ACCT 505 Week 8 Final Exam (Version 3)

1. Question (TCO E) Complying with regulations is a(n) (Points : 5)
2. Question (TCO G) Given the following data, what would ROI be?

• Sales    $70,000
• Net operating income  $10,000
• Contribution margin    $20,000
• Average operating assets        $50,000
  

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1. Question (TCO C) Madlem, Inc., produces and sells a single product whose selling price is $120.00 per unit and whose variable expense is $46.20 per unit. The company’s fixed expense is $405,900 per month.Required: Determine the monthly breakeven in either unit or total dollar sales. Show your work! (Points : 25)
2. Question (TCO B) 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:
   

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1. Question (TCO D) 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
• Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totaled
• $16,000 for the year. The fixed manufacturing overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold.

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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)

2. Question (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)

3. Question (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 ………………………………………………………………..$1,950
• Raw materials inventory, beginning ……………………..$50
• Raw materials inventory, ending …………………………..$30
• Purchases of raw materials ………………………………….$360
• Direct labor …………………………………………………………$120
• Manufacturing overhead ……………………………………$175
• Administrative expenses ……………………………………..$100
• Selling expenses ………………………………………………….$140
• Work-in-process inventory, beginning …………………$50
• Work-in-process  inventory, ending ………………………$70
• Finished goods  inventory,  beginning ………………….$200
• Finished goods inventory, ending ……………………….$105

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)

4. Question (TCO F) Wehr Inc. is preparing its cash budget for April. The budgeted beginning cash balance is $26,000. Budgeted cash receipts total $98,000 and budgeted cash disbursements total $105,000. 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………. desired ending cash balance. (Points : 25)
5. Question (TCO F) The following overhead data are for a department of a large company.
6. Question (TCO H) Mr. Earl Pearl, accountant for Margie Knall, Inc. has prepared the following product-line income data.
7. Question (TCO B) Buckhorn 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        37,000
• Estimated variable manufacturing overhead  $7.77 per machine hour Estimated total fixed manufacturing overhead         $888,000
• The actual machine hours for the year turned out to be 35,000.
• Required: Compute the company’s predetermined overhead rate. (Points : 25)