance $15,000
- Factory property taxes $20,000
- Utilities of factory $34,000
- Indirect labor salaries $156,000 $300,000
Total Conversion Cost $440,000

4 Cost of Goods Manufactured Statements

Manufacturing Cost $712,000
Unit Product Cost $7.12

Manufacturing Cost $712,000

Add: Beginning balance, work in process $124,000
$836,000
Deduct: Ending balance, work in process $130,000
Cost of Goods Manufactured $706,000

5 Cost of Goods Sold Statements

Cost of Goods Manufactured $706,000
Add: Beginning balance, finished goods $84,000
$790,000
Deduct: Ending balance, finished goods $82,000
Cost of Goods Sold $708,000

6 Income Statement for Last Year

Sales $1,200,000
Deduct: Cost of Goods Sold $708,000
Gross Profit $492,000
Deduct:
Selling and Operating Expenses
- Sales Commission $60,000
- Utilities for sales office $1,800
- Sales office salaries $90,000 $151,800
General and Administrative Expenses
- Depreciation on headquarters building $50,000
- Headquarters property taxes $18,000
- Administrative salaries $150,000 $218,000
Net Income $122,200

Percentage of sales $122,200 = $10.18

$1,200,000
Problem 3.32
1 Classfication of each cost
Salaries, nurses Fixed Cost
Aides Fixed Cost
Pharmacy Mixed Cost
Laboratory Mixed Cost
Depreciation Fixed Cost
Laundry Variable Cost
Administration Fixed Cost
Lease (Equipment) Fixed Cost

2 High-low Method to separate the mixed costs into fixed dan variable
Variable Costs = (High Cost - Low Cost) / (High Move - Low Move)

a. Pharmacy
Variable Costs = $15,600 = $52
300

Fixed Cost = Total Cost - Variable Costs

= $251,300 - $52 (4.500)
= $251,300 - $234,000
= $17,300

b. Laboratory
Variable Costs = $6,900 = $23
300

Fixed Cost = Total Cost - Variable Costs

= $127,200 - $23 (4.500)
= $127,200 - $103,500
= $23,700

3 Charge per patient day for 4.300 patient days per month
Salaries, nurses = $55,000 Fixed Cost
Aides = $32,000 Fixed Cost
Pharmacy = $240,900 Mixed Cost
Laboratory = $122,600 Mixed Cost
Depreciation = $25,000 Fixed Cost
Laundry = $20,640 Variable Cost
Administration = $27,000 Fixed Cost
Lease (Equipment) = $36,000 Fixed Cost
Total Cost = $559,140

Charge per patient day = $130.03

4 Charge per patient day for 4.800 patient days per month
Salaries, nurses = $55,000 Fixed Cost
Aides = $32,000 Fixed Cost
Pharmacy = $266,900 Mixed Cost
Laboratory = $134,100 Mixed Cost
Depreciation = $25,000 Fixed Cost
Laundry = $23,040 Variable Cost
Administration = $27,000 Fixed Cost
Lease (Equipment) = $36,000 Fixed Cost
Total Cost = $599,040

Charge per patient day = $124.80

The charge per patient day decreased as the activity ouput increased
because there are fixed cost components. The fixed cost per unit decreased output.
as activity output increased because the same fixed costs are spread
over more activity.