Description
Managerial Accounting
Carl Warren and William B. Tayler
Cengage Learning Fifteenth Edition 2020H
Milestone One – Cost Classification
INSTRUCTIONS:
Putting an X in the appropriate spot, classify the costs as: Direct Material, Direct Labor, Overhead, or Period Costs.
The Fixed and Variable cost classifications have been provided for you.
Item/Cost
Direct
Material
Direct
Labor
Overhead
Period Costs
Fixed
Variable
Salary – Collar maker
x
x
Salary – Leash maker
x
x
Salary – Harness maker
x
x
x
Salary – Receptionist
High-tensile strength nylon webbing
x
x
Polyester/nylon ribbons
x
x
Buckles made of cast hardware
x
x
Depreciation on sewing machines
x
x
Rent
x
x
Utilities and insurance
x
x
Scissors, thread, and cording
x
x
Price tags
x
x
Office supplies
x
Other business equipment
x
Loan payment
x
x
Salary to self
x
x
ACC202 – MANAGERIAL ACCOUNTING
H
Milestone One – Variable and Fixed Costs
Collars
Item
Variable Cost/Item
Item
High-tensile strength nylon webbing
Polyester/nylon ribbons
Buckles made of cast hardware
Price tags
$
$
$
$
4.00
3.00
2.00
0.10
Collar maker’s salary (monthly)
Depreciation on sewing machines
Rent
Utilities and insurance
Scissors, thread, and cording
Loan payment
Salary to self
$
$
$
$
$
$
$
Fixed Costs
2,773.33
55.00
250.00
200.00
400.00
183.33
166.67
Total Variable Costs per Collar
$
9.10
Total Fixed Costs
$
4,028.33
Leashes
Item
Variable Cost/Item
Item
High-tensile strength nylon webbing
Polyester/nylon ribbons
Buckles made of cast hardware
Price tags
$
$
$
$
6.00
4.50
1.50
0.10
Leash maker’s salary (monthly)
Depreciation on sewing machines
Rent
Utilities and insurance
Scissors, thread, and cording
Loan payment
Salary to self
$
$
$
$
$
$
$
Fixed Costs
2,773.33
55.00
250.00
200.00
400.00
183.33
166.67
Total Variable Costs per Leash
$
12.10
Total Fixed Costs
$
4,028.33
Harnesses
Item
Variable Cost/Item
Item
High-tensile strength nylon webbing
Polyester/nylon ribbons
Buckles made of cast hardware
Price tags
$
$
$
$
6.00
4.50
4.00
0.10
Harness maker’s salary
Depreciation on sewing machines
Rent
Utilities and insurance
Scissors, thread, and cording
Loan
Salary to self
$
$
$
$
$
$
$
Fixed Costs
2,946.67
55.00
250.00
200.00
400.00
183.33
166.67
Total Variable Costs per Harness $
14.60
Total Fixed Costs
$
4,201.67
ACC202 – MANAGERIAL ACCOUNTING
H
Milestone Two – Contribution Margin Analysis
COLLARS
LEASHES
HARNESSES
Sales Price per Unit
Variable Cost per Unit
$
28.00
9.10
$
30.00
12.10
$
35.00
14.60
Contribution Margin
$
Correct
18.90
$
Correct
17.90
$
Correct
20.40
ACC202 – MANAGERIAL ACCOUNTING
H
Milestone Two – Break-Even Analysis
COLLARS
LEASHES
HARNESSES
Sales Price
$
28.00
$
30.00
$
35.00
correct for all products
Fixed Costs
$
4,028
$
4,028
$
4,202
correct for all products
Contribution Margin (unit)
$
18.90
$
17.90
$
20.40
correct for all products
213
213.14
$
225
225.05
$
206
205.96
correct for all products
$
Break-Even Units (round up)
Units Sold
Target Profit
Contribution Margin ($)
Break-Even Units (round up)
$
$
$
Units Sold
Target Profit
Contribution Margin ($)
Break-Even Units (round up)
$
$
$
229
300.00
4,328
229
$
$
$
240
500.00
4,528
229
$
$
$
247
400.00
4,428
247
$
$
$
259
600.00
4,628
247
$
$
$
ACC202 – MANAGERIAL ACCOUNTING
230
500.00
4,702
230
BE with Target = (FC + target)/CM
238
650.00
4,852
230
BE with Target = (FC + target)/CM
H
Milestone Three – Statement of Cost of Goods Sold
Beginning Work in Process Inventory
Direct Materials:
Materials: Beginning
Add: Purchases for month of January
Materials available for use
Deduct: Ending materials
$
$
0
20,000
20,000
4,000
Materials Used
Direct Labor
Overhead
Total Costs
16,000
8,493
3,765
$
Deduct: Ending Work in Process Inventory
Cost of Goods Sold
–
28,258
0
$
ACC202 – MANAGERIAL ACCOUNTING
28,258
Milestone Three – Income Statement
Revenue:
Collars
Leashes
Harnesses
$
12,880
10,800
14,000
Total Revenue:
Cost of goods sold
Gross profit
$
$
37,680
(28,258)
9,422
Total Expenses
$
2,300.00
Net Income/Loss
$
7,122.00
Expenses:
General and administrative salaries
Office supplies
Other business equipment
$
ACC202 – MANAGERIAL ACCOUNTING
1,950
200
150
Milestone Three – Variance Analysis
Data for Variance Analysis:
Budgeted
(Standard)
Hours/Qty
Budgeted
(Standard)
Rate
Actual
Hours/Qty
Actual
Rate
Labor
160
$
16.00
180
$
16.50
Materials
660
$
9.10
720
$
10.00
Variances for Collar Sales
Variance
Favorable/
Unfavorable
Direct Labor Time Variance
(Actual Hours – Standard Hours) x Standard Rate
$
320.00
Unfavorable
Direct Labor Rate Variance
(Actual Rate – Standard Rate) x Actual Hours
$
90.00
Unfavorable
Direct Materials Quantity/Efficiency Variance
(Actual Quantity – Standard Quantity) x Standard Price
$
546.00
Unfavorable
Direct Materials Price Variance
(Actual Price – Standard Price) x Actual Quantity
$
648.00
Unfavorable
ACC202 – MANAGERIAL ACCOUNTING
1
ACC – 202 Week 3 Module 3 Assignment
Austin Bentlage
Managerial Accounting 202
Professor Callender
January 19, 2023
2
ACC – 202 Week 3 Module 3 Assignment
Company Overview
The company selected is Toyota Motor Corporation. This is a Japanese automobile
manufacturing corporation headquartered in Toyota City in Aichi, Japan. Kiichiro Toyota
founded the firm in 1937 (Toyota, 2022). Suffice it to state that the Toyota Motor Corporation is
a subsidiary of the Toyota Group. Before Tesla took over reigns in 2021, the selected company
had long been acknowledged as the largest automobile firm in the world. The entity specializes
in manufacturing trucks, cars, and buses, among other types of automobiles (Toyota, 2022).
Toyota Motor Corporation produces approximately ten million automobile units each year. The
company’s revenues reached $256.7 billion in the year ending 2021.
Costing methods
Costing methods come in varied forms. Job order costing and process costing are the
most prominent costing approaches. The two costing methods differ in several aspects. The most
apparent difference lies in the definition of the approaches. On the one hand, job order costing is
used to track the costs along with revenues based on or by job while allowing for standardized
profitability reporting by the job. According to the CFI (2022), job order costing is applied when
an entity allocates costs based on a specific job order. The process costing method, on its part, is
used in determining the aggregate production cost for every product unit. The approach
accumulates costs from every department or process and then allocates them to separate or
individual products produced. The job order costing method is applied for small production runs,
while the process costing method is utilized for large ones. Besides, the job order costing method
necessitates more significant record keeping. In contrast, the process costing method mandates
less record-keeping. The ultimate difference is that the job order costing method is mainly used
3
for a unique or specific production. Contrastingly, the process costing method is applied for
uniform production.
Despite their differences, job order and process costing methods can be applied to the
Toyota Motor Corporation. In the case of the job order costing method, the company will most
likely use the approach when it wants to manufacture small and unique or specific products, for
example, limited luxury vehicles. Through this method, the company will typically allocate
direct material costs, direct labor costs, and manufacturing overheads when manufacturing these
special units. The Toyota Motor Corporation can also apply the process costing method. The
company will use such a method when it wants to produce a certain automobile model on a large
scale for the mass market. Each unit will pass through the same process during its production.
Toyota Motor Corporation will accumulate costs for the process and then allocates them to each
separate unit produced.
Factory overhead
Indirect or overhead costs are ongoing expenses or expenditures related to operating an
entity. While this is the case, the overhead does not include the direct costs usually associated
with creating an offering. For example, Bryer (2006) supposes that the ongoing expenses in the
form of overheads often support an entity but are not linked to the generation of products or
services.
Toyota Motor Corporation must account for a set of indirect or overhead costs. One of
the overhead costs is the depreciation of the equipment used to manufacture the automobile
units. Another overhead cost is electricity used by the firm in manufacturing automobiles,
including their various components. A further overhead cost is salaries to the engineers and
managers, among other staff members employed to facilitate or oversee the manufacturing of the
4
automobile units. Finally, an additional overhead cost the company has to account for is
insurance premiums payment, land taxes, and property taxes.
Accordingly, the costing method Toyota Motor Corporation should use for these costs is
job-order costing. This costing method will typically assign the overhead or indirect costs to the
automobile units produced founded on a predetermined overhead rate (Management Study
Guide, 2022). Toyota will establish this rate at the beginning of the production year by dividing
the aggregate estimated overhead costs by an allocation base the firm selects.
Moreover, if the company opts to use activity-based costing, abbreviated as ABC, the
firm might use several activity bases or cost drivers to allocate the overhead costs. The most
relevant would be the number of kilometers or miles covered by each unit produced, the number
of vehicles sold, and the number of machine hours of electricity necessitated to run different
machines or automated equipment in the automobile manufacturing department.
Recommendation
Founded on the analysis presented above, it is possible to suggest a costing method for
Toyota Motor Corporation with a justification of why the approach will work best for the
organization relative to other methods. To this end, the ideal costing method for Toyota is
process costing. The main reason for such a suggestion is that the selected company is a leading
automobile manufacturer whose system has to produce large vehicle units rapidly. As the
processing costing approach does not mandate too much record-keeping and can be used for
standardized large-scale production, this costing method will be better suited for Toyota. On the
other hand, the job-order costing method would only be beneficial where the company produces
a limited number of automobiles, but this would not appeal to the company.
5
References
Bryer, R. (2006). Accounting and control of the labour process. Critical Perspectives on
Accounting, 17(5), 551-598.
CFI (2022). Job Order Costing Guide.
https://corporatefinanceinstitute.com/resources/accounting/job-order-costing-guide/
Management Study Guide (2022). Allocating Overheads in Job Order Costing.
https://www.managementstudyguide.com/allocating-overheads-in-job-order-costing.htm
Toyota (2022). Company. https://global.toyota/en/
[Company Name]
1
[Note: To complete this template, replace the bracketed text with your own content. Remove this
note before you submit your paper.]
Investor Report for [Company Name]
[Your Name]
Southern New Hampshire University
Report for [Company Name]
Introduction
[Outline your company’s business and your vision for its future.]
[Introduce the company and its business. What is your vision for the future of the
business? What do you hope to achieve? Where do you see the company in five years or ten?]
Purpose
[Explain the purpose of the report and what you hope to convey about the company and
its financials.]
[What do you plan to communicate, and why should your investors pay attention? In
other words, try to persuade your investors that the accounting information you are about to
share is important.]
Methods and Approach
[Explain some management accounting methods you used to determine your costing
strategy, evaluate your financial information, etc., and explain how these methods support the
mission and vision of the company.]
[Briefly describe how your report and the data it represents adheres to industry standards
and the AICPA code of ethics. In other words, why should your investors trust that you are
delivering accurate financial data and that your decision-making process has been ethical?]
Financial Strategy
[In this section, review your original business plan and costing strategies. Remove this
note before you submit your paper.]
Report for [Company Name]
Costing System
[Outline why the job order costing system works best for your business. Explain in detail
the use of job order costing for this business. Be sure to compare and contrast the various costing
systems you learned about in this course as part of your defense.]
Selling Prices
[List the selling price you chose for each product.]
[Explain and defend the selling prices you established for each product. Why did you
choose these prices? Be sure to reference your cost-volume-profit analysis in your defense]
Contribution Margin
[Copy and paste your completed table from the “Contribution Margin Analysis” tab of
your Project Workbook.]
[Share and explain your contribution margin per unit. How did you arrive at these
numbers? Be sure to reference your cost-volume-profit analysis in your defense.]
Target Profits
[Copy and paste the completed table from the “Break-Even Analysis” tab of your Project
Workbook.]
[Specify the break-even points you determined for achieving different target profit levels.
Then, explain and defend the target profits you selected for each area of your business. Be sure
to reference your cost-volume-profit analysis in your defense.]
Financial Statements
[This section is designed to have you assess your financial performance to date. Remove
this note before you submit your paper.]
Report for [Company Name]
Statement of Cost of Goods Sold
[Copy and paste your table from the “COGS” tab of your completed Project Workbook.]
[Compare the actual cost of goods sold over the last month and evaluate the company’s
performance against the budgeted benchmarks. Are the numbers close to what you expected?
Interpret the performance and explain what happened.]
Income Statement
[Copy and paste your table from the “Income Statement” tab of your completed Project
Workbook.]
[Based on your income statement, logically interpret the business’s performance against
the provided benchmarks. Did the company do as well as expected? Explain what happened.]
Variances
[Copy and paste your table from the completed “Variances” tab of your Project
Workbook.]
[Illustrate the variances observed between the planned and actual values for the direct
labor time and the direct materials price for collars. What changed?]
Significance of Variances
[Share a summary of your variance analysis. Were the variances favorable or
unfavorable?]
[Evaluate the significance of the variances. Are the variances favorable or unfavorable?
What does it mean? Explain whether and how your evaluation will affect your budgeting and
planning decisions for the next month or quarter.]
Report for [Company Name]
References
[Include any references cited in your paper in full APA format. Don’t forget to include in-text
citations as well.]
ACC 202 Milestone Three: Actual Costs and Revenue Data Appendix
At the end of the first month of opening your business, you calculate the actual operating costs of the
business and the income you earned. You also notice and document the difference in what you
budgeted for certain materials and labor against the actual amounts you spent on the same.
For your statement of cost of goods sold, use the following data regarding the actual costs incurred by
the business over the past month:
•
Materials purchased: $20,000
o Consumed 80% of the purchased materials
• Direct labor: $8,493
• Overhead costs: $3,765
Note: Assume that the beginning materials and ending work in process are zero for the month.
Use the following revenue and cost information for the income statement. Note that the revenue you
use will depend on the pricing level options you chose in Milestone Two. Also, assume that after
accounting for weekends and other holidays, there were 20 business days in the first month of
operation. For example, if you chose a sales price of $20 per collar, the actual number of collars sold in
the month was 33 per day or 33 x 20 = 660 per month.
Established Sales
Price
Collars
$20
$24
$28
Leashes
$22
$26
$30
Harnesses
$25
$30
$35
Number of Items Sold per
Day
33
28
23
28
23
18
25
22
20
The other costs incurred by the business include:
•
•
•
General and administrative salaries
o Receptionist: $1,950
Office supplies: $200
Other business equipment: $150
1
Variance
At the end of the month, you find that the labor and materials spent on manufacturing collars was
different from what you estimated:
•
•
•
•
The collar maker had to work nine hours a day instead of eight due to an increased demand for
collars.
Because of the increased demand, the hourly rate you paid your employee for making the
collars increased to $16.50.
An increase in the cost of raw material led the direct material cost per collar to increase to $10.
However, you also made and sold 60 more collars than you expected to sell in the month.
You now need to determine the variance in the materials and labor cost from what you estimated in
Milestone Two based on the market research data.
2
ACC 202 Milestone One: Operational Costs Data Appendix
You plan to open a small business for manufacturing pet collars, leashes, and harnesses. You have found
a workshop space you can use for sewing your products. After some research and planning, you have
estimates for the various operating costs for your business.
The total square footage for the sewing rooms is 1,500 square feet broken into three areas (500 square
feet each). You have taken out a loan for start-up costs, and the monthly payment is $550; it goes into
effect immediately and should be accounted for in your costs. You will also collect a modest salary for
the first year of $500 per month; remember to divide evenly among the services.
Salary and Hiring Data
• One collar maker, who will be paid $16.00 per hour and work 40 hours per week
• One leash maker, who will be paid $16.00 per hour and work 40 hours per week
• One harness maker, who will be paid $17.00 per hour and work 40 hours per week
• One receptionist, who will be paid $15.00 per hour and work 30 hours per week
Other Costs
• Rent: $750 per month; allocate based on square footage
• High-tensile strength nylon webbing—$12 per yard of webbing
o 3 collars per yard of webbing
o 2 leashes per yard of webbing
o 2 harnesses per yard of webbing
• Polyester/nylon ribbons—$9 per yard of ribbon
o 3 collars per yard of ribbon
o 2 leashes per yard of ribbon
o 2 harnesses per yard of ribbon
• Buckles made of cast hardware—$0.50 per buckle
o 4 buckles used per collar
o 3 buckles used per leash
o 8 buckles used per harness
• 3 industrial sewing machines at $3,300 each for a total of $9,900; depreciation is $165 per month (5year life, zero salvage value)
• Utilities and insurance: $600 per month; allocate based on square footage
• Scissors, thread, cording: $1,200
• Price tags: $250 for 2,500 ($0.10 each)
• Office supplies: $2,400 or $200 per month
• Other business equipment: $2,000
• Loan payment of $550 per month
• Salary drawn of $500 per month
1
Milestone Two: Market Research Data
You have conducted some market research for style and size of products you want to use to launch
your business. The market research has indicated the following sales price ranges will be optimal for
your area depending on style of products you choose to sell:
●
Collars
o With pricing at $20 per collar, you can expect to sell 30 collars per day.
o With pricing at $24 per collar, you can expect to sell 25 collars per day.
o With pricing at $28 per collar, you can expect to sell 20 collars per day
●
Leashes
o With pricing at $22 per leash, you can expect to sell 28 leashes per day.
o With pricing at $26 per leash, you can expect to sell 23 leashes per day.
o With pricing at $30 per leash, you can expect to sell 18 leashes per day.
●
Harnesses
o With pricing at $25 per harness, you can expect to sell 25 harnesses per day.
o With pricing at $30 per harness, you can expect to sell 22 harnesses per day.
o With pricing at $35 per harness, you can expect to sell 20 harnesses per day.
Additionally, you will need to compare your break-even points for the following target profits for
each area of your business to determine your prices:
●
Collars
o Break-even
o $300 target profit each month
o $500 target profit each month
●
Leashes
o Break-even
o $400 target profit each month
o $600 target profit each month
●
Harnesses
o Break-even
o $500 target profit each month
o $650 target profit each month
Remember that all break-even and target points must be in whole units (we cannot sell a partial
unit). Round up when calculating partial units to ensure costs are covered. Excel tip – use
ROUNDUP function
ACC 202 Milestone Three: Actual Costs and Revenue Data Appendix
At the end of the first month of opening your business, you calculate the actual operating costs of the
business and the income you earned. You also notice and document the difference in what you
budgeted for certain materials and labor against the actual amounts you spent on the same.
For your statement of cost of goods sold, use the following data regarding the actual costs incurred by
the business over the past month:
•
Materials purchased: $20,000
o Consumed 80% of the purchased materials
• Direct labor: $8,493
• Overhead costs: $3,765
Note: Assume that the beginning materials and ending work in process are zero for the month.
Use the following revenue and cost information for the income statement. Note that the revenue you
use will depend on the pricing level options you chose in Milestone Two. Also, assume that after
accounting for weekends and other holidays, there were 20 business days in the first month of
operation. For example, if you chose a sales price of $20 per collar, the actual number of collars sold in
the month was 33 per day or 33 x 20 = 660 per month.
Established Sales
Price
Collars
$20
$24
$28
Leashes
$22
$26
$30
Harnesses
$25
$30
$35
Number of Items Sold per
Day
33
28
23
28
23
18
25
22
20
The other costs incurred by the business include:
•
•
•
General and administrative salaries
o Receptionist: $1,950
Office supplies: $200
Other business equipment: $150
1
Variance
At the end of the month, you find that the labor and materials spent on manufacturing collars was
different from what you estimated:
•
•
•
•
The collar maker had to work nine hours a day instead of eight due to an increased demand for
collars.
Because of the increased demand, the hourly rate you paid your employee for making the
collars increased to $16.50.
An increase in the cost of raw material led the direct material cost per collar to increase to $10.
However, you also made and sold 60 more collars than you expected to sell in the month.
You now need to determine the variance in the materials and labor cost from what you estimated in
Milestone Two based on the market research data.
2
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