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Practice Calculations Chapter 11 Problem Essay

03 and the COGS per unit is $6.89. For Product B, the price per unit is $20.46 and the COGS per unit is $16.37. For Product C. The price per unit is $51.37 and the COGS per unit is $41.10. For Product D. The price per unit is $90 and the COGS per unit is $50.63. The next step is to produce an income statement for each customer type.

Problem 12-34

Product a

B

C

D

Price

$11.03

$20.47

$51.38

$90.00

COGS

$6.90

$16.37

$41.10

$50.63

Customer a

Customer B

Customer C

Revenue

$42,822

$141,384

$359,793

COGS

$25,322

$91,759

$278,319

Gross Profit

$17,501

$49,625

$81,474

Gross Margin

40.87%

35.10%

22.64%

The most profitable customer is Customer a.

The cost to serve % of sales is based on the $140,000 cost to serve expense, which is allocated on the basis of sales. This is calculated as follows:

Customer a

Customer B

Customer C

% of sales

7.87%

25.99%

66.14%

Cost to Serve

$11,020

$36,386

$92,594

These are the cost to serve percentage of sales. The most expensive customer to serve is customer C. This is also the customer with the lowest margins, but the highest dollar value of sales. However, all have the same cost-to-serve as a percentage of sales, because cost-to-serve is allocated as a percentage of sales. The figure is 25.74%.

I'm afraid I do not really understand that chart, and can't make Excel draw it. The...

The best way to increase the profit for every customer is to increase the percentage of Product D. that is sold. This is the highest margin product, so the more of that product that is sold the better the margin for each customer will be. For Customer C, the gross margin is very low.
Problem 12-35

1. Using the physical units method, Solvent a would have 9000/15000 = 60% and Solvent B. would have 40%. This gives the following cost allocations:

Solvent a = 60% * $300,000 = $180,000

Solvent B = 40% * $300,000 = $120,000

2. Using the relative sales value method, we need to calculate the sales value of each product. Solvent a = $30 * 9000 = $270,000 and Solvent B = $45 * 6000 = $270,000 so 50% each.

Solvent a = 50% * $300,000 = $150,000

Solvent B = 50% * $300,000 = $150,000

Problem 13-38.

This question involves working backwards to find the missing data. The first question is about the total budgeted machine hours. The total budgeted overhead is calculated by adding the different overhead types in the budget. This is $70 + $19 + $84 + $139 = $312,000. The budgeted overhead allocation rate is $6 per machine hour. This implies:

$312,000 / $6 = 52,000 machine hours were budgeted.

The second question is about total applied overhead cost. To calculate this, we take the actual hours worked and the budgeted overhead allocation rate:

68,000 * 6 = $408,000

This means that the overhead should have been $408,000. The actual was $439,000, which means that the overhead ran over by $31,000.

Any difference between actual overhead and applied overhead would not appear on the income statement. None of the figures from the budget will appear on the income statement. For December, Hatch's income statement will only…

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