2024 – Page 1 Question 1 TCO F Sandler Corporation bases its predetermined overhead
ACCT505 Final Exam – Sandler Corporation Bases Its Predetermined – 2024
Page 1
Question 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)
Compute the company’s predetermined overhead rate. (Points : 25)
Question 2
(TCO C) Enciso Corporation is preparing its cash budget for November. The budgeted beginning cash balance is $31,000. Budgeted cash receipts total $135,000 and budgeted cash disbursements total $141,000. The desired ending cash balance is $50,000. The company can borrow up to $100,000 at any time from a local bank, with interest not due until the following month.
Required:
Prepare the company’s cash budget for November in good form. (Points : 25)
1. (TCO C) The following overhead data are for a department of a large company.
Actual costs Static
Incurred budget
Activity level (in units) 800 750
Variable costs:
Indirect materials $6,850 $6,600
Electricity $1,312 $1,275
Fixed costs:
Administration $3,570 $3,700
Rent $3,320 $3,200
Required
Construct a flexible budget performance report that would be useful in assessing how well costs were controlled in this department.
2. (TCO D) Hanson, Inc. makes 1,000 units per year of a part called a “prositron” for use in one of its products. Data concerning the unit production costs of the prositron follow:
Direct materials $342
Direct labor 80
Variable manufacturing OH 48
Fixed manufacturing OH 520
Total $990
An outside supplier has offered to sell Hanson, Inc. all of the prositrons it requires. If Hanson, Inc. decided to discontinue making the prositrons, 10% of the above fixed manufacturing overhead costs could be avoided.
Required: Assume Hanson, Inc. has no alternative use for the facilities presently devoted to production of the prositrons. If the outside supplier offers to sell the prositrons for $850 each, should Hanson, Inc. accept the offer? Fully support your answer with appropriate calculations.
3. (TCO E) The following absorption costing income statement and additional data are available from the accounting records of Bernon Co. for the month ended May 31, 2007. During the accounting period, 17,000 units were manufactured and sold at a price of $60 per unit. There were no beginning inventories.
Sales (17,000 @ $60) $1,020,000
Cost of goods sold 612,000
Gross profit $ 408,000
Selling and administrative expenses 66,000
Income from operations $ 342,000
Additional Information:
Cost Total Cost Number of Units Unit Cost
Manufacturing costs:
Variable $442,000 17,000 $26
Fixed 170,000 17,000 10
Total $612,000 $36
Selling and administrative expenses:
Variable ($2 per unit sold) $34,000
Fixed 32,000
Total $66,000
Required
Prepare a new income statement for the year using variable costing. Comment on the differences, if any, between the absorption costing and the variable costing income statements.
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 ………………………………………………$180
Manufacturing overhead ……………………………..$230
Administrative expenses ……………………………..$100
Selling expenses ………………………………………..$140
Work-in-process inventory, beginning ………………$50
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.
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.
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!
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 conditionings hampoo?
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