Professional Documents
Culture Documents
1. (TCO C) Silver City, Inc., has collected the following operating information
below for its current months activity. Using this information, prepare a flexible
budget analysis to determine how well Silver City performed in terms of cost
control.
Static Budget
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
2. (TCO D) Globe 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 Globe to 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
36,000
90,000
Total costs
$240,000
$11.00
$10.75
$10.50
The supplier pricing was obtained in response to a formal request for proposal
(RFP). Procurement has determined these suppliers meet Globes technical
specifications and quality requirements.
If Globe stops producing the part internally, 10% of the fixed manufacturing
overhead would be eliminated.
3. (TCO E) Mesa Company produces a single product. Operating data for the
company and its absorption costing income statement for the last year are
presented below:
2,000
Units produced
9,000
Units sold
10,000
Sales
$100,000
Beginning inventory
12,000
54,000
66,000
6,000
60,000
Gross margin
40,000
28,000
$12,000
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.
4. (TCO A) The following data (in thousands of dollars) have been taken from the
accounting records of the White Sands Corporation for the just-completed year.
Sales
1,150
15
40
150
Direct labor
250
Manufacturing overhead
300
Administrative expenses
500
Selling expenses
300
100
150
80
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?
1. (TCO F) Farmington 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.
400
Materials costs
$6,900
Conversion costs
$2,500
80%
15%
6,000
5,000
$112,500
$210,300
1,200
60%
30%
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.) Tennessee Co. is considering the
production of an exterior paint that will require the purchase of new mixing
machinery. The machinery will cost $700,000, is expected to have a useful life of
12 years, and is expected to have a salvage value of $100,000 at the end of 12
years. The machinery will also need a $40,000 overhaul at the end of Year 7. A
$50,000 increase in working capital will be needed for this investment project.
The working capital will be released at the end of the 12 years. The new paint is
expected to generate net cash inflows of $120,000 per year for each of the 12
years. Tennessees discount rate is 14%.
Required:
b. Based on your answer to (a) above, should Tennessee go ahead with the new
paint?
$130.00
$27.30
$165,3
Required:
85,000
$951,888
Required:
2. (TCO F) Memphis Corporation is preparing its cash budget for February. The
budgeted beginning cash balance is $27,000. Budgeted cash receipts total
$136,000 and budgeted cash disbursements total $128,000. The desired ending
cash balance is $50,000. The company can borrow up to $110,000 at any time
from a local bank, with interest not due until the following month.
Required:
Prepare the companys cash budget for February in good form. Make sure to
indicate what borrowing, if any, would be needed to attain the desired ending
cash balance.