264,000 / 25,000 hrs = $10.56 2650 hrs x 10.56 = $27,984 (d) Sum-of-the-years’-digits. n(n+1) = 10(11) = 55 10/55 x 264,000 x 1/3 = $16,000 9/55 x 264,000 x 2/3 = $28,800 Total = $44,800 (e) Double-declining-balance. 279,000 x 20% x 1/3 = $18,600 [279,000-(279,000x20%)] x 20% x 2/3 = $29,760 Total = $48,360 E11-9 (Composite Depreciation) Presented below is information related to Morrow Manufacturing Corporation. Machine | Cost | Estimated Salvage Value | Estimated Life (in years) | A | $40,500 | $5,500 | 10 | B | 33,600 | 4,800 | 9 | C | 36,000 | 3,600 | 8 | D | 19,000 | 1,500 | 7 | E | 23,500 | 2,500 | 6 | Instructions (a) Compute the rate of depreciation per year to be applied to the machines under the composite method. A: 40,500/10=4050 B: 33,600/9=3733 C: 36,000/8=4500 D: 19,000/7=2714 E: 23,500/6=3916 Total Straight-line depreciation = $18,913 Total Cost = $152,600 Depreciation Rate = 18,913/152,600 = 12.4% (b) Prepare the adjusting entry necessary at the end of the year to record depreciation for the year.
Fin-X Total operation cost Total number of units Cost per unit Allocation of operation cost Units Operation cost (@ $3 per unit) Materials cost Total Cost Number of units Unit Cost 10,000 Sci-X 40,000 Total $150,000 50,000 $3 10,000 $30,000 $200,000 (10,000 * 20) $230,000 10,000 $23 40,000 $120,000 $1,000,000 (40,000 *25) $1,120,000 40,000 $28 50,000 $150,000 The cost of Fin-X per unit is $23. The cost per unit for Sci-X is $28. 3 7-22 Predetermined Overhead Rates Tappan, Inc. manufactures one product and accounts for costs using a job cost system. You have obtained the following information from the corporation’s books and records for the year ended December 31, Year 1: o Total manufacturing cost during the year was $3,000,000 based on actual direct material, actual direct labor, and applied manufacturing overhead. o Manufacturing overhead was applied to work in process at 75 percent of direct labor dollars.
Q= 4 weeks supply = 1600 units R= 400 units a week= 20000 units/ year C= purchase cost per unit= $1250 X (1-.20)= 1,000 H= holding cost= rC= $200 per unit / year S= setup cost= 2000 + 93.75 = $2,093.75 Setups per year= R/Q= 20000/1600= 12.5 Annual setup cost= (R/Q)(S)=12.5X $2,093.75= $26,172 Annual Holding cost= (q/2)(H)= (1600 /2)X $200= $160,000 Total Annual Cost= Annual Setup Cost+ Annual Holding Cost Total Annual Cost= 26,172+160,000 BIM’S Total Annual Cost= $186,172 (b) Compute the economic batch size and the resulting cost savings. Qo= √2RS/H= √(2(20000)(2093.75)/200) = 647 Economic Batch size= 647 Annnual setup cost= (R/Q)(S)= (20000/647) X 2093.75= $64,722 Annual Holding Cost= (Q/2)H= (647/2)X $200= 64,700 Total Annual Cost= Annual setup cost+ Annual Holding Cost Total Annual Cost= $64,722+ $64,700 = $129,422 Cost savings= $186,172- $129,422= $56,750 Cost savings= $56,750 Question 3 (a) Compute Victor’s total annual cost of ordering and carrying inventory. Assumption= 52 weeks/year R = 30 dresses per week = 30 X 52 weeks per year = $1560 Sales price = $300/dress C = 150 per dress Order Lead Time = 2 weeks Fixed Order Cost = S = $225 Cost of Capital = r = 20% Annual Holding cost = H = rC = 150 X 20% = $30 per dress Q = 10 week supply X $30 Annual
3. Wilkerson currently uses a traditional volume-based, full absorbing cost system. Each unit of product cost consists of direct material, direct labor, and manufacturing overhead costs which are allocated based on direct labor cost at a 300% rate. The factory cost flow diagram is shown below. Total Manufacturing Overhead: 806,000 | Total labor cost: 271,250 | Manufacturing cost rate per labor cost: 300% | | Labor cost per unit | | Manufacturing cost per unit | Valves | $10.00 | $10.00*300% | $30.00 | Pumps | $12.50 | $12.50*300% | $37.50 | Flow Controllers | $10.00 | $10.00*300% | $30.00 | | Valves | Pumps | Flow Controllers | Direct Labor | $10.00 | $12.50 | $10.00 | Direct Material | 16.00 | 20.00 | 22.00 | Manufacturing Overhead | 30.00 | 37.50 | 30.00 | Total cost | $56.00 | $70.00 | $62.00 | However, Wilkerson has very high total manufacturing cost, and its three products have diverse consumption manners of indirect cost.
DSO = Receivables / Ave. sales per day Receivables= DSO * Ave. sales per day = 20 * 20,000 Receivables= $400,000 (3-2) Debt Ratio: Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Debt ratio = 1 – (1 / Equity multiplier) Debt ratio = 1 – (1/2.5) = 1 - .40 = .60 Debt ratio = 60% (3-3) Market/Book Ratio: Winston Washers’s stock price is $75 per share. Winston has $10 billion in total assets.
7. Question : (TCO 1) Red Runner’s Work in Process Inventory account has a beginning balance of $50,000 and an ending balance of $40,000. Direct materials used are $70,000 and direct labor used totals $35,000. Cost of goods sold totals $135,000. Manufacturing overhead applied is $20,000.
Such as a suit store will have ties selling at ten dollars per unit, shirts at thirty per unit, paints and so on, this is an example of sales mix. The formula illustrated in chapter 6-12, as I show above, which uses unit selling price minus unit variable costs equals contribution margin per unit. if you use this formula and if you increase the unit selling price you will have a higher contribution margin per unit. An example of this is; if my company DL inc. sells dishwashers at eight hundred dollars per unit and its variable cost per unit is three hundred dollars , how much it cost to make, my contribution margin is five hundred dollars. So if I raise my dishwashers sales from eight hundred dollars to nine hundred I will increase my contribution margin by a hundred dollars.
of Table 1 operations Cost Incurred (USD) Ref of cost given in column: 4 Unit Cost (USD) 1 2 3 4 5 6 A Handling of cartons B Shipping of cartons C Desktop delivery 2000 dly 440000 Para 3(c) 220/ dly D Set up of manual E Enter individual F Validate EDI orders 8000 orders 40000 Para 3(d) G General & Selling in Warehouse by freight 80000 cartons 75000 cartons 16000 orders 150000 lines 600000 Para 3(d) 4160000 Para 3(a) 52/ 450000 Para 3(b) 6/ carton Carton 160000 Para 3(d) order lines of each order (i) (ii) (iii) 10/order 4/line 5 / order Expense USD 42500000 of Annual Sales 200000 Para 3(e) 0.47% of sales 3. Explanation of working out the cost shown in column 5 of table above is given below. (a) Handling of cartons in warehouse:-This has two components. Cost of personnel used in warehouse operations and cost of warehouse excluding personnel expense. (i) Cost of Warehouse excluding personnel is USD 2000000 (ii) Only 90% of warehouse personnel are used for handling of cartons in warehouse.
Using the following calculation, we find: z= x- μ σ -1.96 = 10,000 – 20,000 σ σ=5102 Standard deviation σ = 5,102 μ = 20,000 mean 2. Stock outs were calculated by the four management numbers. Equation is: z = (x – μ)/ σ 15,000: Z = (15,000-20,000)/5102 z = -0.98 Then, reference the cumulative probabilities for standard deviation table in the beginning of the book to identify what -0.98 represents, which is .1635. Since stock outs are any quantity greater than what management suggested, they need to be subtracted from 1. 1 - .1635 = .8365 which = 83.65% Same logic/steps for the rest of the values: 18,000 24,000 28,000 Z = (18,000-20,000)/5102 z=(24,000-20,000)/5102 z=(28,000-20,000)/5102 z = -.39 z=.78 z= 1.57 1 - .3483 = .6517 1 - .7823 = .2177 1 –.9418 = .0582 which = 65.17% which = 21.77% which = 5.82% 3.
Finding the initial investment Answer: $20,000 Purchase price of new machinery $3,000 Installation costs $4,500 After-tax proceeds from sale of old machinery $18,500 Initial investment E11-4. Book value and recaptured depreciation $175,000 $124, 250 $110,000 $50,750 $50, 750 $59,250 Recaptured depreciation E11-5. Initial investment purchase price installation costs – after-tax proceeds from sale of old asset change in net working capital $55,000 $7,500 – $23,750 $2,000 $40,750 Answer: Book value Answer: Initial investment CAPITAL BUDGETING PROBLEMS: CHAPTER 11 Solutions to Problems Note: The MACRS depreciation percentages used in the following problems appear in Chapter 4, Table 4.2. The percentages are rounded to the nearest integer for ease in calculation. For simplification, 5-year-lived projects with 5 years of cash inflows are typically used throughout this chapter.