Reference no: EM131486577

Q1. Fortune, Inc., is preparing its master budget for the first quarter. The comp-any sells a single product at a price of $25 per unit. Sales in units; are forecasted at 39,000 for January, 59,000 for February, and 49,000 for March. Cost of goods sold is $12 per unit. Other expense information for the first quarter fallows.

Commissions - 9% of sales dollars

Rent - $23,000 per month

Advertising - 14% of sales dollars

Office salaries - $80,000 per month

Depredation - $53,000 per month

Interest - 14% annually on a $250,000 note payable

Tex rate - 40%

Prepare a budgeted income statement for this first quarter.

Q2. Business Solutions second quarter 2016 fixed budget performance report for its computer furniture operations follows. The $160,930 budgeted expenses include $109,810 in variable expenses for desks and $15,120 in variable expenses for chairs, as well as $36,000 fixed expenses. The actual expenses include $37,6100 fixed expenses. List fixed and variable expenses separately.

	Fixed Budget	Actual Results	Variances
Desk sales (in units)	139	145
Chair sales (in units)	54	62
Desk sales	$186,260	$192,850	$6,590 F
Chair sales	29,160	34,410	5,250 F
Total expenses	160,930	169,810	8,880 U
Income from operations	$54,490	$57,450	$2,960 F

Prepare a flexible budget performance report that shows any variances between budgeted results and actual results.

The following information applies to the questions displayed below.

Trico Company set the following standard unit costs for its single product.

Direct material (26 lbs. @ $5 per lb.)	$130.00
Direct labor (10 hrs. @10 per hr.)	100.00
Factory overhead - variable (10 hrs. @ $6 per hr.)	60.00
Factory overhead - fixed (10 hrs. @ $9 per hr.)	90.00
Total standard cost	$380.00

The predetermined overhead rate is based on a planned operating volume of 50% of the productive capacity of 70,000 units per quarter. The following flexible budget information is available.

Operating Levels
Production in units	40%	50%	60%
Standard direct labor hours	28,000	35,000	42,000
Budgeted overhead	280,000	350,000	420,000
Fixed factory overhead	$3,150,000	$3,150,000	$3,150,000
Variable factory overhead	$1,680,000	$2,100,000	$2,520,000

During the current quarter, the company operated at 60% of capacity and produced 42,000 units of product actual direct labor totaled 417,000 hours. Units produced were assigned the following standard costs:

Direct materials (1,092,000 lbs. @ $5 per lb.)	$5,460,000
Direct labor (420,000 hours @ $10 per hr.)	4,200,000
Factory overhead (420,000 hrs. @ 15 per hr.)	6,300,000
Total standard cost	$15,960,000

Actual costs incurred during the current quarter follow:

Direct material (1,087,000 lbs. @ $5.10 per lb.)	$5,543,700
Direct labor (417,000 hrs. @ $9.75 per hr.)	4,065,750
Fixed factory overhead costs	3,697,925
Variable factory overhead costs	3,461,887
Total actual costs	$16,769,262

Q3. Required: Compute the direct materials cost variance, including its price and quantity variances.

Q4. Compute the direct materials cost variance, including its price and quantity variances.

Q5. Beyer Company is considering the purchase of an asset for $190,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Assume that Beyer requires a 15% return on its investments. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

	Year 1	Year 2	Year 3	Year 4	Year 5	Total
Net cash flows	$80,000	$45,000	$82,000	$142,000	$45,000	$394,000

a. Compute the net present value of this investment.

b. Should Beyer accept the investment?

Q6. A machine can be purchased for $190,000 and used for five years, yielding the following net incomes. In projecting net incomes, straight-line depreciation is applied, using a five-year life and a zero salvage value.

	Year 1	Year 2	Year 3	Year 4	Year 5
Net income	$12,800	$31,800	$76,000	$47,900	$127,200

Compute the machine's payback period (ignore taxes).

Q7. A machine costs $200,000 and is expected to yield an after-tax net income of $5,000 each year Management predicts this machine has a 11-year service life and a $40.,000 salvage value, and it uses straight-line depreciation. Compute this machine's accounting rate of return.

The following information applies to the questions displayed below.

Manning Corporation is considering a new project requiring a $100,000 investment in test equipment with no salvage value. The project would produce $69,500 of pretax income before depreciation at the end of each of the next six years. The company's Income tax rate is 32%. In compiling its tax return and computing its income tax payments, the company can choose between the two alternative depreciation schedules shown in the table. (FV of $1, PV of $1, FVA of $1 and PVA of $1) Use MACRS) (Use appropriate factor(s) from the tables provided.)

	Straight-Line Depreciation	MACRS Depreciation
Year 1	$10,000	$20,000
Year 2	20,000	32,000
Year 3	20,000	19,200
Year 4	20,000	11,520
Year 5	20,000	11,520
Year 6	10,000	5,760
Totals	$100,000	$100,000

Q8. Complete the following table assuming use of straight-line depreciation. Net cash flow equals the amount of income before depreciation minus the income taxes.

	Income Before Depreciation	Straight-Line Depreciation	Taxable Income	Income Taxes	Net Cash Flows
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6

Q9. Complete the following table assuming use of MACRS depreciation. Net cash flow equals the amount of income before depreciation minus the income taxes.

	Income Before Depreciation	MACRS Depreciation	Taxable Income	Income Taxes	Net Cash Flows
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6

Q10. Compute the net present value of the investment if straight-line depreciation is used. Use 12% as the discount rate.

Q11. Compute the net present value of the investment if MACRS depreciation is used. Use 12% as the discount rate.

Q12. Advertising department expenses of $25,300 and purchasing department expenses of $20,200 of Cozy Bookstore are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows.

Department	Sales	Purchase Orders
Books	$182,400	1,025
Magazines	87,400	625
Newspapers	110,200	850
Total	$380,000	2,500

Complete the following table by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments. (Amounts to be deducted should to be indicated with minus sign.)

Attachment:- Assignment File.rar