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The management of Sharrar Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 45,000 machinehours. In addition, capacity is 52,000 machine-hours and the actual activity for the year is 47,100 machine-hours. All of the manufacturing overhead is fixed and is $1,029,600 per year. For simplicity, it’s assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year. Required: A. Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base. B. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base. C. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity. D. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity. Question 2:Fryer Corporation uses the weighted-average method inits process costing system. This month, the beginninginventory in the first processing department consisted of700 units. The costs and percentage completion of theseunits in beginning inventory were:A total of 7,300 units were started and 6,200 units weretransferred to the second processing department duringthe month. The following costs were incurred in the firstprocessing department during the month:The ending inventory was 80% complete with respect tomaterials and 45% complete with respect to conversioncosts.Required:The total cost transferred from the first processingdepartment to the next processing department duringthe month is closest to what amount?Note: CostMaterial costs . . . . . . . . $132,200Conversion costs . . . . . . $117,500Cost PercentCompleteMaterial costs . . . . . . . . . $12,600 75%Conversion costs. . . . . . . . $8,900 60%A total of 7,300 units were started and 6,200 units weretransferred to the second processing department duringthe month. The following costs were incurred in the firstprocessing department during the month:The ending inventory was 80% complete with respect tomaterials and 45% complete with respect to conversioncosts.Required:The total cost transferred from the first processingdepartment to the next processing department duringthe month is closest to what amount?Note: CostMaterial costs . . . . . . . . $132,200Conversion costs . . . . . . $117,500Your answers may differ from those offered due torounding error. To reduce rounding error, carry out allcomputations to at least three decimal places.Part B: Answer each of the following questions in one tofour sentences. Each answer is worth 4 points.Use the following information to answer questions 1through 10.Financial statements for Praven Company appear below:Praven CompanyStatement of Financial PositionDecember 31, Year 2 and Year 1(dollars in thousands)Year 2 Year 1Currrent assets:Cash and marketable securities. . . . . . . . . . . . $1,150 $1,130Accounts receivable, net . . . . . . . . . . . . . . . . . 190 160Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 180Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . 50 40Total current assets. . . . . . . . . . . . . . . . . . . . . . 560 510Noncurrent assets:Plant & equipment, net . . . . . . . . . . . . . . . . . . 1,420 1,330Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,980 $1,840Current liabilities:Accounts payable . . . . . . . . . . . . . . . . . . . . . . $1,110 $1,100Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 90 60Notes payable, short term . . . . . . . . . . . . . . . . 260 260Total current liabilities . . . . . . . . . . . . . . . . . . . 460 420Noncurrent liabilities:Bonds payable. . . . . . . . . . . . . . . . . . . . . . . . . 400 400Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 860 820Stockholder’s equity:Preferred stock, $5 par, 15% . . . . . . . . . . . . . . 120 120Common stock, $10 par . . . . . . . . . . . . . . . . . 240 240Additional paid-in capital—common stock . . . . 210 210Retained earnings . . . . . . . . . . . . . . . . . . . . . . 550 450Total stockholders’ equity . . . . . . . . . . . . . . . . . 1,120 1,020Total liabilities & stockholders’ equity . . . . . . . . $1,980 $1,840Praven CompanyIncome StatementFor the Year Ended December 31, Year 2(dollars in thousands)Sales (all on account). . . . . . . . . . . . . . . . . . . . . $1,700Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 1,190Gross margin. . . . . . . . . . . . . . . . . . . . . . . . . . . 510Selling and administrative expense . . . . . . . . . . 200Net operating income. . . . . . . . . . . . . . . . . . . . . 310Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 40Net income before taxes. . . . . . . . . . . . . . . . . . . 270Income taxes (30%) . . . . . . . . . . . . . . . . . . . . . . 81Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 189Dividends during Year 2 totaled $89 thousand, of which $18thousand were preferred dividends. The market price of ashare of common stock on December 31, Year 2 was $130.Required:Compute the following for Year 2:1. Book value per share2. Working capital3. Current ratio4. Acid-test ratio5. Accounts receivable turnover6. Average collection period7. Inventory turnover8. Average sale period9. Times interest earned10. Debt-to-equity ratio11. Porter Company has provided the following data for thesecond quarter of the most recent year:Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000Fixed manufacturing overhead. . . . . . . . . . . . . . 55,000Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,500Fixed selling expense . . . . . . . . . . . . . . . . . . . . . 46,250Variable manufacturing overhead . . . . . . . . . . . 41,000Variable administrative expense. . . . . . . . . . . . . 48,000Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . 51,500Fixed administrative expense. . . . . . . . . . . . . . . 44,500Variable selling expense. . . . . . . . . . . . . . . . . . . $ 49,750Assume that direct labor is a variable cost and that therewere no beginning or ending inventories.What is the total contribution margin of Porter Companyfor the second quarter?12. Jatry Corporation’s budgeted sales are $300,000, itsbudgeted variable expenses are $210,000, and itsbudgeted fixed expenses are $60,000. What is thecompany’s break-even in dollar sales amount?13. Superior Industries’ sales budget shows quarterly salesfor the next year as follows:Quarter Sales(units)First . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000Second . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000Third . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000Company policy is to have a finished goods inventory atthe end of each quarter equal to 20% of the next quarter’ssales. How much should the budgeted production forthe second quarter be?14. The following information is available on Company A:Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $900,000Net operating income . . . . . . . . . . . . . . . . . $936,000Stockholders’ equity . . . . . . . . . . . . . . . . . . $100,000Average operating assets. . . . . . . . . . . . . . . $180,000Minimum required rate of return . . . . . . . . 15%What is Company A’s residual income amount?15. Nordstrand Company’s net income last year was$36,000. Changes in selected balance sheet accountsfor the year appear below:Increases(Decreases)Debit balances:Accounts receivable . . . . . . . . . . . . . . . . . . . . . $ (7,000)Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,000)Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . $ (3,000)Credit balances:Accumulated depreciation . . . . . . . . . . . . . . . . $18,000)Accounts payable . . . . . . . . . . . . . . . . . . . . . . $13,000)Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . $((9,000)Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . $(((((((((0)Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . $((1,000)Based solely on this information, the net cash providedby operations under the indirect method on the statementof cash flows would be how much?Your answers may differ from those offered due torounding error. To reduce rounding error, carry out allcomputations to at least three decimal places.
Fryer Corporation uses the weighted-average method in
its process costing system. This month, the beginning
inventory in the first processing department consisted of
700 units. The costs and percentage completion of these
units in beginning inventory were:
A total of 7,300 units were started and 6,200 units were
transferred to the second processing department during
the month. The following costs were incurred in the first
processing department during the month:
The ending inventory was 80% complete with respect to
materials and 45% complete with respect to conversion
costs.
Required:
The total cost transferred from the first processing
department to the next processing department during
the month is closest to what amount?
Note:
Cost
Material costs . . . . . . . . $132,200
Conversion costs . . . . . . $117,500
Cost Percent
Complete
Material costs . . . . . . . . . $12,600 75%
Conversion costs. . . . . . . . $8,900 60%
Your answers may differ from those offered due torounding error. To reduce rounding error, carry out allcomputations to at least three decimal places.
rounding error. To reduce rounding error, carry out all
computations to at least three decimal places.
Part B: Answer each of the following questions in one to
four sentences. Each answer is worth 4 points.
Use the following information to answer questions 1
through 10.
Financial statements for Praven Company appear below:
Praven Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Currrent assets:
Cash and marketable securities. . . . . . . . . . . . $1,150 $1,130
Accounts receivable, net . . . . . . . . . . . . . . . . . 190 160
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 180
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . 50 40
Total current assets. . . . . . . . . . . . . . . . . . . . . . 560 510
Noncurrent assets:
Plant & equipment, net . . . . . . . . . . . . . . . . . . 1,420 1,330
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,980 $1,840
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $1,110 $1,100
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 90 60
Notes payable, short term . . . . . . . . . . . . . . . . 260 260
Total current liabilities . . . . . . . . . . . . . . . . . . . 460 420
Noncurrent liabilities:
Bonds payable. . . . . . . . . . . . . . . . . . . . . . . . . 400 400
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 860 820
Stockholder’s equity:
Preferred stock, $5 par, 15% . . . . . . . . . . . . . . 120 120
Common stock, $10 par . . . . . . . . . . . . . . . . . 240 240
Additional paid-in capital—common stock . . . . 210 210
Retained earnings . . . . . . . . . . . . . . . . . . . . . . 550 450
Total stockholders’ equity . . . . . . . . . . . . . . . . . 1,120 1,020
Total liabilities & stockholders’ equity . . . . . . . . $1,980 $1,840
Income Statement
For the Year Ended December 31, Year 2
Sales (all on account). . . . . . . . . . . . . . . . . . . . . $1,700
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 1,190
Gross margin. . . . . . . . . . . . . . . . . . . . . . . . . . . 510
Selling and administrative expense . . . . . . . . . . 200
Net operating income. . . . . . . . . . . . . . . . . . . . . 310
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 40
Net income before taxes. . . . . . . . . . . . . . . . . . . 270
Income taxes (30%) . . . . . . . . . . . . . . . . . . . . . . 81
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 189
Dividends during Year 2 totaled $89 thousand, of which $18
thousand were preferred dividends. The market price of a
share of common stock on December 31, Year 2 was $130.
Compute the following for Year 2:
1. Book value per share
2. Working capital
3. Current ratio
4. Acid-test ratio
5. Accounts receivable turnover
6. Average collection period
7. Inventory turnover
8. Average sale period
9. Times interest earned
10. Debt-to-equity ratio
11. Porter Company has provided the following data for the
second quarter of the most recent year:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000
Fixed manufacturing overhead. . . . . . . . . . . . . . 55,000
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,500
Fixed selling expense . . . . . . . . . . . . . . . . . . . . . 46,250
Variable manufacturing overhead . . . . . . . . . . . 41,000
Variable administrative expense. . . . . . . . . . . . . 48,000
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . 51,500
Fixed administrative expense. . . . . . . . . . . . . . . 44,500
Variable selling expense. . . . . . . . . . . . . . . . . . . $ 49,750
Assume that direct labor is a variable cost and that there
were no beginning or ending inventories.
What is the total contribution margin of Porter Company
for the second quarter?
12. Jatry Corporation’s budgeted sales are $300,000, its
budgeted variable expenses are $210,000, and its
budgeted fixed expenses are $60,000. What is the
company’s break-even in dollar sales amount?
13. Superior Industries’ sales budget shows quarterly sales
for the next year as follows:
Quarter Sales
(units)
First . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Second . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Third . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Fourth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000
Company policy is to have a finished goods inventory at
the end of each quarter equal to 20% of the next quarter’s
sales. How much should the budgeted production for
the second quarter be?
14. The following information is available on Company A:
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $900,000
Net operating income . . . . . . . . . . . . . . . . . $936,000
Stockholders’ equity . . . . . . . . . . . . . . . . . . $100,000
Average operating assets. . . . . . . . . . . . . . . $180,000
Minimum required rate of return . . . . . . . . 15%
What is Company A’s residual income amount?
15. Nordstrand Company’s net income last year was
$36,000. Changes in selected balance sheet accounts
for the year appear below:
Increases
(Decreases)
Debit balances:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . $ (7,000)
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,000)
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . $ (3,000)
Credit balances:
Accumulated depreciation . . . . . . . . . . . . . . . . $18,000)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $13,000)
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . $((9,000)
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . $(((((((((0)
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . $((1,000)
Based solely on this information, the net cash provided
by operations under the indirect method on the statement
of cash flows would be how much?
Optional Information: Level/Year: 2 Subject: Acct Already Tried: working it out
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