acct505 final 495985

1.(TCO F) Willow Creek Corporation bases its predetermined overhead rate on the estimated labor hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor hours for the upcoming year at 38,500 labor hours. The estimated variable manufacturing overhead was $7.37 per labor hour and the estimated total fixed manufacturing overhead was $601,328. The actual labor hours for the year turned out to be 41,721 labor hours.

Required:

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

2.(TCO F) Matuseski Corporation is preparing its cash budget for October. The budgeted beginning cash balance is $17,000. Budgeted cash receipts total $187,000 and budgeted cash disbursements total $177,000. The desired ending cash balance is $40,000. 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 October in good form. (Points : 25)

2.(TCO D) Lindon Company uses 4,500 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 $69,000 as follows:

An outside supplier has offered to provide Part X at a price of $11 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. (Points : 30)

3.(TCO E) Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year is presented below:

Less cost of goods sold:

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. (Points : 30)

4.(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)

Units in beginning work-in-process inventory

400

Materials costs

$6,900

Conversion costs

$2,500

Percentage complete for materials

80%

Percentage complete for conversion

15%

Units started into production during the month

6,000

Units transferred to the next department during the month

5,800

Materials costs added during the month

$112,500

Conversion costs added during the month

$210,300

Units in ending work-in-process inventory

1,400

Percentage complete for materials

70%

Percentage complete for conversion

40%

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%

Selling price per unit

$130.00

Variable expense per unit

$27.30

Fixed expense per month

$165,347