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TCO D) Topple Company produces a single product. Operating data
for the company and its absorption costing income statement for the last year
are presented below.
|
Units in beginning inventory
|
2,000
|
|
Units produced
|
9,000
|
|
Units sold
|
10,000
|
|
Sales
|
$100,000
|
Less cost of goods sold:
|
Beginning inventory
|
12,000
|
|
Add cost of goods manufactured
|
54,000
|
|
Goods available for sale
|
66,000
|
|
Less ending inventory
|
6,000
|
|
Cost of goods sold
|
60,000
|
|
Gross margin
|
40,000
|
|
Less selling and admin. expenses
|
28,000
|
|
Net operating income
|
$12,000
|
Variable manufacturing costs are $4 per unit. Fixed
manufacturing overhead totals $18,000 for the year. The fixed manufacturing
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)
|
Question 2. 2. (TCO I) (Ignore income taxes in this
problem.) Simpson 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 $700,000, is expected to have a useful life
of 10 years, and is expected to have a salvage value of $70,000 at the end of
10 years. The machinery will also need a $45,000 overhaul at the end of Year
5. A $60,000 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 $150,000 per year for
each of the 10 years. Simpson's discount rate is 18%.
Required: Part A: What is the net present value of this investment opportunity? Part B: Based on your answer to (a) above, should Simpson go ahead with the new conditioning shampoo? (Points : 30) |
|
Question 3. 3. (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.
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) |
|
Question 4. 4. (TCO F) Walker Corporation is preparing
its cash budget for November. The budgeted beginning cash balance is $43,000.
Budgeted cash receipts total $117,000 and budgeted cash disbursements total
$122,000. The desired ending cash balance is $55,000. 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. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance (Points : 25) |
|
Question 5. 5. (TCO F) Bella Lugosi Holdings, Inc.
(BLH), has collected the following operating information for its current
month's activity. Using this information, prepare a flexible budget analysis
to determine how well BLH performed in terms of cost control.
(Points : 25)
|
|
Question 6. 6. (TCO H) Lindon Company uses 10,000
units of Part Y each year as a component in the assembly of one of its
products. The company is presently producing Part Y internally at a total
cost of $100,000 as follows.
Direct materials............................................... $20,000 Direct labor...................................................... 40,000 Variable manufacturing overhead...................... 16,000 Fixed manufacturing overhead....................... 24,000 Total costs.......................................................100,000 An outside supplier has offered to provide Part Y at a price of $10 per unit. If Lindon stops producing the part internally, one third of the fixed manufacturing overhead would be eliminated. Required: Should Lindon Company make or buy the part? Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer. (Points : 30) |
|
Question 7. 7. (TCO B) Sandler Corporation bases its
predetermined overhead rate on the estimated machine hours for the upcoming
year. Data for the upcoming year appear below.
The actual machine hours for the year turned out to be 77,000. Required: Compute the company's predetermined overhead rate. (Points : 25) |
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