TO GENIUSY_2006 ONLY

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Question 1.1. (TCO F) Sandler 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 73,000   Estimated variable manufacturing overhead $3.49 per machine hour Estimated total fixed manufacturing overhead $838,770   Required: Compute the company's predetermined overhead rate. (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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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)                           360                                340 Variable costs:              Indirect materials                     $4,182                           $4,148              Electricity                               $2,536                           $2,414 Fixed costs:             Administration                          $6,540                           $6,500             Rent                                        $6,310                           $6,400 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)  Lindon Company uses 5,000 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $80,000 as follows:

Direct materials...............................................$18,000

Direct labor......................................................20,000

Variable manufacturing overhead...................     12,000

Fixed manufacturing overhead.......................     30,000

Total costs.......................................................80,000

An outside supplier has offered to provide Part X at a price of $13 per unit. If Lindon stops producing the part internally, one third of the manufacturing overhead would be eliminated.

Required: Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer.

(Points : 30)

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.

(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)

TCO C 

Question 1.1. (TCO F) Industrial Supply 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 5,200 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 1,200 Percentage complete for materials 75% Percentage complete for conversion 30%   Required: Calculate the equivalent units for materials for the month in the first processing department. (Points : 25)

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

Selling price per unit	$230.00
Variable expense per unit	$112.70
Fixed expense per month	$239,292

Required: Determine the monthly break-even in unit 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)