acct 505 final exam week 8 devry

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1. (TCO F) Escatel Corporation bases its predetermined overhead rate on the estimated labor hours for the upcoming year. Data for the most recently completed year appear below.

Required:

Compute the company's predetermined overhead rate for the recently completed year. (Points : 25)

2. (TCO C) 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)

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1. (TCO C) The following overhead data are for a department of a large company.

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

(Points : 30)

2. (TCO D) Mr. Earl Pearl, accountant for Margie Knall, Inc. has prepared the following product-line income data.

                                                                                    PRODUCT

                                                                Total             A                  B                      C

Sales................................................$ 100,000........$50,000.........$20,000...........$30,000

Variable expenses..............................  60,000..........30,000............10,000.............20,000

Contribution margin............................. .40,000..........20,000............10,000.............10,000

Fixed expenses:

    Rent................................................. .5,000...........2,500..............1,000...............1,500

    Depreciation..................................... 6,000...........3,000..............1,200................1,800

    Utilities.............................................4,000...........2,000.................500................1,500

    Supervisors' salaries.......................   5,000.......... 1,500.................500................3,000

    Maintenance....................................3,000...........1,500..................600..................900

    Administrative expenses................ 10,000...........3,000.................2,000..............5,000

Total fixed expenses........................ 33,000..........13,500...............5,800.............13,700

Net operating income........................ $7,000..........$6,500.............$4,200............($3,700)

The additional information below is available.

• The factory rent of $1,500 assigned to Product C is avoidable if the product is dropped.
• The company's total depreciation would not be affected by dropping C.
• Eliminating Product C will reduce the monthly utility bill from $1,500 to $800.
• All supervisors' salaries are avoidable.
• If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from $3,000 to $2,000.
• Elimination of Product C will make it possible to cut two persons from the administrative staff. Currently, their combined salaries total $2,000.

Required: Prepare an analysis showing whether Product C should be eliminated.  Articulate your findings.

(Points : 30)

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

Additional Information:

Required: Prepare a new income statement for the year using variable costing. Comment on the differences, if any, between the absorption costing and the variable costing income statements.

(Points : 30)

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 ......................................................$200 
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. (Points : 25)

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1. (TCO F) Loxham 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.

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

(Points : 25)

2. (TCO B) Longiotti Corporation produces and sells a single product. Data concerning that product appear below.

Required:

Determine the monthly break-even in total dollar sales. Show your work! 
(Points : 25)

3. (TCO G) (Ignore income taxes in this problem.) 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)