Reference no: EM131493309

Accounting Assignment

1. Savanna Company is considering two capital nvestment proposals. Relevant data on each project are asfollows:

	Project Red	Project Blue
Capital investment	$440,000	$640,000
Annual net ncome	25,000	60,000
Estimated useful life	8 years	8 years

Depreciation is computed by the straight-line method with no salvage value. Savanna requires an 8% rate of return on all new investments. The present value of lfor 8 periods at 8% is .540 and the present value of an annuity of 1for 8 periods is 5.747.

REQUIREMENTS:

(a) Compute the cash payback period for each project.
(b) Compute the net present value for each project.
(c) Compute the annual rate of return for each project.
(d) Which project should Savanna select

2. Carney Company manufactures cappuccino makers. For the first eight months of 2013, the company reported the following operating mats while operating at 80% of plant capacity:

Sales (500,000 units) Cost of goods sold Gross profit Operating expenses Net income

$90,000,000 54,000,000 36,000,000 24,000,000 $12.000.000

An analysis of costs and expenses reveals that variable cost of goods sold is $95 per unit and variable operating expenses are $35 per unit.

In September, Carney Company receives a special order for 40,000 machines at $135 each from a major coffee shop franchise. Acceptance of the order would result in $13,000 of shipping costs but no ncrease in fixed expenses.

(a) Prepare an incremental analysis for the special order.
(b) Should Carney Company accept the special order? Justify your answer.

3. Data concerning manufacturing overhead for Wilson Industries are presented below. The Mixing Department isa cost center.

An analysis of the overhead costs reveals that all variable costs are controllable by the manager of the Mixing Department and that 50% of supervisory costs are controllable at the department level.

The flexible budget formula and the cost and activity for the months of July and August are as follows:

Flexible Budget Per Direct Labor Hour
		Actual Costs and Activity
Direct labor  hours		July	August
Overhead costs		6,000	7,000
Variable
Indirect materials	$3.50	$ 20,500	$ 25,100
Indirect labor	6.00	39,500	40,700
Factory supplies	1.00	7,600	8,200
Fixed
Depreciation	$20,000	15,000	15,000
Supervision	25,000	23,000	26,000
Property  taxes	1 0,000	12,000	12,000
T otal  costs		$117.600	$127,000

REQUIREMENTS:

(a) Prepare the responsibility reports for the Mixing Department for each month.

(b) Comment on the manager's performance in controlling costs during the two month period.

4. Pleasant Company has decided to begin accumulating a fund for plant expansion. The company deposited $80,000 in a fund on January 2, 2013. Pleasant will also deposit $40,000 annually at the end of each year, starting ii 2013. The fund pays interest at 4% compounded annually. What is the balance of the fund at the end of 2017 (after the 2017 deposit)?

5. Forrest Painting Service has budgeted thefollowi ng time and material for2016:

BUDGETED COSTS FOR 2016
	Time Charges	Material Charges
Painters' wages and benefits	$ 36,000
Service manager's salary and benefits		$23,000
Office employee's salary and benefits	12,000	3,000
Cost of paint		50,000
Overhead (supplies, utilities, etc.)	16,000	8,500
Total budgeted costs	$64,000	$84.500

Forrest budgets 4,000 hours of paint time in 2016 and will charge a profit of $12 per hour, in addition to a 25% markup on the cost of paint.
On February '5, 2016, Forrest is asked to prepare a price estimate to paint a building. Forrest estimates that this job will take 12 labor hours and $500 in paint.

FEQUFEMENTS

1. Compute the labor rate for 2016.
2. Compute the material bading charge rate for 2016.
3. Prepare atime-and-material price estimate for painting the building.