Question 1:
1. The management of Rathburn 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 43,000
machine-hours. In addition, capacity is 47,000 machinehours
and the actual activity for the year is 42,600
machine-hours. All of the manufacturing overhead is
fixed and is $848,820 per year. For simplicity, it is
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. Job F31I, which required 310
machine-hours, is one of the jobs worked on during the
year.
Required:
A. Determine the predetermined overhead rate if the predetermined
overhead rate is based on the estimated
amount of the allocation base.
Managerial Accounting
Note: You should complete all lesson exams before you take the
final exam.
Complete the following exam by answering the questions and
compiling your answers into a word-processing document. When
you’re ready to submit your answers, refer to the instructions at
the end of your exam booklet. 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.
Part A: 20-Point Questions (2 questions ✕ 20 points =
40 total points). Show all work.
EXAMINATION NUMBER:
061525002 Final Examination
B. Determine how much overhead would be applied to
Job F31I if the predetermined overhead rate is based
on the estimated amount of the allocation base.
C. Determine the underapplied or overapplied overhead
for the year if the predetermined overhead rate is
based on the estimated amount of the allocation base.
D. Determine the predetermined overhead rate if the predetermined
overhead rate is based on the amount of
the allocation base at capacity.
Question 2:
2. Sumter Company uses the weighted-average method in
its process costing system. The following data pertain to
operations in the first processing department for a recent
month:
Work in process, beginning:
Units in process. . . . . . . . . . . . . . . . . . . . . . . . 6,000
Percent complete with respect to materials . . . 60%
Percent complete with respect to conversion . . 20%
Costs in the beginning inventory:
Materials cost . . . . . . . . . . . . . . . . . . . . . . . . . $78,200
Conversion cost . . . . . . . . . . . . . . . . . . . . . . . . $3,600
Units started during the month . . . . . . . . . . . . . ?
Units completed and transferred out
during the month . . . . . . . . . . . . . . . . . . . . . . . 70,000
Costs added to production during the month:
Materials cost . . . . . . . . . . . . . . . . . . . . . . . . . $286,600
Conversion cost . . . . . . . . . . . . . . . . . . . . . . . . $216,000
Work in process, ending:
Units in process. . . . . . . . . . . . . . . . . . . . . . . . 8,000
Percent complete with respect to materials . . . 75%
Percent complete with respect to conversion . . 25%
Required:
How many units were started into production during the
month?
What was the cost per equivalent unit for conversion
during the month?
How much cost, in total, was assigned to the units
transferred out to the next department during the
month?Final Examination 3
Part B: 4–Point Questions (15 questions ✕ 4 points =
60 total points). Show all work.
Use the following information to answer questions 1–10.
Shull Corporation’s most recent balance sheet and income
statement appear below:
Shull Corporation
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Currrent assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,180 $1,150
Accounts receivable . . . . . . . . . . . . . . . . . . . . . 200 190
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 140
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . 100 90
Total current assets. . . . . . . . . . . . . . . . . . . . . . 620 570
Plant & equipment, net . . . . . . . . . . . . . . . . . . . 780 800
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,400 $1,370
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $1,110 $1,130
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 80 70
Notes payable, short term . . . . . . . . . . . . . . . . 60 60
Total current liabilities. . . . . . . . . . . . . . . . . . . . 250 260
Bonds payable. . . . . . . . . . . . . . . . . . . . . . . . . . 220 240
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 470 500
Stockholders’ equity:
Preferred stock, $100 par value, 5% . . . . . . . . 200 200
Common stock, $2 par value. . . . . . . . . . . . . . 400 400
Additional paid-in capital—common stock. . . . 100 100
Retained earnings . . . . . . . . . . . . . . . . . . . . . . 230 170
Total stockholders’ equity . . . . . . . . . . . . . . . . . 930 870
Total liabilities & stockholders’ equity . . . . . . . . $1,400 $1,3704 Final Examination
Dividends on common stock during Year 2 totaled $40 thousand.
Dividends on preferred stock totaled $10 thousand.
The market price of common stock at the end of Year 2 was
$9.80 per share.
Required:
Compute the following for Year 2:
1. Gross margin percentage.
2. Earnings per share (of common stock).
3. Price-earnings ratio.
4. Dividend payout ratio.
5. Dividend yield ratio.
6. Return on total assets.
7. Return on common stockholders’ equity.
8. Book value per share.
9. Working capital.
10. Current ratio.
Shull Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account). . . . . . . . . . . . . . . . . . . . . $1,130
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 700
Gross margin. . . . . . . . . . . . . . . . . . . . . . . . . . . 430
Selling and administrative expense . . . . . . . . . . 244
Net operating income. . . . . . . . . . . . . . . . . . . . . 186
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 29
Net income before taxes. . . . . . . . . . . . . . . . . . . 157
Income taxes (30%) . . . . . . . . . . . . . . . . . . . . . . 47
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110Final Examination 5
11. Green Company’s costs for the month of August were as
follows: direct materials, $27,000; direct labor, $34,000;
selling, $14,000; administrative, $12,000; and manufacturing
overhead, $44,000. The beginning work in process
inventory was $16,000 and the ending work in process
inventory was $9,000. What was the cost of goods manufactured
for the month?
12. Tempcon, Inc. sells and installs furnaces for $3,000 per
furnace. The following cost formula relates to last year’s
operations at Tempcon:
Y = $125,000 + $1,800X
If Tempcon sold and installed 500 furnaces last year,
what was its total contribution margin last year?
13. Kassabian Corporation uses an activity-based costing
system with three activity cost pools. The company has
provided the following data concerning its costs and its
activity-based costing system:
Costs:
Wages and salaries . . . . . . . . . . . . . . . . . . . . . $440,000
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . 220,000
Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $860,000
Distribution of resource consumption:
Activity Cost Pools
Assembly Setting Other Total
Up
Wages and salaries . . . 50% 30% 20% 100%
Depreciation . . . . . . . . 20% 40% 40% 100%
Utilities . . . . . . . . . . . . 25% 35% 40% 100%
How much cost, in total, would be allocated in the firststage
allocation to the Assembly activity cost pool?6 Final Examination
14. Kronstedt Corporation has a standard cost system in
which it applies manufacturing overhead to products on
the basis of standard machine-hours (MHs). The company
has provided the following data for the most recent
month:
Budgeted level of activity (MHs) . . . . . . . . . . . . . 6,100
Actual level of activity (MHs) . . . . . . . . . . . . . . . 6,300
Cost formula for variable overhead cost (per MH) $6.70
Budgeted fixed manufacturing overhead cost. . . $42,000
Actual total variable overhead . . . . . . . . . . . . . . $41,580
Actual total fixed manufacturing overhead. . . . . $45,000
What was the variable overhead rate variance for the
month?
15. (Ignore income taxes in this problem.) Jarvey Company
is studying a project that would have a ten-year life
and would require a $450,000 investment in equipment
which has no salvage value. The project would provide
net operating income each year as follows for the life of
the project:
Sales . . . . . . . . . . . . . . . . . . . . . $500,000
Less cash variable expenses . . . 200,000
Contribution margin . . . . . . . . . 300,000
Less fixed expenses:
Fixed cash expenses . . . . . . . . $150,000
Depreciation expenses. . . . . . . 45,000 195,000
Net operating income. . . . . . . . . $105,000
The company’s required rate of return is 12%. What is
the payback period for this project?
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