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ACCT 505 FINAL EXAM
Question
ACCT 505 FINAL EXAM
1 Topple Company
2 Simpson Beauty Products Corporation
3 Maroon Corporation
4 Walker Corporation
5 Bella Lugosi Holdings, Inc. (BLH),
6 Lindon Company uses 10,000
7 Sandler Corporation
1 Topple Company produces a single product. Operating data for the company and
its absorption costing income statement for the last year are presented below.
Units in beginning inventory 2,000
Units produced 9,000
Units sold 10,000
Sales $100,000
Less cost of goods sold:
Beginning inventory 12,000
Add cost of goods manufactured 54,000
Goods available for sale 66,000
Less ending inventory 6,000
Cost of goods sold 60,000
Gross margin 40,000
Less selling and admin. Expenses 28,000
Net operating income $12,000
Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totals
$18,000 for the year. The
fixed manufacturing 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 Simpson 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 $700,000, is expected to have a useful life of 10 years,
and is expected to have a salvage value of $70,000 at the end of 10 years. The machinery will also need a
$45,000 overhaul at the end of Year 5. A
$60,000 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 $150,000 per year for
each of the 10 years. Simpson's
discount rate is 18%.
Required:
Part A: What is the net present value of this investment opportunity?
Part B: Based on your answer to (a) above, should
Simpson go ahead with the new conditioning shampoo?
3 The following data (in thousands of dollars) have
been taken from the accounting records of the Maroon Corporation for the
just-completed year.
Sales 1,700
Raw materials inventory, beginning 50
Raw materials inventory, ending 25
Purchases of raw materials 210
Direct labor 360
Manufacturing overhead 330
Administrative expenses 400
Selling expenses 200
Work-in-process inventory, beginning 120
Work-in-process inventory, ending 150
Finished goods inventory, beginning 80
Finished goods inventory, ending 120
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?
4 Walker Corporation is preparing its cash budget
for November. The budgeted
beginning cash balance is $43,000. Budgeted
cash receipts total $117,000 and budgeted cash disbursements total $122,000. The desired ending cash balance is
$55,000. 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. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance
5 Bella Lugosi Holdings, Inc. (BLH), has collected the following
operating information for its current month's activity. Using this information, prepare a
flexible budget analysis to determine how well BLH performed in terms of cost
control.
Actual Costs Incurred Static Budget
Activity level (in units) 5,250 5,178
Variable costs:
Indirect materials $24,182 $23,476
Utilities $22,356 $22,674
Fixed costs:
Administration $63,450 $65,500
Rent $65,317 $63,904
6 Lindon Company uses 10,000 units of Part Y each
year as a component in the assembly of one of its products. The company is presently producing
Part Y internally at a total cost of $100,000 as follows.
Fixed manufacturing overhead 24,000
An outside supplier has offered to provide Part Y
at a price of $10 per unit. If
Lindon stops producing the part internally, one third of the fixed
manufacturing overhead would be eliminated.
Required: Should Lindon Company make or buy the part? Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer.
Required: Should Lindon Company make or buy the part? Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer.
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