ACCT 1340 FINAL 8-10, 12-13

1.

Fab Manufacturing Corporation manufactures and sells stainless steel coffee mugs. Expected mug sales at Fab (in units) for the next three months are as follows:

  

Fab likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales. How many mugs should Fab plan on producing during the month of November? 
 

2.

The following are budgeted data:

  

One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. Purchases of raw materials for February would be budgeted to be: 
 

Richards Corporation has the following budgeted sales for the first half of next year:

  

The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:

  

The accounts receivable balance on January 1 is $70,000. Of this amount, $60,000 represents uncollected December sales and $10,000 represents uncollected November sales.

3.

What is the budgeted accounts receivable balance on May 30? 
 

Bracken Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:

· Sales are budgeted at $330,000 for November, $340,000 for December, and $340,000 for January.
· Collections are expected to be 80% in the month of sale, 17% in the month following the sale, and 3% uncollectible.
· The cost of goods sold is 75% of sales.
· The company would like to maintain ending merchandise inventories equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
· Other monthly expenses to be paid in cash are $21,800.
· Monthly depreciation is $19,000.
· Ignore taxes.

  

4.

December cash disbursements for merchandise purchases would be: 
 

Noel Enterprises has budgeted sales in units for the next five months as follows:

  

Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on May 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.

5.

The beginning inventory in units for September is: 
 

6.

The desired ending inventory for August is: 
 

Vanderhyde Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During May, the kennel budgeted for 3,300 tenant-days, but its actual level of activity was 3,340 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May:

Data used in budgeting:

  

Actual results for May:

  

7.

The net operating income in the planning budget for May would be closest to: 
 

Larance Detailing's cost formula for its materials and supplies is $2,230 per month plus $1 per vehicle. For the month of November, the company planned for activity of 75 vehicles, but the actual level of activity was 25 vehicles. The actual materials and supplies for the month was $2,160.

8.

The spending variance for materials and supplies in November would be closest to: 
 

Hairston Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During November, the company budgeted for 7,700 units, but its actual level of activity was 7,720 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for November:

Data used in budgeting:

  

Actual results for November:

  

9.

The direct materials in the flexible budget for November would be closest to: 
 

Tabeling Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During August, the company budgeted for 6,500 units, but its actual level of activity was 6,540 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for August:

Data used in budgeting:

  

Actual results for August:

  

10.

The net operating income in the planning budget for August would be closest to: 
 

Lantagne Clinic uses client-visits as its measure of activity. During May, the clinic budgeted for 3,800 client-visits, but its actual level of activity was 3,820 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for May:

Data used in budgeting:

  

Actual results for May:

  

11.

The net operating income in the planning budget for May would be closest to: 
 

Hammes Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During February, the company budgeted for 5,500 units, but its actual level of activity was 5,510 units. The company has provided the following data concerning the formulas to be used in its budgeting:

  

12.

The activity variance for direct labor in February would be closest to: 
 

13.

Blue Corporation's standards call for 2,500 direct labor-hours to produce 1,000 units of product. During May 900 units were produced and the company worked 2,400 direct labor-hours. The standard hours allowed for May production would be: 
 

14.

Hien, Inc. uses machine-hours as the base to apply its manufacturing overhead. The following information relates to variable manufacturing overhead standards at Hien:

Standard rate per machine-hour: $50
Total standard machine-hours allowed for units produced during September: 4,000

Hien's variable overhead rate variance for September was $800 favorable. Its variable overhead efficiency variance was $3,600 unfavorable. How many machine-hours did Hien actually use during September? 
 

The following materials standards have been established for a particular product:

  

The following data pertain to operations concerning the product for the last month:

  

The direct materials purchases variance is computed when the materials are purchased.

15.

What is the materials quantity variance for the month? 
 

Berends Corporation makes a product with the following standard costs:

  

The company reported the following results concerning this product in April.

  

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

16.

The materials price variance for April is: 
 

Longview Hospital performs blood tests in its laboratory. The following standards have been set for each blood test performed:

  

During May, the laboratory performed 1,500 blood tests. On May 1 there were no direct materials (plates) on hand; after a plate is used for a blood test it is discarded. Variable overhead is assigned to blood tests on the basis of standard direct labor-hours. The following events occurred during May:

· 3,600 plates were purchased for $9,540
· 3,200 plates were used for blood tests
· 340 actual direct labor-hours were worked at a cost of $5,550

The direct materials purchases variance is computed when the materials are purchased.

17.

The variable overhead efficiency variance for May is 
 

Ortman Corporation makes a product with the following standard costs:

  

The company reported the following results concerning this product in May.

  

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

18.

The materials price variance for May is: 
 

The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 100,000 wheels annually are:

  

An outside supplier has offered to sell Talbot similar wheels for $1.25 per wheel. If the wheels are purchased from the outside supplier, $15,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $45,000 per year. Direct labor is a variable cost.

19.

At what purchase price for the wheels would Talbot be indifferent between making or buying the wheels? 
 

Eley Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 40,000 units per month is as follows:

  

The normal selling price of the product is $86.10 per unit.
An order has been received from an overseas customer for 2,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.20 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.

20.

Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $76.40 per unit. By how much would this special order increase (decrease) the company's net operating income for the month? 
 

Crane Corporation makes four products in a single facility. Data concerning these products appear below:

  

The milling machines are potentially the constraint in the production facility. A total of 22,600 minutes are available per month on these machines.

21.

Which product makes the MOST profitable use of the milling machines? 
 

Duarte Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $31 to buy from farmers and $15 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $27 or processed further for $14 to make the end product industrial fiber that is sold for $44. The beet juice can be sold as is for $32 or processed further for $29 to make the end product refined sugar that is sold for $50.

22.

How much more profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar? 
 

Paulsen Corporation makes two products, W and P, in a joint process. At the split-off point, 50,000 units of W and 60,000 units of P are available each month. Monthly joint production costs are $290,000. Product W can be sold at the split-off point for $5.60 per unit. Product P either can be sold at the split-off point for $4.75 per unit or it can be further processed and sold for $7.20 per unit. If P is processed further, additional processing costs of $3.10 per unit will be incurred.

23.

What would the selling price per unit of Product P need to be after processing in order for Paulsen Corporation to be economically indifferent between selling P at the split-off point or processing P further? 
 

Dowchow Corporation makes two products from a common input. Joint processing costs up to the split-off point total $38,400 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:

  

24.

What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point? 
 

25.

(Ignore income taxes in this problem.) Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The auto was purchased for $28,000 and will have a 6-year useful life and a $4,000 salvage value. Delivering prescriptions (which the pharmacy has never done before) should increase gross revenues by at least $32,000 per year. The cost of these prescriptions to the pharmacy will be about $25,000 per year. The pharmacy depreciates all assets using the straight-line method. The payback period for the auto is closest to: 
 

26.

Mujalli Corporation is considering a capital budgeting project that would require an initial investment of $200,000. The investment would generate annual cash inflows of $64,000 for the life of the project, which is 4 years. At the end of the project, equipment that had been used in the project could be sold for $10,000. The company's discount rate is 9%. The net present value of the project is closest to: 
 

27.

Valotta Corporation has provided the following data concerning an investment project that it is considering:

  

The working capital would be released for use elsewhere at the end of the project. The net present value of the project is closest to: 
 

(Ignore income taxes in this problem.) Jimba's, Inc., has purchased a new donut maker. It cost $20,000 and has an estimated life of 10 years. The following annual donut sales and expenses are projected:

  

Assume cash flows occur uniformly throughout a year except for the initial investment.

28.

The simple rate of return on the new machine is closest to: 
 

(Ignore income taxes in this problem.) Pro-Mate, Inc. is a producer of athletic equipment. The company is considering the purchase of a machine to produce baseball bats. The machine will cost $60,000 and have a 10-year useful life. The following annual revenues and expenses are projected:

  

The machine will have no salvage value. Assume cash flows occur uniformly throughout a year except for the initial investment.

29.

The payback period for the new machine is about: 
 

(Ignore income taxes in this problem.) Carlson Manufacturing has some equipment that needs to be rebuilt or replaced. The following information has been gathered relative to this decision:

  

Carlson uses the total cost approach to net present value analysis and a discount rate of 12%. Regardless of which option is chosen, rebuild or replace, at the end of five years Carlson Manufacturing will have no future use for the equipment.

30.

If the new equipment is purchased, the present value of the annual cash operating costs associated with this alternative is: