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    Cost accounting for Hareston Company and Weller Company

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    The production department of Hareston Company has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:

    1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
    Units to be produced 7,000 8,000 9,000 6,000

    In addition, the beginning raw materials inventory for the first quarter is budgeted to be 4,200 pounds and the beginning accounts payable for the first quarter is budgeted to be $13,300.

    Each unit requires three pounds of raw material that costs $2 per pound. Management desires to end each quarter with an inventory of raw materials equal to 20% of the following quarter's production needs. The desired ending inventory for the fourth quarter is 4,500 pounds. Management plans to pay for 60% of raw material purchases in the quarter acquired and 40% in the following quarter. Each unit requires 0.75 direct labor-hours and direct labor-hour workers are paid $12 per hour.

    The budgeted unit sales of Weller Company for the upcoming fiscal year are provided below:
    1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
    Budgeted unit sales 11,500 13,900 10,400 9,300

    The company's variable selling and administrative expense per unit is $3. Fixed selling and administrative expenses include advertising expenses of $13,000 per quarter, executive salaries of $37,000 per quarter, and depreciation of $15,000 per quarter. In addition, the company will make insurance payments of $6,000 in the first quarter and $6,000 in the third quarter. Finally, property taxes of $4,000 will be paid in the second quarter.

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    Solution Summary

    The following solution helps with various cost accounting problems.