Beginning raw materials $5600 Ending raw materials $4200 Direct Labor $17,250 Ra

Question

Beginning raw materials $5600

Ending raw materials $4200

Direct Labor $17,250

Raw materials purchases $7400

Depreciation of factory equipment $6750

Factory repairs and maintenance $3300

Beginning finished goods inventory $10800

Ending finished goods inventory $8900

Beginning goods in process inventory $5350

Ending goods in process inventory $6300

OH application rate 60% of DL

a) Calculate the cost of materials used.
(b) Calculate the manufacturing costs incurred during the period.
(c) Calculate the Cost of Goods Manufactured during the period.
(d) Calculate the Cost of Goods Sold during the period.
(e) Calculate the amount by which overhead is under- or over-applied.

PROBLEM 2
Legacy Company is considering the production and sale of a new product with the following sales and cost data: unit sales price $18; unit variable costs $8.10; and total fixed costs of $8,250. Legacy is subject to a 25% tax rate. Determine the dollar sales needed to generate an after-tax income of $33,000.

PROBLEM 3

David, Inc. is preparing its master budget for the second quarter. The following sales and production data have been forecasted:

April May June July August

Unit Sales 400 500 520 480 540

Finished goods inventory on March 31: 120 units
Raw materials inventory on March 31: 450 pounds
Desired ending inventory each month:
Finished goods:30% of next month's sales
Raw materials:25% of next month's production needs
Number of pounds of raw material required per finished unit: 4 lb.
Number of direct labor hours to produce each unit: 3 hours
Labor rate per hour: $10
(a) How many units should be produced during April and May?
(b) How many pounds of raw materials should be purchased in April?
(c) What is the budgeted labor cost for April?

PROBLEM 4

The following information describes production activities of the Central Corp.:

Raw materials used 16,000lbs @ $4.05 per lb

Factory payroll 5545 hrs for a total of $72,085

30,000 units were completed during the year
Budgeted standards for each unit produced:
1/2 lb. of raw material at $4.15 per lb.
10 minutes of direct labor at $12.50 per hour

Compute the direct materials price and quantity and the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.

PROBLEM 5

A company is considering a proposal to invest $30,000 in a project that would provide the following net cash flows:

Year 1 $6500

Year 2 $10,700

Year 3 $15,000

Year 4 $12,800

(a) Compute the project's payback period.
(b) Compute the net present value of the project assuming a 10% discount rate with the following factors: PV factors for $1(yr 1: 0.9091; yr 2: 0.8264; yr 3:0 .7513; yr 4: 0.6830)
(c) Should the company invest in the machine? Why or why not?

Explanation / Answer

PARTICULARS

AMOUNT($)

AMOUNT($)

Beginning raw materials

$5600

Raw materials purchases

$7400

Ending raw materials

($4200)

COST OF MATERIALS USED

$8800

Direct Labor

$17,250

PRIME COST

$26050

FACTORY OVERHEADS

Depreciation of factory equipment

$6750

Factory repairs and maintenance

$3300

WORKS COST ICURRED/ MANUFACTURIG COST INCURRED

10050

ADD:-Beginning goods in process inventory

$5350

LESS:-Ending goods in process inventory

($6300)

FACTORY OVERHEADS/ /COST OF GOODS MANUFACTURED

$35150

ADD:-Beginning finished goods inventory

$10800

LESS:-Ending finished goods inventory

($8900)

COST OF GOODS SOLD

$3750

OH application rate 60% of DL =60% OF 17250 =10350

OVERHEAD INCURRED = 10050

UNDERAPPLIED =10350-10050 = $300

PARTICULARS

AMOUNT($)

AMOUNT($)

Beginning raw materials

$5600

Raw materials purchases

$7400

Ending raw materials

($4200)

COST OF MATERIALS USED

$8800

Direct Labor

$17,250

PRIME COST

$26050

FACTORY OVERHEADS

Depreciation of factory equipment

$6750

Factory repairs and maintenance

$3300

WORKS COST ICURRED/ MANUFACTURIG COST INCURRED

10050

ADD:-Beginning goods in process inventory

$5350

LESS:-Ending goods in process inventory

($6300)

FACTORY OVERHEADS/ /COST OF GOODS MANUFACTURED

$35150

ADD:-Beginning finished goods inventory

$10800

LESS:-Ending finished goods inventory

($8900)

COST OF GOODS SOLD

$3750

OH application rate 60% of DL =60% OF 17250 =10350

OVERHEAD INCURRED = 10050

UNDERAPPLIED =10350-10050 = $300

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