Accounting homework help
Accounting homework help. 1
ACCT-621 UCW Assignment_#2
Instructions
The title page is a requirement
Answer the questions on your own. Any reference to any kind of open
sources will trigger academic consequences
Submit only the solution to the question. Do not copy-paste the questions
in your submission
For all questions show all your calculation, starting with the formula,
then – calculation, then – solution
The numbers should be shown in standard currency format: i.e. 1,000,000
The signs as $, %, etc. should accompany the figures, i.e. $40, 15%, 3.5
times
Neither, Excel skills, nor writing style will be awarded any marks
The title of the tables have to be explanatory, and the tables fit into the
pages
The accounts` abbreviation should not be used and extraneous information
should not be provided
Start answering each question from new page. Place ONE ANSWER for
ONE PAGE
Do NOT use multiple colour or highlighting
Design your submission using the APA or CHICAGO style and submit in the
DOC (DOCX) or PDF format
No bonus marks for the early submission
READ THE QUESTION CAREFULLY AND
ANSWER WHAT IS ASKED
2
Q.I {10 marks}
Selected account balances of Manufacturing Company appear below for 20XX:
Beginning of year End of year
Finished goods inventory $20,000 $ 26,000
Work in process inventory 30,000 35,000
Raw materials inventory 46,000 26,000
Sales 340,000
Direct labour 55,000
Factory supervisory salaries 18,000
Income tax expense 25,000
Factory insurance 12,000
Raw material purchases 90,000
Administrative expenses 27,000
Sales returns and allowances 15,000
Factory depreciation expense 22,000
Indirect labour 11,000
Selling expenses 35,000
Required
Using the above information for Manufacturing Company, answer the following questions.
Support your answers with clearly identified formula and computations or a schedule in a
required format.
1. Calculate the amount of direct materials used in production
2. Calculate the total manufacturing costs incurred
3. Calculate the cost of goods manufactured
4. Calculate the cost of goods sold
5. Calculate the amount of net income
3
Q. II {10 marks}
Company makes 40,000 units per year of a part that it uses in the products it
manufactures. The unit product cost of this part is computed as follows:
Direct materials $ 11.30
Direct labour $ 22.70
Variable manufacturing overhead $ 1.20
Fixed manufacturing overhead $ 24.70
Unit product cost $ 59.90
An outside supplier has offered to sell the company all the parts that Company needs for
$46.20 a unit. If the company accepts this offer, the facilities now being used to make the
part could be used to make more units of a product that is in high demand. The additional
contribution margin on this other product would be $264,000 per year.
If the part were purchased from the outside supplier, all direct labour cost of the part would
be avoided. However, $21.90 of the fixed manufacturing overhead cost being applied to the
part would continue, even if the part were purchased from the outside supplier. This fixed
manufacturing overhead cost would be applied to the company’s remaining products.
Required
a. Calculate how much of the unit product cost of $59.90 is relevant in the decision of
whether to make or buy the part
b. Calculate the net total dollar advantage (disadvantage) of purchasing the part rather than
making it
c. Calculate the maximum amount the company should be willing to pay an outside supplier
per unit for the part if the supplier commits to supplying all 40,000 units required each year
4
Q. III {8 marks}
Lego Inc. has three product lines in its retail stores: Children 3-5 years, Children 6-10
years, and Children 12+ years old. The allocated fixed costs are based on revenue and are
unavoidable.
Results of the fourth quarter are presented below:
Children 3-5 Children 12+ Children 6-10 Total
Units sold 750 1,000 1,200 2,950
Revenue $22,500 $15,000 $9,600 $47,100
Variable departmental costs 12,000 8,000 5,000 25,000
Direct fixed costs 4,000 3,000 4,500 11,500
Allocated fixed costs 4,777 3,185 2,038 10,000
Net income (loss) $ 1,723 $815 $(1,938) $600
Demand of individual products is not affected by changes in other product lines.
Required
In a table format prepare an incremental analysis of the effect of dropping the Children 6-10
product line.
5
Q. IV {8 marks}
Required
Answer the following questions with supporting formulas and calculation
Determine the missing amounts
Unit Selling Price Unit Variable Costs Contribution Margin
per Unit
Contribution Margin
Ratio
1. $ 300 $ 200 a. b.
2. $ 600 c. $ 100 d.
3. e. f. $ 400 40%
6
Q. V {18 marks}
Required
Answer the following independent questions. Support your answers with clearly identified formulas
and computation.
a. A company is considering purchasing factory equipment that costs $400,000 and is
estimated to have no salvage value at the end of its 5-year useful life. If the equipment is
purchased, annual revenues are expected to be $150,000 and annual operating expenses
exclusive of depreciation expense are expected to be $25,000. The straight-line method of
depreciation would be used.
Calculate the cash payback period on the equipment
b. Consider the following data (and ignore the impact of income taxes):
Initial cost of equipment $ 962,000
Annual cash inflows $ 191,720
Salvage value $ 0
Estimated life 10 years
Calculate the internal rate of return on this investment
c. A company is considering purchasing factory equipment that costs $400,000 and is
estimated to have no salvage value at the end of its 5-year useful life. If the equipment is
purchased, annual revenues are expected to be $150,000 and annual operating expenses
exclusive of depreciation expense are expected to be $25,000. The straight-line method of
depreciation would be used.
If the equipment is purchased, calculate the annual rate of return that expected on this
equipment
d. Calculate the net present value of a project with the following cash flows if the required
rate of return is 14 percent
Year Cash flows
0 $(33,680)
1 10,796
2 22,308
3 4,170
e. You are considering the following two mutually exclusive projects. The required rate of
return is 13 percent for the project A and 10.5 percent for the project B.
Prove with computation which the project to accept. Support your answer using NPV, IRR,
cash payback period, and profitability index methods.
Year Project A Project B
0 $ (54,000) $ (78,000)
1 $ 36,300 $ 35,700
2 $ 24,600 $ 62,800
3 $ 9,500 $ 0
7
Q. VI {13 marks}
Required
Answer the following independent questions. Support your answers with clearly identified
formulas and computation.
a. A company`s available data:
Sales $2,500,000
Net operating income 1,500,000
Return on investment 25%
Cost of capital 15%
Calculate the company`s total assets.
b. Using the data from question VI (a), calculate the residual income.
c. An automobile parts `company has three divisions:
Engines Brakes Windshields
Sales $ 8,000,000 $ 9,000,000 $ 10,000,000
Contribution margin 2,000,000 2,500,000 3,500,000
Operating income 1,500,000 1,500,000 2,750,000
Investment base 12,000,000 14,000,000 16,000,000
The company`s desired rate of return is 15%.
a. Compute each divisions` ROI
b. Compute each divisions` residual income
c. Rank each division by both ROI and residual income
d. Explain which division has the best performance in the year and why
8
Q. VII {12 marks}
A Company has budgeted the following unit sales:
2020 Units
January 10,000
February 8,000
March 9,000
April 11,000
May 15,000
On December 31, 2019 the finished goods units on hand were 2,000 units. Each unit
requires 3 pounds of raw materials that are estimated to cost an average of $4 per pound.
It is the company’s policy to maintain a finished goods inventory at the end of each month
equal to 20% of next month’s anticipated sales.
They also have a policy of maintaining a raw materials inventory at the end of each month
equal to 30% of the pounds needed for the following month’s production. There were 8,640
pounds of raw materials on hand at December 31, 2019.
Required
For the first quarter of 2020, prepare
1) a production budget and
2) a direct materials budget.
9
Q. VIII {15 marks}
A Company has budgeted sales revenues as follows:
Budgeted Sales Revenues
January $55,000
February 75,000
March 90,000
April 80,000
May 60,000
June 35,000
Past experience has indicated that 80% of sales each month are on credit and that
collection of credit sales occurs as follows:
• 60% in the month of sale,
• 30% in the month following the sale, and
• 5% in the second month following the sale.
• the other 5% is uncollectible.
Required
Prepare a schedule which shows expected cash receipts from sales for the months of April,
May, and June.
10
Q. IX {6 marks}
A Company has a materials price standard of $2.50 per kilogram. Four thousand kilograms
of materials were purchased at $2.40 a kilogram.
The actual quantity of materials used was 3,500 kilograms, although the standard quantity
allowed for the output was 3,400 kilograms.
Required
a. Calculate the Company’s materials price variance
b. Calculate the Company’s materials quantity variance
c. Calculate the Company’s total materials variance
The end of the assignment