2.(TCO D) Lindon Company uses 4,500 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 $69,000 as follows:
| Direct materials |
$16,000 |
| Direct labor |
18,000 |
| Variable manufacturing overhead |
10,000 |
| Fixed manufacturing overhead |
25,000 |
| Total costs |
$69,000 |
An outside supplier has offered to provide Part X at a price of $11 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) |
3.(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:
| Units in beginning inventory |
0 |
| Units produced |
9,000 |
| Units sold |
7,000 |
| Sales |
$100,000 |
Less cost of goods 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 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. (Points : 30) |
4.(TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just-completed year.
| Sales |
1,150 |
| Raw materials inventory, beginning |
15 |
| Raw materials inventory, ending |
40 |
| Purchases of raw materials |
150 |
| Direct labor |
250 |
| Manufacturing overhead |
300 |
| Administrative expenses |
500 |
| Selling expenses |
300 |
| Work in process inventory, beginning |
100 |
| 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?(Points : 25) |
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| 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.
Work in process, beginning:
| Units in beginning work-in-process inventory |
400 |
| Materials costs |
$6,900 |
| Conversion costs |
$2,500 |
| Percentage complete for materials |
80% |
| Percentage complete for conversion |
15% |
| Units started into production during the month |
6,000 |
| Units transferred to the next department during the month |
5,800 |
| Materials costs added during the month |
$112,500 |
| Conversion costs added during the month |
$210,300 |
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.(Points : 25) |
