Final Projec

1. HIGH-LOW METHOD

The following information is available regarding the total manufacturing overhead costs of Pay more, Inc., for five months in 2012:

a. Using the high-low method, compute the following:

1. The variable element of overhead cost per machine-hour:

$____________________ per machine-hour.

2.The fixed element of monthly overhead cost: $__________________.

b.Use the cost relationship determined in part a to estimate the total manufacturing overhead costs for July 2012, given that 7,250 machine-hours are scheduled. $_________________

2.JOINT PRODUCTION DECISIONS

Grassy Fertilizer manufactures two lines of garden grade fertilizer as part of a joint production process: GF10 and GF20. Joint costs up to Grassy’s split-off point total $85,000 per batch. These joint costs are allocated to GF10 and GF20 in proportion to their relative sales values at the split-off point of $40,000 and $60,000, respectively.

Both lines of garden grade fertilizer can be further processed into commercial grade fertilizer. The following table summarizes the costs and revenue associated with additional processing of GF10 and GF20:

a.The $85,000 in joint costs should be allocated to each product as follows:

GF10 $____________, GF20 $____________

b.Which product (GF10 or GF20) would result in a net decrease in operating income if processed into a commercial grade fertilizer? ____________

c.Which product (GF10 or GF20) would result in a net increase in operating income if processed into a commercial grade fertilizer? ____________

3.PREPARATION OF RESPONSIBILITY INCOME STATEMENTS

Hal-Marts, Inc., has two sales departments: equipment and clothing. During February, these two departments reported the following operating results:

In addition, fixed costs common to both departments amounted to $54,400.

Complete the following responsibility income statement for Hal-Marts, Inc. Follow the contribution margin approach, and show percentages as well as dollar amounts. Conclude your income statement with the company’s income from operations.

4.STANDARD COST SYSTEMS VARIANCE COMPUTATIONS

Livingston Corporation recently implemented a standard cost system. The company’s cost accountant has provided the following data to perform a variance analysis for May:

Compute the following variances. Indicate whether each variance is favorable (F) or unfavorable (U):

a.Materials price variance: $__________

b. Materials quantity variance: $__________

c.Labor rate variance: $__________

d..Labor efficiency variance: $__________

e.Overhead spending variance: $__________

f. Overhead volume variance: $__________

5.CAPITAL BUDGETING

Golden Flights, Inc., is considering buying some specialized machinery that would enable the company to obtain a six-year government contract for the design and engineering of a futuristic plane. The machinery costs $975,000 and must be destroyed for security reasons at the end of the six-year contract period. The estimated annual operating results of the project are as follows:

All revenue from the contract and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes. You are to compute the following three factors for this project

a. Payback period: __________ years

b. Return on average investment: __________%

c. Net present value of the investment in this machinery, discounted at an annual rate of 12% (an annuity table shows that the present value of $1 received annually for six years discounted at 12% is 4.111): $__________