Problem 1: Moore Company needs to determine the variable utilities rate per direct machine hour in order to estimate cost for August. Relevant information is as follows.
Month Machine Hours Worked Utilities Cost
April 4,800 $4,144
May 5,200 4,300
June 5,600 4,482
July 6,000 4,804
Moore anticipates producing 3,800 units in August, with each unit requiring 1.5 hours of machine time. The company uses the high-low method to analyze costs.
Required:
A. Calculate the variable and fixed components of the utilities cost.
B. Using the data calculated above, estimate the utilities cost for August.
C. Compare the high-low method versus the visual-fit method with respect to (1) number of data observations used in the analysis and (2) objectivity of the results.
Problem 2: Hampton Company had the following inventory balances at the beginning and end of the year:
January 1 December 31
Raw material $ 50,000 $ 35,000
Work in process 130,000 170,000
Finished goods 280,000 255,000
During the year, the company purchased $100,000 of raw material and spent $340,000 on direct labor. Other data: manufacturing overhead incurred, $450,000; sales, $1,560,000; selling and administrative expenses, $90,000; income tax rate, 30%.
Required:
A. Calculate cost of goods manufactured.
B. Calculate cost of goods sold.
C. Determine Hampton's net income.