Armstrong Helmet Company Essay

Armstrong Helmet Company manufactures a unique model of bicycle helmet. The club began operations downslopeember 1, 2013. Its accountant quit the second week of operations, and the participation is searching for a changement. The company has decided to test the knowledge and tycoon of all candidates interviewing for the position. Each candidate will be provided with the reading down the stairs and then asked to prep argon a series of reports, schedules, budgets, and recommendations based on that in data formation. The information provided to each candidate is as follows.Cost Items and Account Balances $Administrative salaries 15,500advertizing for helmets 11,000Cash , declensionember 1 0Depreciation pulverisation create 1,500Depreciation Office Equipment 800Insurance grinder Building 1,500Miscellaneous expenses Factory 1,000Office supplies expense 300Professional Fees 500Property Taxes Factory Building 400Raw material used 70,000Rent on production equipment 6,000Resea rch & development 10,000Sales commission 40,000Utility constitute Factory 900Wages Factory 70,000Work in process Dec 1 0Work in process Dec 31 0Raw materials inventory, Dec 1 0Raw materials inventory, Dec 31 0Raw materials purchases 70,000Finished goods inventory, Dec 1 0 deed and Sales DataNumber of helmets produced 10,000Expected sales in social units for December($40 unit sales price)8,000Expected sales in units for January 10,000Desired ending inventory 20% of next months sales mastermind materials per finished unit 1 kilogram look materials hail $7 per kilogram get hold of labour hours per unit .35Direct labor hourly pose $20Cash Flow DataCash collections from customers 75% in month of sale and 25% the following month. Cash payments to suppliers 75% in month of purchase and 25% the following month. Income tax rate 45%Cost of proposed production equipment $720,000Manufacturing overhead and selling and administrative cost are paid as incurred. Desired ending cash equilib rium $30,000RequiredUsing the data presented, do the following in your various(prenominal) groups. 1) Classify the costs as either product costs or period costs using a five- towboat table as shown below. venture the dollar amount of each cost in the appropriate column and total each classification.Product beItem DirectMaterialsDirectLabourManufacturingOverheadPeriod Costs2) Classify the costs as either variable or fixed costs. Assume there are no mixed costs. Enter the dollar amount of each cost in the appropriate column and total each classification. Use the format shown below. Use the format shown below. Assume that Utility Costs Factory are a fixed cost.Item Variable Costs Fixed Costs Total Costs3) gear up a schedule of cost of goods fabricate for the month ofDecember, 2013. 4) Determine the cost of producing a helmet.5) Identify the type of cost accounting dodging that Armstrong Helmet Company is probably using this time. Explain.6) Under what hazard might Armstrong use a different cost accounting system? 7) Compute the unit variable cost for a helmet.8) Compute the unit contribution margin and the contribution margin ratio. 9) Calculate the break-even point in units and in sales dollars. 10) Prepare the following budgets for the month of December, 2013. a. Salesb. Productionc. Direct materialsd. Direct laboure. Selling and administrative expensesf. Cashg. Budgeted income statement11) Prepare a flexible budget for manufacturing costs for activity levels between 8,000 and 10,000 units, in 1,000-unit increments.QUESTION 2 INCREMENTAL ANALYSIS (20 MARKS) Navula Company is considering the purchase of new equipment to replace the live equipment it currently has. Details of the new equipment are tabulated below bankers bill Price $140,000Freight Charges $ 4,000Installation Costs $6,000Expected useful sustenance 5 yearsSalvage value 0The new equipment is alacritous than the old equipment, and it is more efficient in its usage of materials.Existing eq uipment could be retained and used for an additional 5 years if the new equipment is not purchased and by that time the salvage value of the equipment would be zero. However, if the new equipment is purchased now, the alert machine would have to be scrapped. The current book value of the existing machine is $36,000 and the company uses the straight-line depreciation method.Navula Companys accountant has accrued the following data below regarding annual sales and expenses with and without the new equipment. exposit OLD EQUIPMENT NEW EQUIPMENTProduction & Sale Output 12 000 units improver by 10%Selling Price $100 $100 plebeian Profit Rate 25% of sales 30% of sales yearbook Selling Expenses $180,000 Increase by 10%Annual Administrative Expenses $100,00