ACCT 505 Week 8 Final Exam All Correct and Complete Answer

ACCT 505 Week 8 Final Exam All Correct and Complete Answer

1. (TCO F) : Wahr 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 32,000. The estimated variable manufacturing overhead was $7.17 per labor hour and the estimated total fixed manufacturing overhead was $584,320. The actual labor hours for the year turned out to

be 33,300.
Required:
Compute the company’s predetermined overhead rate for the recently completed year. (Points : 25)

2. (TCO C) Enciso Corporation is preparing its cash budget for November. The budgeted beginning cash balance is $31,000. Budgeted cash receipts total $135,000 and budgeted cash disbursements total $141,000. The

desired ending cash balance is $50,000. 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.

TCO B Questions

Question 1. 1. (TCO C) The following overhead data are for a department of a large company.
Actual costs Static
incurred budget
Activity level (in units) 500 450
Variable costs:
Indirect materials $5,950 $5,382
Electricity $1,112 $1,008
Fixed costs:
Administration $2,770 $2,800
Rent $5,120 $5,100
Required: Construct a flexible budget performance report that would be useful in assessing how well costs were controlled in this department.

2. TCO D) Hanson, Inc. makes 1,000 units per year of a part called a “prositron” for use in one of its products. Data concerning the unit production costs of the prositron follow:
Direct materials $342
Direct labor 80
Variable manufacturing OH 48
Fixed manufacturing OH 520
Total $990
An outside supplier has offered to sell Hanson, Inc. all of the prositrons it requires. If Hanson, Inc. decided to discontinue making the prositrons, 10% of the above fixed manufacturing overhead costs could be avoided.

Required: Assume Hanson, Inc. has no alternative use for the facilities presently devoted to production of the prositrons. If the outside supplier offers to sell the prositrons for $850 each, should Hanson, Inc. accept the

offer? Fully support your answer with appropriate calculations.

3. (TCO E) Duif Company’s absorption costing income statement for the last year of operations is presented below.
Sales…………………………………………………$70,000
Less cost of goods sold:
Beginning inventory………………………………………. 0
Add cost of goods manufactured………………48,000
Goods available for sale………………………….48,000
Less ending inventory………………………………6,000
Cost of goods sold………………………………..42,000
Gross margin……………………………………….28,000
Less selling and admin. expenses……………..25,000
Net operating income…………………………..$ 3,000
Data on units produced and sold for the year are given below.
Units in beginning inventory……………………………..0
Units produced……………………………………….8,000
Units sold………………………………………………7,000

Fixed factory overhead totaled $16,000 for the year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 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.

4. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Karmana Corporation for the just-completed year.
Sales ……………………………………………………….$950
Raw materials inventory, beginning ………………….$10
Raw materials inventory, ending ……………………..$30
Purchases of raw materials ………………………….$120
Direct labor ………………………………………………$180
Manufacturing overhead ……………………………..$230
Administrative expenses ……………………………..$100
Selling expenses ………………………………………..$140
Work-in-process inventory, beginning ………………$70
Work-in-process inventory, ending ………………….$40
Finished goods inventory, beginning ………………$100
Finished goods inventory, ending ……………………$80

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. In addition, elaborate on the relationship between these schedules as they

relate to the flow of product costs in a manufacturing company.

TCO C

Question 1. 1. (TCO F) 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.

2. (TCO B) Madlem, Inc., produces and sells a single product whose selling price is $240.00 per unit and whose variable expense is $86.40 per unit. The company’s fixed expense is $720,384 per month.

Required: Determine the monthly break-even in either unit or total dollar sales. Show your work!

3. (TCO G) (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?

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