(TCO E) Topple Company produces a single product. Operating data for the company and its

SOLUTION BY CHARTERED ACCOUNTANT

(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:

Unites in beginning
inventory
0

Units produced
9,000

Units
sold
7,000

Sales

$100,000

Less cost of good
sold:

Beginning
inventory
0

Add cost of goods
manufactured
54,000

Goods available for
sale
54,000

Less ending
inventory
12,000

Cost of goods
sold
42,000

Gross
Margin
58,000

Less Selling and admin
expenses
28,000

Net operating
income
30,000

Variable manufacturing
cost are $4 per unit. Fixed factory overheard 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.

2.
(TCO A) The following data (in thousands of dollars) have been taken from the
accounting record of the Marroon Corporation for the just-completed year.

Sales

1,200

Raw materials
inventory, beginning

25

Raw materials
inventory,
ending
50

Purchases of raw
materials
180

Direct
labor
230

Manufacturing
overhead

250

Administrative
expenses

400

Selling
expenses
200

Work-in-process
inventory,
beginning
150

Work-in process
inventory,
ending
120

Finished goods
inventory,
beginning
100

Finished goods
inventory,
ending
110

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 statement if the ending finished goods inventory is
overstated or understated?

1.
(TCO F) Carter 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

started into
production during the month 6,000

Units transferred to
the next dept. during the month 5,800

Materials cost added
during the
month
$112,500

Conversion cost added
during the
month
$210,000

Ending work in
process:

Units in ending
work-in-process
inventory
1,400

Percentage complete
for materials

70%

Percentage complete
for
conversion
40%

Required: Calculate
the equivalent units for materials (using the weighted-average method) for the
month in the first processing department.

2.
(TCO G) – (Ignore income taxes in this problem.) Axillar 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
$375,000 is expected to have a useful life of 10 years and is expected to have
a salvage value of $50,000 at the end of 10 years. The machinery will also need
a $35,000 overhaul at the end of Year 6. A $40,000 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 $85,000 per year for each of the 10 years. Axillar’s discount
rate is 16%.

Required:

(a)What is the net
present value of this investment opportunity?

(b)Based on your
answer to (a) above, should Axillar go ahead with the new conditioning shampoo?

3.
(TCO B) Madlem, Inc.m produces and sells a single product whose selling price
is $240.00 per unit and whose variable expense is $86.40 per unit. The
company’s fixed expense is $720,384 per month.

Required:

Determine the monthly
break-even in either unit or total dollar sales. Show your work

1. (TCO F) The willow
creek corporation basis its predetermined overhead rate on the estimated labor
hours for the upcoming year. At the beginning of the most recently complete
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 42,721 hours

Required:

Compute the company’s
predetermined overhead rate for the recently completed year

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 disbursments 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.

1.
(TCO C) Nic Saybin Enterprises Accounting Department collects all pertinent
monthly operating data. Selected data are presented below for the current
month. From the data provided, please provide Saybin Enterprise Management with
a flexible budget analysis to see how cost were controlled.

Actual Cost
Incurred Static Budget

Activity level (in
units)
$754,009
$746,500

Variable Cost

Indirect
Materials
$328,897
$325,640

Utilities
$174,332
$171,890

Fixed Cost

General &
administrative
$237,985
$244,908

Rent
$135,500
$135,000

2.
(TCO D) McMullen Co. manufactures automatic door openers. The company uses
15,000 electronic hinges per year as a component in the assembly of the
openers. You have been engaged by McMullen assist with an evaluation of whether
the company should continue producing the hinges or purchase them from an
outside vendor.

The accounting
Department provided the following detail regarding the annual cost to produce
electronic hinges:

Direct materials

$54,000

Direct
Labor
$60,000

Variable Manufacturing

Overhead

$36,000

Fixed manufacturing

Overheard

$90,000

Total
Cost
$240,000

The Procurement
Department provides the following supplier pricing

Supplier A price per
hinge $11.00

Supplier A price per
hinge $10.75

Supplier A price per
hinge $10.50

The supplier pricing
was obtained in response to a formal request for proposal (RFP) Procurement has
determined these suppliers meet McMullen’s technical specifications and quality
requirements.

If McMullen stops
producing the part internally 10% of the fixed manufacturing overhead would be
eliminated.

Required: Prepare a
make or buy analysis showing the annual advantage or disadvantage of accepting
an outside supplier’s offer.