Cost Accounting (14th Edition)

ASSIGNMENT MATERIAL 217
2012 Inventories in Units
Expected Target
Product January 1, 2012 December 31, 2012
Thingone 20,000 25,000
Thingtwo 8,000 9,000
The following direct materials are used in the two products:
Amount Used per Unit
Direct Material Unit Thingone Thingtwo
A pound 4 5
B pound 2 3
C each 0 1
Projected data for 2012 with respect to direct materials are as follows:
Direct Material Anticipated Purchase Price
Expected Inventories
January 1, 2012
Target Inventories
December 31, 2012
A $12 32,000 lb. 36,000 lb.
B 5 29,000 lb. 32,000 lb.
C 3 6,000 units 7,000 units
Projected direct manufacturing labor requirements and rates for 2012 are as follows:
Product Hours per Unit Rate per Hour
Thingone 2 $12
Thingtwo 3 16
Manufacturing overhead is allocated at the rate of $20 per direct manufacturing labor-hour.
Based on the preceding projections and budget requirements for Thingone and Thingtwo, prepare the following
budgets for 2012:
1. Revenues budget (in dollars)
2. Production budget (in units)
3. Direct material purchases budget (in quantities)
4. Direct material purchases budget (in dollars)
5. Direct manufacturing labor budget (in dollars)
6. Budgeted finished goods inventory at December 31, 2012 (in dollars)
6-31 Budgeted income statement. (CMA, adapted) Easecom Company is a manufacturer of videoconferencing
products. Regular units are manufactured to meet marketing projections, and specialized units are made after
an order is received. Maintaining the videoconferencing equipment is an important area of customer satisfaction.
With the recent downturn in the computer industry, the videoconferencing equipment segment has suffered,
leading to a decline in Easecom’s financial performance. The following income statement shows results for 2011:
Required
Easecom Company
Income Statement
For the Year Ended December 31, 2011 (in thousands)
Revenues:
Equipment $6,000
Maintenance contracts ƒƒ1,800
Total revenues $7,800
Cost of goods sold
ƒƒ4,600
Gross margin 3,200
Operating costs
Marketing 600
Distribution 150
Customer maintenance 1,000
Administration
ƒƒƒ900
Total operating costs
ƒƒ2,650
Operating income
$ƒƒ550