DEVRY ACCT 505 FINAL EXAM

Nic Saybin Enterprises Accounting Department collects all pertinent monthly operating data. Selected data are presented below for the current month. From the data provided, please provide Saybin Enterprises Management with a flexible budget analysis to see how costs were controlled. 
Actual Costs Incurred Static Budget 
Activity level (in units) 754,009 746,500 
Variable Costs: 
Indirect materials $328,897 $325,640 
Utilities $174,332 $171,890 
Fixed Costs: 
General and administrative $237,985 $244,908 
Rent $135,500 $135,000

(TCO D) McMullen Co. manufactures automatic door openers. The company uses 15,000 electronic hinges per year as a component in the assembly of the openers. You have been engaged by McMullen to assist with an evaluation of whether the company should continue producing the hinges or purchase them from an outside vendor. 

The Accounting Department provided the following detail regarding the annual cost to produce electronic hinges: 

Direct materials $54,000 
Direct labor 60,000 
Variable manufacturing overhead 36,000 
Fixed manufacturing overhead 90,000 
Total costs $240,000 


The Procurement Department provided the following supplier pricing: 
Supplier A price per hinge $11.00 
Supplier B price per hinge $10.75 
Supplier C price per hinge $10.50 

The supplier pricing was obtained in response to a formal request for proposal (RFP). Procurement has determined these suppliers meet McMullen's technical specifications and quality requirements.

If McMullen stops producing the part internally, 10% of the fixed manufacturing overhead would be eliminated.

Required: Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting an outside supplier's offer. 
(TCO E) 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 factory overhead totals $18,000 for the year. This 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. 
TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just-completed year.


Sales 1,200 
Raw materials inventory, beginning 25 
Raw materials inventory, ending 50 
Purchases of raw materials 180 
Direct labor 230 
Manufacturing overhead 250 
Administrative expenses 400 
Selling expenses 200 
Work-in-process inventory, beginning 150 
Work-in-process inventory, ending 120 
Finished goods inventory, beginning 100 
Finished goods inventory, ending 110 

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? 
Carter 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 
Percentage complete for materials 80% 
Percentage complete for conversion 15% 
Units started into production during the month 6,000 
Units transferred to the next department during the month 5,800 
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 1,400 
Percentage complete for materials 70% 
Percentage complete for conversion 40% 

Required: Calculate the equivalent units for materials (using the weighted-average method) for the month in the first processing department.

(TCO G) (Ignore income taxes in this problem.) Five years ago, the City of Paranoya spent $30,000 to purchase a computerized radar system called W.A.S.T.E. (Watching Aliens Sent To Earth). Recently, a sales rep from W.A.S.T.E. Radar Company told the city manager about a new and improved radar system that can be purchased for $50,000. The rep also told the manager that the company would give the city $10,000 in trade on the old system. The new system will last 10 years. The old system will also last that long but only if a $4,000 upgrade is done in 5 years. The manager assembled the following information to use in the decision regarding which system is more desirable:


Old System New System 
Cost of radar system $30,000 $50,000 
Current salvage value $10,000 - 
Salvage value in 10 years $5,000 $8,000 
Annual operating costs $34,000 $29,000 
Upgrade required in 5 years $4,000 - 
Discount rate 14% 14% 

Required:
(a) What is the City of Paranoya's net present value for the decision described above? Use the total cost approach.
(b) Should the City of Paranoya purchase the new system or keep the old system? 
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! 

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 38,500 labor hours. The estimated variable manufacturing overhead was $7.37 per labor hour and the estimated total fixed manufacturing overhead was $601,328. The actual labor hours for the year turned out to be 41,721 labor hours.

Required:

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

1. (TCO F) Buckhorn Corporation bases its predetermined overhead rate on the estimated machine hours for the upcoming year. Data for the upcoming year appear below.



Estimated machine hours 85,000
Estimated variable manufacturing overhead $5.55 per machine hour
Estimated total fixed manufacturing overhead $951,888 
Required:
Compute the company's predetermined overhead rate. 
(TCO F) Matuseski Corporation is preparing its cash budget for October. The budgeted beginning cash balance is $17,000. Budgeted cash receipts total $187,000 and budgeted cash disbursements total $177,000. The desired ending cash balance is $40,000. The company can borrow up to $120,000 at any time from a local bank, with interest not due until the following month. 

Required:

Prepare the company's cash budget for October in good form. (Points : 25)