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(TCO F) Sandler Corporation bases its predetermined overhead rate on the estimated machine hours for the upcoming year.

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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
Estimated variable manufacturing
overhead
Estimated total fixed manufacturing
overhead

73,000
$3.49 per machine hour
$838,77
0

Required:
Compute the company's predetermined overhead rate. (Points : 15)
2. (TCO C) The selling and administrative expense budget of Fenley Corporation is based on the
number of units sold, which are budgeted to be 2,500 units in January. The variable selling and
administrative expense is $4.40 per unit. The budgeted fixed selling and administrative expense is
$35,750 per month, which includes depreciation of $4,000. The remainder of the fixed selling and
administrative expense represents current cash flows.
Required:
Prepare the selling and administrative expense budget for January. (Points : 15)
Part 2
1. (TCO C) The following overhead data are for a department of a large company.
Actual Costs Incurred
Static Budget
Activity level (in units)
800
750
Variable costs:
Indirect materials
Electricity
Fixed costs:
Administration
Rent

$6,850
$1,312

$6,600
$1,275

$3,570
$3,320

$3,700
$3,200

Required: Construct a flexible budget performance report that would be useful in assessing how
well costs were controlled in this department.


Question 2. 2. (TCO D) Hanson, Inc. makes 1,000 units per year of a part called a prositron
for use in one of its products. Data concerning the unit production costs of the prositron
follow.
Direct materials
Direct labor
Variable manufacturing OH

$342
80
48

Fixed manufacturing OH

520

Total

$990

An outside supplier has offered to sell Hanson, Inc. all of the prositrons it requires. If Hanson,
Inc. decided to discontinue making the prositrons, 10% of the above fixed manufacturing
overhead costs could be avoided.
Required: Assume Hanson, Inc. has no alternative use for the facilities presently devoted to
production of the prositrons. If the outside supplier offers to sell the prositrons for $850 each,
should Hanson, Inc. accept the offer? Fully support your answer with appropriate calculations.
(Points : 15)
3. (TCO E) The following absorption costing income statement and additional data are available
from the accounting records of Bernon Co. for the month ended May 31, XXXX. During the
accounting period, 17,000 units were manufactured and sold at a price of $60 per unit. There
were no beginning inventories.
Bernon Co.
Absorption Costing Income Statement
for the Month Ended May 31, XXXX

Sales (17,000 @ $60)

Cost of goods sold

$1,020

612


Gross profit

$ 408

Selling and administrative expenses

66

Income from operations

$ 342

Additional Information:

Cost

Total Cost

Number of Units

$442,000

17,000

Fixed

170,000

17,000

Total

Un

$612,000

Manufacturing costs:

Variable

Selling and administrative expenses:

Variable ($2 per unit sold)

$

Fixed

Total
Required: Prepare a new income statement for the year using variable costing. Comment on the
differences, if any, between the absorption costing and the variable costing income statements.

$


(Points : 15)
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
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 :
15)

1. (TCO F) 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:
Units in beginning work in process inventory
Materials costs
Conversion costs
Percent complete for materials
Percent complete for conversion
Units started into production during the month
Units transferred to the next department during the month
Materials costs added during the month
Conversion costs added during the month
Ending work in process:
Units in ending work-in-process inventory
Percentage complete for materials
Percentage complete for conversion

400
$6,900
$2,500
80%
15%
6,000
5,200
$112,500
$210,300
1,200
75%
30%


Required: Calculate the equivalent units for materials for the month in the first processing
department.
(Points : 20)
2. (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! (Points : 20)
3. (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?

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