1. 15 points) Please describe at least three differences between managerial and financial accounting. Please discuss how these differences impact the various constituents of the firm (in other words, people who use the accounting data).

2. (25 points) XYZ Products, Inc. computes its predetermined overhead rate annually of the basis of direct labor hours. At the beginning of the year, they estimated that total manufacturing overhead would be $1,000,000 and the total direct labor would be 20,000 hours.

1. Please compute the companys predetermined overhead rate to be used during the course of the year.

2. At the end of the year, actual manufacturing overhead was $950,000 and actual direct labor was 22,500 hours. Pleas reconcile the Manufacturing Overhead account and prepare the appropriate journal entry to close the account. Was manufacturing overhead over- or under-applied?

3. (20 points) Please use the following data to determine the ending work in process inventory and the cost of goods manufactured transferred to the finished goods inventory for the month. Please use the weighted-average method in your computations.

Percent Completed

Units Materials Conversion

Work in process, June 1 500

Units started into production in June 10,000

Units completed and transferred out in June 10,250

Work in process, June 30 250 70% 50%

Additional Information:

Beginning Work in process $ 2,800 $ 4,500

Costs added to production in June $122,300 $203,000

4. (20 points) LeafCo is a producer of a line of leaf-blowers. All sales are on account. They have budgeted the following sales for the 3rd. quarter:

July August September Total

Budgeted Sales (all on account) $200,000 300,000 400,000 900,000

June sales were $250,000. From past experience, the company anticipates that 60% of a months sales will be collected in the month of sale, and 40% in the month following the sale. Bad debts are negligible and can be ignored. What is the cash collection budget for the quarter? Please prepare monthly budgets and a total budget for the quarter.

5. (15 points) A company is considering investing $2,500,000 in new equipment to produce an additional product. The company thinks that another $1,000,000 will be required in working capital to get the new process operational. The company also believes that $500,000 of the working capital will be released at the end of the 5 year functional life of the process. The company also thinks that the residual value of the equipment will be $1,500,000 (i.e. the equipment can be sold at the end of the project). The company expects cash flows from the project to be (in years 1-5, respectively) $500,000, $1,500,000, $1,500,000, $1,500,000, and $1,000,000. The companys required return on investments of this nature is 25%. Should the company accept this project or not? Please show your computations.

6. (5 points) Based on your results from problem 5, what is the projects internal rate of return as compared to the required rate of return? How do you know this to be correct? No computation required.