3. (TCO E) Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year is presented below:

Units in beginning inventory 0
Units produced 9,000
Units sold 7,000
Sales $100,000
Less cost of goods sold:
Beginning inventory 0
Add cost of goods manufactured 54,000
Goods available for sale 54,000
Less ending inventory 12,000
Cost of goods sold 42,000
Gross margin 58,000
Less selling and admin. expenses 28,000
Net operating income $30,000

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. (Points : 30)

4. (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 1,150
Raw materials inventory, beginning 15
Raw materials inventory, ending 40
Purchases of raw materials 150
Direct labor 250
Manufacturing overhead 300
Administrative expenses 500
Selling expenses 300
Work in process inventory, beginning 100
Work in process inventory, ending 150
Finished goods inventory, beginning 80
Finished goods inventory, ending 120

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? (Points : 25)

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1. (TCO F) 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. (Points : 25)
2. (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)


3. (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! (Points : 25)

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