Accounting for Decision Making
- Trim Force Corp. had the following information in their accounting records:
|Work in process inventory, beginning balance||$50,000|
|Cost of direct materials used||$350,000|
|Direct labor cost applied to production||$200,000|
|Cost of finished goods manufactured||$750,000|
Manufacturing overhead during production was $250,000. What was the work in process inventory on hand at the end of the year?
- Walsh Corp. uses direct labor hours to determine their applied manufacturing overhead. They use a rate of $30 per direct labor hour. During the production period, company employees worked 10,000 direct labor hours, and had actual overhead costs of $305,000.
- Record the year-end journal entry to close out the Manufacturing Overhead account to the Cost of Goods Sold account.
- Was manufacturing overhead underapplied or was it overapplied?
- Sorin Corp. uses process costing for its two production departments: Cutting and Painting. The company’s manufacturing information for the month of August is provided below:
|Beginning work in process||$1,000||$1,200|
|Costs transferred in||?||?|
|Costs incurred in Aug||$3,500||$5,000|
|Ending work in process||$2,000||$2,500|
- Record the transfer costs from the cutting department to the painting department in Aug.
- Record the transfer costs from the painting department to the finished goods inventory account in Aug.
- Badin Corp. has the following information about its most popular product line:
|Sales price per unit||$50|
|Variable cost per unit||$25|
|Total fixed manufacturing & overhead costs||$400,000|
Compute the following:
- Unit contribution margin.
- Units that must be sold to break even.
- Units that must be sold to earn an operating income of $500,000.
- Complete Dillon Corp.’s flexible budget for 75,000 units using the information listed below:
|25,000 Units||50,000 Units||75,000 Units|
|Cost of Goods Sold||$250,000||$500,000|
|Gross Profit on Sales||$125,000||$250,000|
|Operating expenses ($10,000 of it is fixed)||$35,000||$60,000|
|Income Taxes (30% of operating income)||$27,000||$57,000|
Assume that cost of goods sold and any variable operating expenses vary directly with sales and that income taxes remain constant at 30%.
- Del Sol Healthcare is considering two capital investment proposals. The information for both projects is listed below:
|Proposal #1||Proposal #2|
|Cost of the investment||$250,000||$300,000|
|Estimated salvage value||$25,000||$30,000|
|Average estimated net income||$50,000||$60,000|
Calculate the return on average investment for both proposals and discuss which one would be the best option for investment.