ACCT 505 FINAL EXAM
1 Topple Company
2 Simpson Beauty Products
Corporation
3 Maroon Corporation
4 Walker Corporation
5 Bella Lugosi Holdings, Inc.
(BLH),
6 Lindon Company uses 10,000
7 Sandler Corporation
1 Topple Company produces a
single product. Operating data for the company and its absorption costing
income statement for the last year are presented below.
Units in beginning inventory 2,000
Units produced 9,000
Units sold 10,000
Sales $100,000
Less cost of goods sold:
Beginning inventory 12,000
Add cost of goods manufactured 54,000
Goods available for sale 66,000
Less ending inventory 6,000
Cost of goods sold 60,000
Gross margin 40,000
Less selling and admin. Expenses 28,000
Net operating income $12,000
Variable manufacturing costs are
$4 per unit. Fixed manufacturing overhead totals $18,000 for the year. The
fixed manufacturing 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.
2 Simpson 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
$700,000, is expected to have a useful life of 10 years, and is expected to
have a salvage value of $70,000 at the end of 10 years. The machinery will also
need a $45,000 overhaul at the end of Year 5. A $60,000 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 $150,000 per year for each of the 10 years. Simpson's
discount rate is 18%.
Required:
Part A: What is the net present value of this investment opportunity?
Part B: Based on your answer to
(a) above, should Simpson go ahead with the new conditioning shampoo?
3 The following data (in
thousands of dollars) have been taken from the accounting records of the Maroon
Corporation for the just-completed year.
Sales 1,700
Raw materials inventory,
beginning 50
Raw materials inventory, ending 25
Purchases of raw materials 210
Direct labor 360
Manufacturing overhead 330
Administrative expenses 400
Selling expenses 200
Work-in-process inventory,
beginning 120
Work-in-process inventory, ending 150
Finished goods inventory,
beginning 80
Finished goods inventory, ending 120
Use the above data to prepare (in
thousands of dollars) a schedule of Cost of Goods Manufactured and a Schedule
of Cost of Goods Sold for the year. In addition, what is the impact on the
financial statements if the ending finished goods inventory is overstated or
understated?
4 Walker Corporation is preparing
its cash budget for November. The budgeted beginning cash balance is $43,000.
Budgeted cash receipts total $117,000 and budgeted cash disbursements total
$122,000. The desired ending cash balance is $55,000. The company can borrow up
to $100,000 at any time from a local bank, with interest not due until the
following month.
Required:
Prepare the company's cash budget for November in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance
5 Bella Lugosi Holdings, Inc.
(BLH), has collected the following operating information for its current
month's activity. Using this information, prepare a flexible budget analysis to
determine how well BLH performed in terms of cost control.
Actual Costs Incurred Static
Budget
Activity level (in units) 5,250 5,178
Variable costs:
Indirect materials $24,182 $23,476
Utilities $22,356 $22,674
Fixed costs:
Administration $63,450 $65,500
Rent $65,317 $63,904
6 Lindon Company uses 10,000
units of Part Y each year as a component in the assembly of one of its
products. The company is presently producing Part Y internally at a total cost
of $100,000 as follows.
Direct materials............................................... $20,000
Direct
labor...................................................... 40,000
Variable manufacturing
overhead...................... 16,000
Fixed manufacturing overhead 24,000
Total
costs.......................................................100,000
An outside supplier has offered
to provide Part Y at a price of $10 per unit. If Lindon stops producing the
part internally, one third of the fixed manufacturing overhead would be
eliminated.
Required: Should Lindon Company make or buy the part? Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer.
Required: Should Lindon Company make or buy the part? Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer.
TUTORIAL PREVIEW
|
Items
|
Year
|
Amount
|
18% Factor
|
Present value
|
|
Cost of machinery
|
0
|
$(700,000)
|
1.00
|
$(700,000)
|
|
Salvage value
|
10
|
$70,000
|
0.19106
|
13,374
|
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