Armstrong Helmet Company Essay

Armstrong Helmet Company manufactures a alone theoretical account of bike helmet. The company began operations December 1. 2013. Its accountant quit the 2nd hebdomad of operations. and the company is seeking for a replacing. The company has decided to prove the cognition and ability of all campaigners questioning for the place. Each campaigner will be provided with the information below and so asked to fix a series of studies. agendas. budgets. and recommendations based on that information. The information provided to each campaigner is as follows.

Cost Items and Account Balances $
Administrative wages 15. 500
Ad for helmets 11. 000
Cash. December 1 0
Depreciation – Factory Building 1. 500
Depreciation – Office Equipment 800
Insurance – Factory Building 1. 500
Assorted disbursals – Factory 1. 000
Office supplies expense 300
Professional Fees 500
Property Taxes – Factory Building 400
Raw stuff used 70. 000
Rent on production equipment 6. 000
Research & A ; development 10. 000
Gross saless committee 40. 000
Utility Costss – Factory 900
Wagess – Factory 70. 000
Work in procedure – Dec 1 0
Work in procedure – Dec 31 0
Natural stuffs stock list. Dec 1 0
Natural stuffs stock list. Dec 31 0
Natural stuffs purchases 70. 000
Finished goods stock list. Dec 1 0
Production and Gross saless Datas
Number of helmets produced 10. 000
Expected gross revenues in units for December
( $ 40 unit gross revenues monetary value )
8. 000
Expected gross revenues in units for January 10. 000
Desired stoping stock list 20 % of following month’s gross revenues
Direct stuffs per finished unit 1 kg
Direct stuffs cost $ 7 per kg
Direct labor hours per unit. 35
Direct labour hourly rate $ 20Cash Flow Data
Cash aggregations from clients: 75 % in month of sale and 25 % the undermentioned month. Cash payments to providers: 75 % in month of purchase and 25 % the undermentioned month. Income revenue enhancement rate: 45 %
Cost of proposed production equipment: $ 720. 000
Manufacturing overhead and merchandising and administrative costs are paid as incurred. Desired stoping hard currency balance: $ 30. 000
Using the information presented. make the followers in your several groups. 1 ) Classify the costs as either merchandise costs or period costs utilizing a five-column tabular array as shown below. Enter the dollar sum of each cost in the appropriate column and entire each categorization.

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Merchandise Costss
Item Direct
Operating expense
Time period Costss
2 ) Classify the costs as either variable or fixed costs. Assume there are no assorted costs. Enter the dollar sum of each cost in the appropriate column and entire each categorization. Use the format shown below. Use the format shown below. Assume that ‘Utility Costss – Factory’ are a fixed cost.

Item Variable Costss Fixed Costs Total Costss
3 ) Fix a agenda of cost of goods manufactured for the month of
December. 2013. 4 ) Determine the cost of bring forthing a helmet.
5 ) Identify the type of cost accounting system that Armstrong Helmet Company is likely utilizing this clip. Explain.
6 ) Under what fortunes might Armstrong utilize a different cost accounting system? 7 ) Compute the unit variable cost for a helmet.
8 ) Compute the unit part border and the part border ratio. 9 ) Calculate the break-even point in units and in gross revenues dollars. 10 ) Fix the undermentioned budgets for the month of December. 2013. a. Gross saless

B. Production
c. Direct stuffs
d. Direct labor
e. Selling and administrative disbursals
f. Cashg. Budgeted income statement
11 ) Fix a flexible budget for fabrication costs for activity degrees between 8. 000 and 10. 000 units. in 1. 000-unit increases. QUESTION 2 INCREMENTAL ANALYSIS ( 20 MARKS ) Navula Company is sing the purchase of new equipment to replace the bing equipment it presently has. Detailss of the new equipment are tabulated below: Invoice Price $ 140. 000

Freight Charges $ 4. 000
Installation Costs $ 6. 000
Expected utile life 5 old ages
Salvage value 0
The new equipment is faster than the old equipment. and it is more efficient in its use of stuffs.
Existing equipment could be retained and used for an extra 5 old ages if the new equipment is non purchased and by that clip the salvage value of the equipment would be zero. However. if the new equipment is purchased now. the bing machine would hold to be scrapped. The current book value of the bing machine is $ 36. 000 and the company uses the straight-line depreciation method.

Navula Company’s comptroller has accumulated the following informations below sing one-year gross revenues and disbursals with and without the new equipment.
Production & A ; Sale Output 12 000 units Increase by 10 %
Selling Price $ 100 $ 100
Gross Profit Rate 25 % of gross revenues 30 % of gross revenues
Annual Selling Expenses $ 180. 000 Increase by 10 %
Annual Administrative Expenses $ 100. 00


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