Exam (elaborations) ACCT 505 Final with Answers (ACCT505)

Exam (elaborations) ACCT 505 Final with Answers (ACCT505) 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) Answer Computer Overhead Rate Fixed Manuf OH Var Manuf OH (3.46x73000) Per Direct Lab H 3.46 Direct Lab Hours 73000 Est Manuf OH (+) Direct Lab Hours 73000 OH Rate 14.95 (/73000) 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) Answer Cash Budget for November Beginning Cash balance $31,000.00 Cash Receipts $135,000.00 Total Cash Available $166,000.00 (31000+) Less: Cash Disbursement $141,000.00 Excess Cash $25,000.00 (-) This study source was downloaded by from CourseH on 09-06-2021 08:47:26 GMT -05:00 This study resource was shared via CourseH ACCT 505 Final with Answers Borrow $25,000.00 () Cash Ending $50,000.00 1. (TCO C) The following overhead data are for a department of a large company. Actual Costs Incurred Static Budget Activity level (in units) 500 450 Variable costs: Indirect materials $5,950 $5,382 Electricity $1,112 $1,008 Fixed costs: Administration $2,770 $2,800 Rent $5,120 $5,100 Required: Construct a flexible budget performance report that would be useful in assessing how well costs were controlled in this department. (Points : 30) Answer Department of a large company Flexible Budget Performance Report Actual costs incurred Flexible budget Variance Activity level (in units) 500 500 Variable costs: Indirect materials $5,950 5,980 $30 F Electricity 1,112 1,120 $8 F Total variable costs $7,062 $7,100 Fixed Costs: Administration 2,770 2,800 $30 F Rent 5,120 5,100 -$20 U Total fixed costs 7,890 7,900 Total costs $14,952 $15,000 $48 F double check $48 This study source was downloaded by from CourseH on 09-06-2021 08:47:26 GMT -05:00 This study resource was shared via CourseH Actual activity level (units) 500 Static budget 450 Difference 50 Ramp up static budget by 11.111% Test: 500 (TCO D) Mr. Earl Pearl, accountant for Margie Knall, Inc. has prepared the following product-line income data. PRODUCT Total A B C Sales................................................$ 100,000........$50,000.........$20,000...........$30,000 Variable expenses.............................. 60,000..........30,000............10,000.............20,000 Contribution margin............................. .40,000..........20,000............10,000.............10,000 Fixed expenses: Rent................................................. .5,000...........2,500..............1,000...............1,500 Depreciation..................................... 6,000...........3,000..............1,200................1,800 Utilities.............................................4,000...........2,000.................500................1,500 Supervisors' salaries....................... 5,000.......... 1,500.................500................3,000 Maintenance....................................3,000...........1,500..................600..................900 Administrative expenses................ 10,000...........3,000.................2,000..............5,000 Total fixed expenses........................ 33,000..........13,500...............5,800.............13,700 Net operating income........................ $7,000..........$6,500.............$4,200............($3,700) The additional information below is available.  The factory rent of $1,500 assigned to Product C is avoidable if the product is dropped.  The company's total depreciation would not be affected by dropping C.  Eliminating Product C will reduce the monthly utility bill from $1,500 to $800.  All supervisors' salaries are avoidable.  If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from $3,000 to $2,000.  Elimination of Product C will make it possible to cut two persons from the administrative staff. Currently, their combined salaries total $2,000. Required: Prepare an analysis showing whether Product C should be eliminated. Articulate your findings. Answer CM 10000 Rent 1500 Utilities 800 Sup Salary 3000 Maint 2000 This study source was downloaded by from CourseH on 09-06-2021 08:47:26 GMT -05:00 This study resource was shared via CourseH Admin Exp Total 700 3. (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 $1 per unit sold. Required: Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements. Answer workings ($) ($) Sales 80,000 Less : Variable Cost of Goods Sold Opening Inventory 0 Cost of Goods Manufactured 9,000 X $4 36,000 Goods Available For Sale 36,000 Less : Closing Inventory 1,000 X $4 (4,000) (32,000) Contribution 48,000 Less : Variable Selling & Admin Cost 8,000 X 1 (8,000) 40,000 Less Fixed Expenses Fixed Factory OHD (18,000) Fixed Selling & Admin Cost 28,000 – 8,000 (20,000) Net Operating Income 2,000 Absorbtion Costing Profit 4,000 Less : Fixed Cost Element in Closing Inventory ($2 X 1,000) (2,000) Variable Costing Profit 2,000 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 This study source was downloaded by from CourseH on 09-06-2021 08:47:26 GMT -05:00 This study resource was shared via CourseH 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. (Points : 25) Answer Cost of goods Manuf Beginning raw materials inventory $10 Add: purchases raw material 120 Raw materials available for use $130 Deduct ending raw materials 30 Raw materials used in production $100 Direct labor 180 Manufacturing overhead 230 Total manufacturing costs $510 Add beginning work-in-process inventory 50 $560 Deduct ending work-in-process inventory 40 Cost of goods manufactured $520 Cost of goods Solds Finished Goods Inv 100 COGM $520 Total Goods Availble 620 Less: Finished Goods End 80 COGS 540 (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 6,000 This study source was downloaded by from CourseH on 09-06-2021 08:47:26 GMT -05:00