1.(TCO D) 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

Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totaled $16,000 for the year. The fixed manufacturing 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)

2.(TCO I) (Ignore income taxes in this problem.) Sampson 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 $550,000, is expected to have a useful life of 10 years, and is expected to have a salvage value of $55,000 at the end of 10 years. The machinery will also need a $35,000 overhaul at the end of Year 5. 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 10 years. The new shampoo is expected to generate net cash inflows of 95,000 per year for each of the 10 years. Sampson's discount rate is 16%. Required: Part A: What is the net present value of this investment opportunity? Part B: Based on your answer to (a) above, should Sampson go ahead with the new conditioning shampoo?(Points : 30)

3.(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 ........................................................................ $1,000 Raw materials inventory, beginning ........................$130 Raw materials inventory, ending ................................$90 Purchases of raw materials ........................................$220 Direct labor ..................................................................$240 Manufacturing overhead ..........................................$210 Administrative expenses ...........................................$200 Selling expenses ............................................... .........$240 Work-in-process inventory, beginning ....................$25 Work-in-process inventory, ending ..........................$45 Finished goods inventory, beginning .....................$200 Finished goods inventory, ending ...........................$160 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)

4.(TCO F) Enciso Corporation is preparing its cash budget for November. The budgeted beginning cash balance is $36,000. Budgeted cash receipts total $110,000 and budgeted cash disbursements total $112,000. The desired ending cash balance is $40,000. 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(Points : 25)

5.(TCO F) 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

(Points : 25)

6.(TCO H) 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. Direct materials............................................... $20,000 Direct labor...................................................... 40,000 Variable manufacturing overhead...................... 16,000 Fixed manufacturing overhead....................... 24,000 Total costs.......................................................100,000 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.(Points : 30)

7.(TCO B) Escatel Corporation bases its predetermined overhead rate on the estimated labor hours for the upcoming year. Data for the most recently completed year appear below.

Estimates made at the beginning of the year
Estimated labor hours	25,000
Estimated variable manufacturing overhead	$7.10	perlabor hour
Estimated total fixed manufacturing overhead	$625,000
Actual labor hours for the year	28,000

Required:

Compute the company's predetermined overhead rate for the recently completed year.(Points : 25)

1. (TCO D) 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 Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totaled $16,000 for the year. The fixed manufacturing 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) 2. (TCO I) (Ignore income taxes in this problem.) Sampson 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 $550,000, is expected to have a useful life of 10 years, and is expected to have a salvage value of $55,000 at the end of 10 years. The machinery will also need a $35,000 overhaul at the end of Year 5. 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 10 years. The new shampoo is expected to generate net cash inflows of 95,000 per year for each of the 10 years. Sampson's discount rate is 16%. Required: Part A: What is the net present value of this investment opportunity? Part B: Based on your answer to (a) above, should Sampson go ahead with the new conditioning shampoo? (Points : 30) 3. (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 ........................................................................ $1,000 Raw materials inventory, beginning ........................$130 Raw materials inventory, ending ................................$90 Purchases of raw materials ........................................$220 Direct labor ..................................................................$240 Manufacturing overhead ..........................................$210 Administrative expenses ...........................................$200 Selling expenses ............................................... .........$240 Work-in-process inventory, beginning ....................$25 Work-in-process inventory, ending ..........................$45 Finished goods inventory, beginning .....................$200 Finished goods inventory, ending ...........................$160 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) 4. (TCO F) Enciso Corporation is preparing its cash budget for November. The budgeted beginning cash balance is $36,000. Budgeted cash receipts total $110,000 and budgeted cash disbursements total $112,000. The desired ending cash balance is $40,000. 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 (Points : 25) 5. (TCO F) 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 (Points : 25) 6. (TCO H) 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. Direct materials............................................... $20,000 Direct labor...................................................... 40,000 Variable manufacturing overhead...................... 16,000 Fixed manufacturing overhead....................... 24,000 Total costs.......................................................100,000 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. (Points : 30) 7. (TCO B) Escatel Corporation bases its predetermined overhead rate on the estimated labor hours for the upcoming year. Data for the most recently completed year appear below. Estimates made at the beginning of the year Estimated labor hours 25,000 Estimated variable manufacturing overhead $7.10 per labor hour Estimated total fixed manufacturing overhead $625,000 Actual labor hours for the year 28,000 Required: Compute the company's predetermined overhead rate for the recently completed year. (Points : 25)