Accounting homework

Managerial Accounting BA-602 - Final Exam (Chapters 10,11,12,13,14)

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1) Nelson Company has two divisions. The following information is available:

North Division South Division Revenue $300,000 $500,000 After-tax operating income 100,000 90,000 Average invested capital 100,000 200,000 Invested capital at end of period 200,000 300,000 Cost of capital 20% 15%

Required: Compute the following for each division: A) Return on investment B) Return on sales C) Capital turnover D) Residual income

2) The following data are available for three divisions of Beck Company:

Division A Division B Division C Operating income A $45,000 I Revenue B E $84,000 ROI 15% F 12% Invested capital $150,000 G $35,000 Return on sales 8% 9% J Cost of capital 12% H 10% Capital turnover C 2.5 K Economic profit D $15,000 L

Required: Compute the missing data.

3) Dolly Company is contemplating three different equipment investments. The relevant data follows: Proposal D Proposal O Proposal G

Cost $200,000 $320,000 $830,000 Annual savings of cash operating costs $40,000 $100,000 $150,000 Terminal salvage value 0 0 0 Estimated useful life in years 10 10 10 Minimum desired rate of return 12% 12% 12% Method of depreciation Straight-line Straight-line Straight-line

The present value factor of an ordinary annuity for 10 periods at 12% is 5.6502. The present value factor of one for 10 periods at 12% is 0.322.

Required: A) Compute the net present value of each investment. Ignore income taxes. B) If only one investment can be acquired, which investment should be chosen?

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4) Slowly Company has obtained the following information about a proposed project:

Future sales $200,000 Future expenses, excluding depreciation $140,000 Depreciation expense per year $35,000 Estimated salvage value in 5 years 0 Cost of equipment $175,000 Cost of capital 10% Income tax rate 40% Estimated useful life(in years) 5 Depreciation method Straight-line Present value of ordinary annuity at 10% for 5 periods 3.7908 Present value of one at 10% for 5 periods 0.6209

Required: A) What is the net after-tax income per year? B) What is the annual after-tax cash flow from depreciation expense? C) What is the NPV of the project?

5) Cowboy Company wishes to sell a machine with a book value of $40,000. The income tax rate is 30%. The machine is sold for $50,000.

Required: A) What is the net after-tax cash flow from the sale of the machine? B) If the machine is sold for $20,000, what is the net after-tax cash flow from the sale of the machine?

6) Bryant Company has obtained the following data about a possible planned investment:

Cost $270,000 Terminal salvage value in 8 years $10,000 Additional annual revenues for 8 years $250,000 Additional annual cash expenses for 8 years $200,000 Estimated useful life in years 8 Minimum desired rate of return 10% Present value of ordinary annuity, 10%, 8 periods 5.3349 Present value of one, 10%, 8 periods 0.4665

The company uses straight-line depreciation method. Ignore income taxes.

Required: A) Compute the net present value of the investment. B) Compute the payback period.

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7) Robert Company's power plant provides electricity to two producing departments. The annual budget for the power plant shows the following:

Budgeted fixed costs $500,000 Budgeted variable costs per kilowatt hour $1

Actual annual costs incurred by the power plant were: Actual fixed costs $215,000 Actual variable costs $350,000

Additional annual data follows: Producing Department 1 Producing Department 2

Capacity available 250,000 kilowatt hours 150,000 kilowatt hours Capacity used 270,000 kilowatt hours 165,000 kilowatt hours

Required: A) Compute the amount of fixed costs allocated to each producing department. B) Compute the amount of variable costs allocated to each producing department.

8) Seahawks Company has two service departments, Maintenance and Cafeteria, as well as two production departments, Mixing and Bottling. Maintenance Department costs are allocated based on square footage and Cafeteria Department costs are allocated based on number of employees. The following data was available:

Maintenance Cafeteria Mixing Bottling Direct costs $210,000 $180,000 $76,000 $85,000 Square footage 1,000 2,000 4,000 6,000 Number of employees 30 20 60 100 Direct labor hours 8,000 6,000

Assume the direct method is used to allocate service department costs to producing departments.

Required: A) Determine the total costs of the Mixing Department after allocating the service departments' costs. B) Determine the total costs of the Bottling Department after allocating the service departments' costs.

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9) Colts Company manufactures three products from a joint process. Joint costs for the year amount to $500,000. The following data are available:

Product Number of Units Produced Sales Price Per Unit A 5,000 $6 B 4,000 $10 C 1,000 $10

In addition, the following weights were available: Product Number of Units Produced Weight Per Unit A 5,000 10 pounds B 4,000 20 pounds C 1,000 30 pounds

Required: Using the relative-sales-value method, determine the amount of joint costs allocated to each product.

10) Cougar Company has two service departments, Maintenance and Cafeteria, as well as two production departments, Mixing and Finishing. Maintenance Department costs are allocated based on direct labor hours and Cafeteria Department costs are allocated based on number of employees. The following data are available:

Maintenance Cafeteria Mixing Finishing Direct costs $7,000 $2,800 $1,200 $400 Direct labor hours 180 50 20 10 Number of employees 36 120 540 60

Assume the step-down method of allocating service departments' costs is used. The Maintenance Department renders the greatest service and is allocated first.

Required: A) Determine the total costs of the Mixing Department after allocating the service departments' costs. B) Determine the total costs of the Finishing Department after allocating the service departments' costs.

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11) Smith Company applies overhead based on machine hours. The following data was available:

Budgeted factory overhead $266,400 Budgeted machine hours 18,500 Actual factory overhead $287,920 Actual machine hours 19,050 Cost of goods sold $560,000 Direct materials inventory, ending balance $60,000 Work-in-process inventory, ending balance $190,000 Finished goods inventory, ending balance $250,000

Required: A) Compute the budgeted factory overhead rate. B) Compute the underapplied or overapplied factory overhead. C) Under the immediate write-off approach to overhead variances, how would you dispose of the overhead variance? D) If the immediate write-off approach to overhead variances is not used, how would you dispose of the overhead variance?

12) The following data are available for Scream Company for the year ended December 31, 2015:

Sales 38,000 units Sales price $50 per unit Actual variable manufacturing costs $1,400,000 Actual fixed manufacturing costs $228,000 Actual variable nonmanufacturing costs $76,000 Actual fixed nonmanufacturing costs $135,000 Work-in-process inventory, January 1, 2015 0 Finished goods inventory, January 1, 2015 0 Direct materials inventory, January 1, 2015 0 Work-in-process inventory, December 31, 2015 0 Direct material inventory, December 31, 2015 0 Expected production 40,000 units Actual production 40,000 units

Required: A) Using the variable-costing approach, prepare an income statement for the year ended December 31, 2015. Assume actual fixed costs were equal to budgeted fixed costs. B) Using the absorption-costing approach, prepare an income statement for the year ended December 31, 2015. Assume actual fixed costs were equal to budgeted fixed costs.

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13) Smithison Company gathered the following information for the year ended April 30, 2015:

Units produced 11,200 Units expected to be produced 11,200 Units sold 8,400 Direct labor $99,600 Direct materials used $155,000 Fixed selling and administrative expenses $64,800 Fixed manufacturing overhead $52,640 Variable manufacturing overhead $70,200 Contribution margin $71,200 Direct materials inventory, April 30, 2015 0 Direct materials inventory, April 30, 2014 0 Work-in-process inventory, April 30, 2015 0 Work-in-process inventory, April 30, 2014 0 Finished goods inventory, April 30, 2014 0

Required: A) Under variable costing, what is the cost of the finished goods inventory on April 30, 2015? B) Under absorption costing, what is the cost of the finished goods inventory on April 30, 2015?

14) Splitsville Company has two departments. Factory overhead costs are applied based on direct labor cost in Department A and machine hours in Department B. The following information is available:

Budgeted Items Dept. A Dept. B Direct labor cost $180,000 $165,000 Machine hours 51,000 40,000 Factory overhead cost $225,000 $180,000

Actual data for Job #10 are as follows: Actual Items Dept. A Dept. B Direct materials requisitioned $10,000 $16,000 Direct labor cost $11,000 $14,000 Machine hours 5,000 3,000

Required: A) Compute the budgeted factory overhead rate for Department A. B) Compute the budgeted factory overhead rate for Department B. C) What is the total overhead cost for Job #10? D) If Job #10 consists of 50 units of product, what is the unit cost of this job? Note: Unit costs includes not only overhead assigned but other costs.

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