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    Flow of Inventoriable Costs; CVP analysis

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    Problem One: Flow of Inventoriable Costs. Hofstra Plastics' selected data for August 2008 are presented here (in millions):

    Direct materials inventory 8/ 1/ 2008 $ 90
    Direct materials purchased $360
    Direct materials used $375
    Total manufacturing overhead costs $480
    Variable manufacturing overhead costs $250
    Total manufacturing costs incurred during August 2008 $1,600
    Work- in- process inventory 8/ 1/ 2008 $200
    Cost of goods manufactured $1,650
    Finished goods inventory 8/ 1/ 2008 $125
    Cost of goods sold $1,700

    Calculate the following costs:
    1. Direct materials inventory 8/ 31/ 2008
    2. Fixed manufacturing overhead costs for August
    3. Direct manufacturing labor costs for August
    4. Work- in- process inventory 8/ 31/ 2008
    5. Cost of goods available for sale in August
    6. Finished goods inventory 8/ 31/ 2008

    Problem Two: CVP analysis, service firm. Wildlife Escapes generates average revenue of
    $4,000 per person on its five- day package tours to wildlife parks in Kenya. The variable costs per person are:

    Airfare $ 1,500
    Hotel accommodations $1,000
    Meals $300
    Ground transportation $600
    Park tickets and other costs $200
    Total $ 3,600
    Annual fixed costs total $ 480,000.

    1. Calculate the number of package tours that must be sold to break even.
    2. Calculate the revenue needed to earn a target operating income of $ 100,000. 3. If fixed costs increase by $ 24,000, what decrease in variable cost per person must be achieved to maintain the breakeven point calculated in requirement 1?

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    Solution Summary

    The flows of inventoriable costs for CVP analysis are examined.

    $2.19

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