2-71. (continued)
Allocation to customer types:
Households
Business
Allocation of customer cost:
Allocated cost per customer ……..
$112
$112
Number of customers ………………
12,000
3,000
Allocated cost …………………………
$1,344,000
$336,000
Allocation of other costs:
Allocated cost per ton ………………
$20
$20
Number of tons ……………………….
4,000
12,000
Allocated cost …………………………
$80,000
$240,000
Total allocated cost ………………….
$576,000
Total number of tons ………………..
Number of pounds …………………..
Average allocated cost per pound
2-72. (20 min.) Reconstruct Financial Statements: Koufax Materials Corp.
Problems 2-72 through 2-74 are similar, but vary in difficulty. Problem 2-72 is a straight-
forward completion of the statements based on the data provided. Problem 2-73
required students to compute some of the information from the data provided, but they
2-72. (continued)
2-73. (30 min.) Reconstruct Financial Statements: San Ysidro Company.
aMaterials used is given, but this number is not. To obtain it,
Beg. Bal. + Purchases = Mat. Used + End. Bal.
Beg. Bal. = Mat. Used + End. Bal. – Purchases
$309,880 = $1,069,880 + $248,000 – $1,008,000
2-73 (continued)
a Total depreciation = Depreciation on plant + Depreciation on administrative building
portion
Depreciation on plant is 80% of the total depreciation, so total depreciation is,
2-74. (40 Min.) Reconstruct Financial Statements: Westlake Inc
a Total labor is $1,200,000 (= $180,000 indirect labor ÷ 0.15)
Direct labor is $1,020,000 [= $1,200,000 x (1.00 – 0.15)]
b The manufacturing portion of the building occupies 75 percent of the floor space or
150,000 square feet (= 200,000 x 0.75). Plant depreciation is $300,000
(= $400,000 x 0.75).
c From the completed Income Statement.
2-74 (continued)
a The administrative portion of the building occupies 25 percent of the floor space or
50,000 square feet (= 200,000 x 0.25). Administrative depreciation is $100,000
(= $400,000 x 0.25).
2-75. (20 Min.) Finding Unknowns: Mary’s Mugs.
a. $2,812.50.
Direct materials cost per unit = Direct materials cost ÷ Units produced
= $6,000 ÷ 20,000 units = $0.30 per unit.
Direct materials used per mug = 0.4 pounds.
Direct materials cost per pound = $0.30 ÷ 0.4 pounds = $0.75 per pound.
Direct materials inventory = 3,750 pounds $0.75 per pound = $2,812.50.
c. $4.25.
Selling price per unit = Sales revenue ÷ Units sold
= Sales revenue ÷ (Units produced – units in ending finished goods
inventory)
= $73,312 ÷ (20,000 – 2,750) = $73,312 ÷ 17,250 = $4.25.
d. $13,642.
Operating profit for year 1:
Sales revenue ……………………………………………..
$ 73,312
Cost of goods sold (17,250 x $2.22) ……………….
38,295
Less marketing and administrative costs ………….
2-76. (40 Min.) Finding Unknowns: BS&T Partners.
Note: This problem is challenging, because there is no indication of how to begin or the
order in which to solve for the unknowns.
We begin by computing the following unit costs:
Manufacturing cost per unit = Direct materials + Direct labor + Manufacturing overhead
= $5.00 + $6.25 + $15.75 = $27.00
Full cost per unit = Manufacturing cost per unit + Selling, general & administrative
= $27.00 + $12.00 = $39.00
2-76 (continued)
c. Full costs = Cost of goods sold + Selling, general, and administrative costs
Then,
Operating profit = Sales revenue – Cost of goods sold – Selling, general, and
administrative costs
= Sales revenue – Full costs
$55,200 = $414,000 – Full costs
Full costs = $414,000 — $55,200 = $358,800
Full costs = Units sold x Full cost per unit
$358,800 = Units sold x $39.00
Units sold = $358,800 ÷ $39.00
= 9,200 units sold
e. Finished goods ending (units) = Finished goods beginning (units) + Units produced
– Units sold
400 = 0 + Units produced — 9,200
Units produced = 9,200 + 400 = 9,600
Solutions to Integrative Case
2-77. (30 min.) Analyze the Impact of a Decision on Income Statements:
Tunes2Go.
a. This year’s income statement:
Baseline
(Status Quo)
Rent
Equipment
Difference
$4,800,000
$4,800,000
0
(600,000)
(600,000)
0
(2,250,000)
(2,250,000)
0
(450,000)
(450,000)
0
(375,000)
(375,000)
0
0
(2,550,000)
a
$2,550,000
lower
$1,125,000
$ (1,425,000)
$2,550,000
lower
a Equipment write-off = $3 million cost – $450,000 accumulated depreciation for one
year (equipment was purchased on January 1 of the year).
b. Next year’s income statement:
Baseline
(Status Quo)
Rent
Equipment
Difference
Sales revenue …………………..
higher
Operating costs:
Equipment rental ……………
higher
Variable ………………………..
Fixed cash expenditures ….
(2,250,000)
b
lower
Equipment depreciation …..
(450,000)
lower
Other depreciation ………….