The White Flour Company mills wheat into flour The equivalen

The White Flour Company mills wheat into flour. The equivalent units are measured in terms of tons of flour produced. At the beginning of the year, the mill contained 20 tons of flour that was 30 percent milled. During the year, another 500 tons of flour were completely milled. At the end of the year, the company has 40 tons of flour 80 percent milled. How many equivalent tons of flour has the White Flour Company milled during the year?

Solution

1.Statement Showing Equivalent tons of Flour

Units   Particulars                                                            Degree Of Completion     Units(tons)

20   Opening Stock                                                            70%                                        14

500 Completed (finished Stock)                                      100%                                    500

40 Closing Stock                                                                  80%                                         32

                                                                                        Total Equivalent units    =      546 units                          

2 under recovery of over heads

   Over head recovery rate =total over head/direct labour hours

                                                 =80000/4000

                                                  =20per hour

Over heads allocated for actual hours =3600*20=72000

Actual overhead incurred                                          =82000  

Under recovery/allocation                                       =10000

3 (a)

       Ans:    Batch Level –Cleaning Equipment

                     Unit Level-Purchasing Ingrediantes

                    Product Sustaining level-Advertising

                    Facility Sustaining Level-Rent of factory

3(b)ANs:

   5 Batches*100=            500

20 Purchases*50=      1000

Dual Advt*500 =        1000

                               Total $2500

3(c)

Ans: Even Place is available , It is not advisable to produce more products due to heavy rental cost.

4.What is the profit effect if the division b is closed ?

Ans: If the company chooses to close the Division B due to losses that is facing then Entire Central administration cost of $1 millions will have to bare by Entire Division A only which results in loss of $ 200000, If wont close then Profit of $200000 will be there on two division so it is not advisable to close the Division B.

Note: Given One Million Dollars cost is unavoidable even though if One division is Dropped

5.If palm Size model is dropped the fixed cost allocated to palm size model is 120000, should be recovered from slim size model hence fixed cost is $300000.

Silm Size Model

     Sales                  500000

   Direct cost          (225000)

  Fixed Cost            (300000)

        Net Loss         (25000)

Note: There is no alternate use of additional capacity