1. (TCO F) Wahr 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 32,000. The estimated variable manufacturing overhead was $7.17 per labor hour and the estimated total fixed manufacturing overhead was $584,320. The actual labor hours for the year turned out to be 33,300.
Required:
Compute the company's predetermined overhead rate for the recently completed year.
2. (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.
3. (TCO C) The following overhead data are for a department of a large company.
Actual costs Static
Incurred budget
Activity level (in units) 360 340
Variable costs:
Indirect materials $4,182 $4,148
Electricity $2,536 $2,414
Fixed costs:
Administration $6,540 $6,500
Rent $6,310 $6,400
Required:
Construct a flexible budget performance report that would be useful in assessing how well costs were controlled in this department.
4. (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.
5. (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 ........................$80
Required:
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
6. (TCO F) Maverick 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 5,600
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 800
Percentage complete for materials 70%
Percentage complete for conversion 30%
Required:
Calculate the equivalent units for materials for the month in the first processing department.
7. (TCO B) Heckaman Corporation produces and sells a single product. Data concerning that product appear below.
Selling price per unit $230.00
Variable expense per unit $112.70
Fixed expense per month $239,292
Required:
Determine the monthly break-even in unit sales. Show your work!
8. (TCO G) (Ignore income taxes in this problem.) Bill Anders retires in 8 years. He has $650,000 to invest and is considering a franchise for a fast food outlet. He would have to purchase equipment costing $500,000 to equip the outlet and invest an additional $150,000 for inventories and other working capital needs. Other outlets in the fast food chain have an annual net cash inflow of about $160,000. Mr. Anders would close the outlet in 8 years. He estimates that the equipment could be sold at that time for about 10% of its original cost. Mr. Anders' required rate of return is 16%.
Required:
Part A: What is the investment's net present value when the discount rate is 16%?
Part B: Refer to your calculations. Is this an acceptable investment? Why or why not?