BU 330 Ashworth College Net Annual Operating Cash Inflow Worksheet

Be certain to indicate the proper question number before each of your answers. Remember to show your work if an answer requires a mathematical solution.

Question 1:
At an activity level of 8,800 units, Pember Corporation's total variable cost is $146,520 and its total fixed cost is $219,296. For the activity level of 8,900 units, compute the following values.

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Required:

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1. The total variable cost
2. The total cost
3. The average variable cost per unit
4. The average fixed cost per unit
5. The average total cost per unit

Note: Assume that the activity level is within the relevant range.

Question 2:
Job 397 was recently completed. The following data have been recorded on its job cost sheet.

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Direct materials

$59,400

Direct labor-hours

1,254 DLHs

Direct labor wage rate

$11 per DLH

Number of units completed

3,300 units

The company applies manufacturing overhead on the basis of direct labor-hours. The predetermined overhead rate is $37 per direct labor-hour.

Required:

What's the unit product cost that would appear on the job cost sheet for this job?

Question 3:
Carver, Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.

Work in process, beginning:

Units in process

700

Percent complete with respect to materials

50%

Percent complete with respect to conversion

40%

Units started into production during the month

23,000

Work in process, ending:

Units in process

200

Percent complete with respect to materials

80%

Percent complete with respect to conversion

40%

Required:

Using the weighted-average method, what are the equivalent units of production for materials and for conversion costs?

Question 4:
Hayek Corporation uses the FIFO method in its process costing. The following data concern the company's mixing department for the month of August.

Materials

Conversion

Work in process, August 1

$31,734

$30,320

Cost added to production in the mixing department during August

$91,332

$81,864

Equivalent units of production for August

7,740

7,580

Required:

What are the cost per equivalent unit for materials and the cost per equivalent for conversion for the mixing department for August using the FIFO method?

Question 5:
Maddaloni International, Inc. produces and sells a single product. The product sells for $160.00 per unit, and its variable expense is $46.40 per unit. The company's monthly fixed expense is $219,248.

Required:

What's the monthly break-even in total dollar sales?

Question 6:
Mitchel Corporation manufactures a single product. Last year, variable costing net operating income was $55,000. The fixed manufacturing overhead costs released from inventory under absorption costing amounted to $24,000.

Required:

What's the absorption costing net operating income from last year?

Question 7:
Calder Corporation manufactures and sells one product. The following information pertains to the company's first year of operations:

Variable cost per unit:

Direct materials

$92

Fixed costs per year:

Direct labor

$720,000

Fixed manufacturing overhead

$3,264,000

Fixed selling and administrative

$1,935,000

The company doesn't have any variable manufacturing overhead costs or variable selling and administrative costs. During its first year of operations, the company produced 48,000 units and sold 45,000 units. The company’s only product sells for $258 per unit.

Required:

What is the net operating income?

Question 8:
Mouret Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products.

Activity Cost Pools

Activity Rate

Setting up batches

$92.68 per batch

Processing customer orders

$95.08 per customer order

Assembling products

$3.41 per assembly hour

Last year, Product N79A required 28 batches, 6 customer orders, and 712 assembly hours.

Required:

How much total overhead cost would be assigned to Product N79A using the company's activity-based costing system?

Question 9:
The manufacturing overhead budget of Paparella Corporation is based on budgeted direct labor-hours. The November direct labor budget indicates that 6,000 direct labor-hours will be required in that month. The variable overhead rate is $2.00 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $79,200 per month, which includes depreciation of $21,000. All other fixed manufacturing overhead costs represent current cash flows.

Required:

1. Determine the cash disbursements for manufacturing overhead for November.
2. Determine the predetermined overhead rate for November.

Question 10:
Sund Corporation bases its budgets on the activity measure “customers served.” During April, the company plans to serve 38,000 customers. The company has provided the following data concerning the formulas it uses in its budgeting:

Fixed Element per Month

Variable Element per Month

Revenue

---

$2.10

Wages and salaries

$25,000

$0.50

Supplies

$0

$0.30

Insurance

$6,200

$0.00

Miscellaneous expenses

$2,500

$0.40

Required:

Prepare the company’s planning budget for April. What is the net operating income?

Question 11:
Shawl Corporation's variable overhead is applied on the basis of direct labor-hours. The standard cost card for product F02E specifies 5.5 direct labor-hours per unit of F02E. The standard variable overhead rate is $6.80 per direct labor-hour. During the most recent month, 1,560 units of product F02E were made, and 8,700 direct labor-hours were worked.

The actual variable overhead incurred was $52,635.

Required:
A. What was the variable overhead rate variance for the month?
B. What was the variable overhead efficiency variance for the month?

Question 12:
Kingdon Corporation's manufacturing overhead includes $7.10 per machine-hour for variable manufacturing overhead and $207,000 per period for fixed manufacturing overhead.

Required:

What's the predetermined overhead rate for the denominator level of activity of 4,600 machine-hours?

Question 13:
Pinkney Corporation has provided the following data concerning its direct labor costs for November:

Standard wage rate

$12.20 per DLH

Standard hours

5.3 DLHs per unit

Actual wage rate

$11.20 per DLH

Actual hours

39,720 DLHs

Actual output

7,900 units

Required:

Show the journal entry to record the incurrence of direct labor costs.

Question 14:
Iba Industries is a division of a major corporation. The following data are for the latest year of operations:

Sales

$5,820,000

Net operating income

$436,500

Average operating assets

$2,000,000

The company's minimum required rate of return

18%

Required:

What is the division’s residual income?

Question 15:
Tullius Corporation has received a request for a special order of 8,000 units of product C64 for $50.00 each. The normal selling price of this product is $53.25 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product C64 is computed as follows:

Direct materials

$18.10

Direct labor

7.40

Variable manufacturing overhead

5.20

Fixed manufacturing overhead

4.80

Unit production cost

$35.50

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product C64 that would increase the variable costs by $5.00 per unit and that would require a one-time investment of $43,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.

Required:

How much is the “effect” (incremental net operating income) on the company's total net operating income through accepting the special order?

Question 16:
(Ignore income taxes in this problem.) Hinck Corporation is investigating automating a process by purchasing a new machine for $520,000 that would have an eight-year useful life and no salvage value. By automating the process, the company would save $134,000 per year in cash operating costs. The company's current equipment would be sold for scrap now, yielding $22,000. The annual depreciation on the new machine would be $65,000.

Required:

What's the simple rate of return on the investment to the nearest tenth of a percent?

Question 17:
(Ignore income taxes in this problem.) Schaad Corporation has entered into an eight-year lease for a piece of equipment. The annual payment under the lease will be $2,500, with payments being made at the beginning of each year.

Required:

If the discount rate is 14%, what's the present value of the lease payments?

Question 18:
Brodigan Corporation has provided the following information concerning a capital budgeting project:

Investment required in equipment

$450,000

Net annual operating cash inflow

$220,000

Tax rate

30%

After-tax discount rate

12%

The expected life of the project and the equipment is three years, and the equipment has zero salvage value. The company uses straight-line depreciation on all equipment, and the depreciation expense on the equipment would be $150,000 per year. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. The net annual operating cash inflow is the difference between the incremental sales revenue and incremental cash operating expenses.

Required:

What is the net present value of the project?

Question 19:
Dukas Corporation's net cash provided by operating activities was $218,000; its net income was $203,000; its capital expenditures were $146,000; its cash dividends were $49,000.

Required:

What is the company's free cash flow?

Question 20:
Mihok Corporation has provided the following financial data:

Year 2

Year 1

Stockholders' equity:

Common stock, $3 par value

$300,000

$300,000

Additional paid-in capital—common stock

100,000

100,000

Retained earnings

375,000

370,000

Total stockholders' equity

$775,000

$770,000

Income Statement
for the Year Ended December 31, Year 2

Sales

$1,380,000

Cost of goods sold

780,000

Gross margin

600,000

Operating expenses

567,714

Net operating income

32,286

Interest expense

18,000

Net income before taxes

14,286

Income taxes (30%)

4,286

Net income

$10,000

Dividends on common stock during Year 2 totaled $5,000. The market price of common stock at the end of Year 2 was $0.97 per share.

Required:

1. What is the company’s earnings per share for Year 2?
2. What is the company’s price-earnings ratio for Year 2?
3. What is the company’s dividend payout ratio for Year 2?
4. What is the company’s dividend yield ratio for Year 2?
5. What is the company’s book value per share at the end of Year 2?