29 Dec (TCO I) (Ignore income taxes

Question 1 30 pts

(TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the following company for the just-completed year.

Sales ………………………………………………………………$1,950

Raw materials inventory, beginning …………………………$50

Raw materials inventory, ending ……………………………..$30

Purchases of raw materials …………………………………..$360

Direct labor …………………………………………………………$120

Manufacturing overhead ……………………………………….$175

Administrative expenses ……………………………………….$100

Selling expenses ………………………………………………….$140

Work-in-process inventory, beginning ……………………….$50

Work-in-process inventory, ending ……………………………$70

Finished goods inventory, beginning ……………………….$200

Finished goods inventory, ending ……………………………$105

Required:

Use these 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.

Question 2 25 pts

TCO B) Willow Creek Corporation bases its predetermined overhead rate on the estimated labor hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor hours for the upcoming year at 32,500 labor hours. The estimated variable manufacturing overhead was $5.55 per labor hour and the estimated total fixed manufacturing overhead was $710,000. The actual labor hours for the year turned out to be 40,000 labor hours.

Required:

Compute the company’s predetermined overhead rate for the recently completed year.

Question 3 30 pts

((TCO B) A company 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

5,400

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

1,000

Percentage complete for materials

80%

Percentage complete for conversion

30%

Required: Calculate the total equivalent units for conversion for the month in the first processing department.

Question 4 25 pts

(TCO C) A company produces and sells a single product whose selling price is $120.00 per unit and whose variable expense is $46.20 per unit. The company’s fixed expense is $405,900 per month.

Required: Determine the monthly breakeven in unit sales. Show your work!

Question 5 30 pts

(TCO D) The following absorption costing income statement and additional data are available from the accounting records of XYZ Co. for the month ended December 31, 2017. During the accounting period, 17,000 units were manufactured and sold at a price of $60 per unit. There were no beginning inventories.

XYZ Co.

Absorption Costing Income Statement

for the Month Ended December 31, 2017

Sales (17,000 @ $60)

$1,020,000

Cost of goods sold

612,000

Gross profit

$ 408,000

Selling and administrative expenses

66,000

Income from operations

$ 342,000

Additional Information:

Cost

Total Cost

Number of Units

Unit Cost

Manufacturing costs:

Variable

$442,000

17,000

$26

Fixed

170,000

17,000

10

Total

$612,000

$36

Selling and administrative expenses:

Variable ($2 per unit sold)

$34,000

Fixed

32,000

Total

$66,000

Required:

1. Prepare a new income statement for the year using variable costing.

2. Did the operating income change under the variable costing method? Please explain.

Question 6 5 pts

(TCO E) Complying with regulations is a(n)

batch-level activity.

product-level activity.

unit-level activity.

organization sustaining activity.

Question 7 30 pts

TCO F) The following overhead data are for a department of a large company.

Actual Costs Incurred

Static Budget

Activity level (in units)

360

340

Variable costs:

Indirect materials

$4,182

$4,148

Electricity

$2,536

$2,414

Fixed costs:

Administration

$6,540

$6,500

Rent

$6,310

$6,400

Required:

Construct a flexible budget performance report that would be useful in assessing how well costs were controlled in this department. In your flexible budget, be sure to indicate whether each noted variance is either favorable or unfavorable.

75 words

Question 8 25 pts

TCO F) A corporation is preparing its cash budget for the month. The budgeted beginning cash balance is $54,000. Budgeted cash receipts total $127,000 and budgeted cash disbursements total $99,000. The desired ending cash balance is $100,000. The company can borrow up to $150,000 at any time from a local bank, with interest not due until the following month.

Required:

Prepare the company’s cash budget for the month in good form. For full credit, indicate what borrowing, if any, would be needed to attain the desired ending cash balance.

42 words

Question 9 5 pts

(TCO G) Given the following data, what would ROI be?

Sales

$140,000

Net operating income

$15,000

Contribution margin

$40,000

Average operating assets

$100,000

Stockholder’s equity

$50,000

30.0%

15.0%

28.6%

10.7%

Question 10 25 pts

(TCO H) A company makes 10,000 units per year of a part for use in one of its products. Data concerning the unit production costs of the part follow.

Direct materials $250

Direct labor 125

Variable manufacturing OH 50

Fixed manufacturing OH 150

Total $575

An outside supplier has offered to sell the company all of the parts it requires. If the company decided to discontinue making the parts, 20% of the above fixed manufacturing overhead costs could be avoided.

Required:

Assume the company has no alternative use for the facilities presently devoted to production of the parts. If the outside supplier offers to sell the parts for $425 each, should the company accept the offer?

Fully support your answer with appropriate calculations.

40 words

Question 11 30 pts

(TCO I) (Ignore income taxes in this problem.) Bill Anders retires in 8 years. He has $650,000 to invest and is considering a franchise for a fast-food outlet. He would have to purchase equipment costing $500,000 to equip the outlet and invest an additional $150,000 for inventories and other working capital needs. Other outlets in the fast-food chain have an annual net cash inflow of about $160,000. Mr. Anders would close the outlet in 8 years. He estimates that the equipment could be sold at that time for about 10% of its original cost. Mr. Anders’ required rate of return is 16%.

Required:

Part A: What is the investment’s net present value when the discount rate is 16%?

Part B: Refer to your calculations. Is this an acceptable investment? Why or why not?