Expert Answers

1. (TCO F) Buckhorn Corporation bases its predetermined overhead rate on the estimated machine hours for the upcoming year. Data for the upcoming year appear below.
Estimated machine hours 85,000
Estimated variable manufacturing overhead $5.55 per machine hour
Estimated total fixed manufacturing overhead $951,888

Compute the company’s predetermined overhead rate. (Points : 25)

2. (TCO F) Payment Inc. is preparing its cash budget for February. The budgeted beginning cash balance is $27,000. Budgeted cash receipts total $136,000 and budgeted cash disbursements total $128,000. The desired ending cash balance is $50,000. The company can borrow up to $110,000 at any time from a local bank, with interest not due until the following month.


Prepare the company’s cash budget for February in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance. (Points : 25)

3. (TCO E) Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year are presented below:

Units in beginning inventory 2,000
Units produced 9,000
Units sold 10,000
Sales $100,000
Less cost of goods sold:
Beginning inventory 12,000
Add cost of goods manufactured 54,000
Goods available for sale 66,000
Less ending inventory 6,000
Cost of goods sold 60,000
Gross margin 40,000
Less selling and admin. expenses 28,000
Net operating income $12,000

Variable manufacturing costs are $4 per unit. Fixed factory overhead totals $18,000 for the year. This overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold.

Required: Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements. (Points : 30)

4. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just-completed year.
Sales 1,200
Raw materials inventory, beginning 25
Raw materials inventory, ending 50
Purchases of raw materials 180
Direct labor 230
Manufacturing overhead 250
Administrative expenses 400
Selling expenses 200
Work-in-process inventory, beginning 150
Work-in-process inventory, ending 120
Finished goods inventory, beginning 100
Finished goods inventory, ending 110

Use the above data to prepare (in thousands of dollars) a schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold for the year. In addition, what is the impact on the financial statements if the ending finished goods inventory is overstated or understated? (Points : 25)

5. (TCO F) Carter Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below.

Work in process, beginning:
Units in beginning work-in-process inventory 400
Materials costs $6,900
Conversion costs $2,500
Percentage complete for materials 80%
Percentage complete for conversion 15%
Units started into production during the month 6,000
Units transferred to the next department during the month 5,800
Materials costs added during the month $112,500
Conversion costs added during the month $210,300
Ending work in process:
Units in ending work-in-process inventory 1,400
Percentage complete for materials 70%
Percentage complete for conversion 40%

Required: Calculate the equivalent units for materials (using the weighted-average method) for the month in the first processing department. (Points : 25)

6. (TCO B) Aziz Corporation produces and sells a single product. Data concerning that product appear below.

Selling price per unit $130.00
Variable expense per unit $27.30
Fixed expense per month $165,347


Determine the monthly break-even in either unit or total dollar sales. Show your work! (Points : 25)