ACCT 505 Final Exam 2016

ACCT 505 Final Exam 2016

1. Sandler Corporation bases its predetermined overhead rate on the estimated machine hours for the upcoming year. Data for the upcoming year appear below.

Estimated machine hours 73,000

Estimated variable manufacturing overhead $3.49 per machine hour

Estimated total fixed manufacturing overhead $838,770

Compute the company's predetermined overhead rate

2. Lindon Company uses 5,000 units of Part X each year as a component in the assembly of one of its products.

The company is presently producing Part X internally at a total cost of $80,000 as follows.

Direct materials...............................................$18,000

Direct labor......................................................20,000

Variable manufacturing overhead................... 12,000

Fixed manufacturing overhead....................... 30,000

Total costs.......................................................80,000

An outside supplier has offered to provide Part X at a price of $13 per unit. If Lindon stops producing the part internally, one third of the manufacturing overhead would be eliminated

Required:

Prepare an analysis showing the annual dollar advantage or disadvantage of accepting the outside supplier's offer.

3. The following overhead data are for a department of a large company.

Actual costs Static	Actual	Flexible	Varaince
Incurred budget	Incurred	Budget
Activity level (in units) 800 750	800	800
Variable costs:
Indirect materials $6,850 $6,600	6850	7040	190
Electricity $1,312 $1,275	1312	1360	48
Fixed costs:
Administration $3,570 $3,700	3570	3700	130
Rent $3,320 $3,200	3320	3200	-120
Total	15052	15300	248
Variable cost per unit

Required

Construct a flexible budget performance report that would be useful in assessing how well costs were controlled in this department.

4. The selling and administrative expense budget of Fenley Corporation is based on the number of units sold, which are budgeted to be 2,500 units in January. The variable selling and administrative expense is $4.40 per unit. The budgeted fixed selling and administrative expense is $35,750 per month, which includes depreciation of $4,000. The remainder of the fixed selling and administrative expense represents current cash flows.

Required:

Prepare the selling and administrative expense budget for January.(Points : 25)

5. Hanks Company produces a single product. Operating data for the company and its absorption costing income statement for the last year is presented below.

Units in beginning inventory...................................0

Units produced...............................................9,000

Units sold......................................................8,000

Sales.........................................................$80,000
Less cost of goods sold:

Beginning inventory.............................................. 0

Add cost of goods manufactured..................54,000

Goods available for sale...............................54,000

Less ending inventory....................................6,000

Cost of goods sold......................................48,000

Gross margin..............................................32,000

Less selling and admin. expenses.................28,000

Net operating income................................$ 4,000

Variable manufacturing costs are $4 per unit. Fixed factory overhead totals $18,000 for the year. This overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold.

Required:

Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements.

Maverick Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below.

Work in process, beginning:
Units in beginning work in process inventory	400
Materials costs	$6,900
Conversion costs	$2,500
Percent complete for materials	80%
Percent complete for conversion	15%
Units started into production during the month	6,000
Units transferred to the next department during the month	5,600
Materials costs added during the month	$112,500
Conversion costs added during the month	$210,300
Ending work in process:
Units in ending work-in-process inventory	800
Percentage complete for materials	70%
Percentage complete for conversion	30%

Required:

Calculate the equivalent units for materials for the month in the first processing department

Heckaman Corporation produces and sells a single product. Data concerning that product appear below.

Selling price per unit	$230.00
Variable expense per unit	$112.70
Fixed expense per month	$239,292

Required:

Determine the monthly break-even in unit sales. Show your work!

Axillar Beauty Products Corporation is considering the production of a new conditioning shampoo that will require the purchase of new mixing machinery. The machinery will cost $375,000, is expected to have a useful life of 10 years, and is expected to have a salvage value of $50,000 at the end of 10 years. The machinery will also need a $35,000 overhaul at the end of Year 6. A $40,000 increase in working capital will be needed for this investment project. The working capital will be released at the end of the 10 years. The new shampoo is expected to generate net cash inflows of $85,000 per year for each of the 10 years. Axillar's discount rate is 16%.

Required:

a. What is the net present value of this investment opportunity?

b. Based on your answer to (a) above, should Axillar go ahead with the new conditioning shampoo? (Points : 35)

TUTORIAL PREVIEW

Items	Year	Amount	16% Factor	Present value
Cost of machinery	0	$(375,000)	1.00	$(375,000)
Salvage value	10	$50,000	0.227	11,350

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