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3 pages/≈825 words
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Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Essay
Language:
English (U.S.)
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Topic:
Allocating Fixed Cost and Budgeting: Herrestad Company
Essay Instructions:
Please see the attached and let me know immediately if you cannot have this completed by Sunday. Please summarize subject material at the end of the paper ( provide a conclusion).
Essay Sample Content Preview:
Allocating Fixed Cost and Budgeting
Name
Institution
Date
Part 1
Complete the statement in good format and make sure you allocate the fixed costs to the two products. When done, comment on the information and the relative profitability of the two products.
The production runs are 65 and 35 for product A and B, and this was utilized in allocating the fixed manufacturing overhead costs for a total of $ 200,000. The number of sales rep are 10 and 15 for products A and B, and this was used in apportioning the fixed selling and administrative costs at $60,000 and $ 40,000 for products A and B respectively. The total profitability was $ 180,000 for both products, but there was net loss of $ 16,000 for product A compared to a net profit of $ 196,000 for product B. since the fixed costs for product A were higher than the contribution ($190,00 vs $ 174,000), this resulted in a reported loss.
Part II
| Herrestad Company | |||
| Segmented Income Statement for the period ending Dec. 31, 2015 | |||
| A | B | Total | |
| Sales | $960,000 | $1,080,000 | $2,040,000 |
| Variable costs: | |||
| Direct material | 560,000 | 240,000 | 800,000 |
| Direct labor | 120,000 | 360,000 | 480,000 |
| Variable Overhead | 80000 | 120000 | 200000 |
| Variable Selling and Admin | 26000 | 54000 | 80000 |
| Total variable costs | 786,000 | 774,000 | 1,560,000 |
| Contribution | $174,000 | $306,000 | $480,000 |
| Less | |||
| Fixed Costs | |||
| Fixed Manufacturing Overhead | 130,000 | 70,000 | 200,000 |
| Fixed selling and Administrative | 60,000 | 40,000 | 100,000 |
| Total Fixed Costs | 190,000 | 110,000 | 300,000 |
| Net Profit | ($16,000) | $196,000 | $180,000 |
Part II
| Herrestad Company | ||||
| Segmented Income Statement for the period ending Dec. 31, 2015 | ||||
| A | B | C | Total | |
| Sales | $960,000 | $1,080,000 | $150,000 | $2,190,000 |
| Variable costs: | ||||
| Direct material | 560,000 | 240,000 | 28,000 | $828,000 |
| Direct labor | 120,000 | 360,000 | 60,000 | $540,000 |
| Variable Overhead | 80,000 | 120,000 | 20,000 | $220,000 |
| Variable Selling and Admin | 26,000 | 54,000 | 0 | $80,000 |
| Total variable costs | 786,000 | 774,000 | 108,000 | $1,668,000 |
| Contribution | $174,000 | $306,000 | $42,000 | $522,000 |
| Less | ||||
| Fixed Costs |
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