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)

Question 2.2. (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 : 25)

1. (TCO C) The following overhead data are for a department of a large company.                                                           Actual costs                  Static
Incurred                         budget

Activity level (in units)                           360                                340

Variable costs:
Indirect materials                     $4,182                           $4,148
Electricity                               $2,536                           $2,414
Fixed costs:
Administration                          $6,540                           $6,500
Rent                                        $6,310                           $6,400

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

(Points : 30)

Question 2.2. (TCO D)  Lindon Company uses 5,000 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $80,000 as follows:Direct materials………………………………………..$18,000

Direct labor………………………………………………20,000

Variable manufacturing overhead……………….     12,000

Fixed manufacturing overhead…………………..     30,000

Total costs……………………………………………….80,000

An outside supplier has offered to provide Part X at a price of $13 per unit. If Lindon stops producing the part internally, one third of the manufacturing overhead would be eliminated.

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

(Points : 30)

Question 3.3. (TCO E) Duif Company’s absorption costing income statement for the last year of operations is presented below.Sales…………………………………………………$70,000
Less cost of goods sold:
Beginning inventory………………………………………. 0
Add cost of goods manufactured………………48,000
Goods available for sale………………………….48,000
Less ending inventory………………………………6,000
Cost of goods sold………………………………..42,000
Gross margin……………………………………….28,000
Less selling and admin. expenses……………..25,000
Net operating income…………………………..$  3,000

Data on units produced and sold for the year are given below.

Units in beginning inventory……………………………..0
Units produced……………………………………….8,000
Units sold………………………………………………7,000

Fixed factory overhead totaled $16,000 for the year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 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.

(Points : 30)

Question 4.4. (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 ………………………………………………$200
Manufacturing overhead ……………………………..$230
Administrative expenses ……………………………..$100
Selling expenses ………………………………………..$140
Work-in-process inventory, beginning ………………$70
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)

1. (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 month 6,000

Units transferred to the next department during the month 5,400

Materials costs added during the month $112,500

Conversion costs added during the month $210,300

 

Ending work in process: