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Acc102 Principles of Managerial Accounting Final Project – Paymore Inc, Portable Enterprises, Metro Video, John Co, and Mason Co

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Acc102 Principles of Managerial Accounting

Final Project

1.  The following information is available regarding the total manufacturing overhead costs of Paymore, Inc., for five months in2010:

                                             Machine Hours          Mfg Overhead Cost

February                                 6900                        $6250

March                                     5000                       $5375

April                                       6300                       $6025

May                                         9333                       $7975

June                                        6833                       $6050

(a) Using the high-low method, compute the following:

(1) The variable element of overhead cost per machine-hour:

$____________________ per machine-hour

(2) The fixed element of monthly overhead cost:$__________________

(b) Use the cost relationship determined in part a to estimate the total manufacturing overhead costs for July 2010, given that 7,250machine-hours are scheduled. $___________________

 

2.  Portable Enterprises produces two lines of mobile homes: double-wide and single-wide. Unit cost and revenue data pertaining to each product are shown below:

Double-wide  Single-wide

Selling price    $70,000           $40,000

Total Variable costs    45,000             20,000

Each double-wide home requires 350 different labor hours and 125 machine hours.  Each single-wide home requires 175 direct labor hours and 150 machine hours.  Demand for each line of homes far exceeds the company’s total production capacity.

Labor Hours    Machine Hours

Double-wide home     350      125

Single-wide home       175      150

(a)   If Portable’s production capacity is constrained by limited direct labor hours, which line of homes should it produce?

(b)  If Portable’s total production capacity is constrained by machine hours, which line of homes should it produce?

 

3.  Shown below is the current monthly income statement of Metro Video, by profit centers:

METRO VIDEO

Income Statement by Profit Centers

For the Month Ended April 30, 20__

Metro Video               Segments

Equipment Sales                     Video Rentals

Dollars             %         Dollars             %         Dollars             %

Sales    560,000    100%   280,000     100%   280,000      100%

Variable costs  (268,800)   -48%    (198,800)   -71%    (70,000)      -25%

Contribution margin    291,200    52%     81,200     29%     210,000      75%

Fixed costs traceable to departments  (67,200)   -12%    (25,200)     -9%      (42,000)     -15%

Departments responsibility margins    224,000      40%     $56,000  0%     $168,000      60%

Common fixed costs   (61,600)          -11%

Income from operations          $162,400        29%

On the basis of this information, compute the increase in monthly income from operations that may be expected to result from each of the following actions:

(a)    Spending $5,000 per month in advertising is expected to increase sales in the Equipment Sales Department by 35%.

(b) Closing the Equipment Sales Department and allowing the Video Rentals Department to expand is expected to increase the revenue of the Video Rentals Department by $105,000 per month. This action also is expected to increase fixed costs traceable to the Video Rentals Department by $40,000 per month.

 

4.  Assume the following data for John Company’s August operations.

Standard overhead per direct labor hour based on normal monthly capacity of 30,000 hours:

Fixed( $270,000/30,000 hours)      $9

Variable ($660,000/30,000 hours) 22 $31

Direct labor hours actually worked in August $28,000 hours

Actual overhead cost incurred ( including $270,000

fixed costs) $824,000

(a) Compute the amount of overhead applied to Work-in-Process during August. $_______________

(b) Compute the total manufacturing overhead budgeted based on hours worked during August. $_______________

(c) Compute the overhead spending variance for August. Indicate whether favorable (F) or unfavorable (U). $_______________

(d) Compute the overhead volume variance for August. Indicate whether favorable (F) or unfavorable (U). $_______________

 

5.  Mason Co. Is evaluating two alternative investment proposals. Below are data for each proposal:

Proposal A Proposal B

Initial investment cost………………………. $84,000 $96,000

Estimated useful life………………………….. .. 5 years 6 years

Estimated salvage value……………………….. $4,000 -0-

Estimated annual net income………………. $8,200 $8,000

The following information was taken from present value tables:

Present value

$1 due in 5 years , discounted at 12% ………………. .567

$1 due in 6 years , discounted at 12% ………………. .507

$1 received annually for 5 years , discounted at 12% …………3.605

$1 received annually for 5 years , discounted at 12% …………4.111

All revenue and expenses other than depreciation will be received and paid in cash. The company uses a discount rate of 12% in evaluating all capital investments.

Compute the following for each proposal (round payback period to the nearest tenth of a year and round return on average investment to the nearest tenth of a percent):

Proposal A Proposal B

(a) Annual net cash flow: $ $

(b) Payback period (in years):

(c) Average investment: $ $

(d) Return on average investment % %

(e) Net present value: $ $

(f) Based on your analysis, which proposal appears to be the best investment?

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