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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.
Estimates made at the beginning of the year 24,000
Estimated labor hours $6.86 per labor hour
Estimated variable manufacturing overhead $394,560
Estimated total fixed manufacturing overhead 24,500
Actual labor hours for the year

Required:

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

 

  1. (TCO C) Wehr Inc. is preparing its cash budget for April. The budgeted beginning cash balance is $19,000. Budgeted cash receipts total $105,000 and budgeted cash disbursements total $98,000. The desired ending cash balance is $50,000. 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 April in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance.(Points : 25)
  2. (TCO C) The following overhead data are for a department of a large company.
Actual Costs Incurred Static Budget
Activity level (in units) 500 450
Variable costs:
     Indirect materials $5,950 $5,382
     Electricity $1,112 $1,008
Fixed costs:
     Administration $2,770 $2,800
     Rent $5,120 $5,100

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

  1. (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.

 

 

  1. (TCO E) Hanks 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………………………………………………8,000
Sales…………………………………………………$80,000
Less cost of goods sold:
Beginning inventory………………………………………. 0
Add cost of goods manufactured………………54,000
Goods available for sale………………………….54,000
Less ending inventory………………………………6,000
Cost of goods sold………………………………..48,000
Gross margin……………………………………….32,000
Less selling and admin. expenses……………..28,000
Net operating income…………………………..$  4,000

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.

  1. (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 ……………………$80Use 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)
  2. (TCO B) Longiotti Corporation produces and sells a single product. Data concerning that product appear below.
Selling price per unit $150.00
Variable expense per unit $36.00
Fixed expense per month $159,600

Required:

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

  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.
Work in process, beginning:
Units in beginning work in process inventory 400
Materials costs $6,900
Conversion costs $2,500
Percent complete for materials 80%
Percent complete for conversion 15%
Units started into production during the month 6,000
Units transferred to the next department during the month 5,400
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 1,000
Percentage complete for materials 80%
Percentage complete for conversion 30%

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

(Points : 25)

  1. (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:

  1. What is the city of Paranoya’s net present value for the decision described above? Use the total cost approach.
  2. Should the city of Paranoya purchase the new system or keep the old system?

(Points : 35)