Problem 1: Beginning raw materials $5600 Ending raw materials $4200 Direct Labor
ID: 2375774 • Letter: P
Question
Problem 1:
Beginning raw materials $5600
Ending raw materials $4200
Direct Labor $17,250
Raw materials purchases $7400
Depreciation of factory equipment $6750
Factory repairs and maintenance $3300
Beginning finished goods inventory $10800
Ending finished goods inventory $8900
Beginning goods in process inventory $5350
Ending goods in process inventory $6300
OH application rate 60% of DL
a) Calculate the cost of materials used.
(b) Calculate the manufacturing costs incurred during the period.
(c) Calculate the Cost of Goods Manufactured during the period.
(d) Calculate the Cost of Goods Sold during the period.
(e) Calculate the amount by which overhead is under- or over-applied.
PROBLEM 3
David, Inc. is preparing its master budget for the second quarter. The following sales and production data have been forecasted:
April May June July August
Unit Sales 400 500 520 480 540
Finished goods inventory on March 31: 120 units
Raw materials inventory on March 31: 450 pounds
Desired ending inventory each month:
Finished goods:30% of next month's sales
Raw materials:25% of next month's production needs
Number of pounds of raw material required per finished unit: 4 lb.
Number of direct labor hours to produce each unit: 3 hours
Labor rate per hour: $10
(a) How many units should be produced during April and May?
(b) How many pounds of raw materials should be purchased in April?
(c) What is the budgeted labor cost for April?
PROBLEM 5
A company is considering a proposal to invest $30,000 in a project that would provide the following net cash flows:
Year 1 $6500
Year 2 $10,700
Year 3 $15,000
Year 4 $12,800
(a) Compute the project's payback period.
(b) Compute the net present value of the project assuming a 10% discount rate with the following factors: PV factors for $1(yr 1: 0.9091; yr 2: 0.8264; yr 3:0 .7513; yr 4: 0.6830)
(c) Should the company invest in the machine? Why or why not?
Explanation / Answer
problem 1
a. cost of materials used= 56000+7400-4200=59200
b. manufacturing cost= 59200+6750+3300+17250=86500
c. cog manufactured=59200+6750+3300+17250+5350-6300=85550
d. cogs=59200+6750+3300+5350-6300+17250+10350+10800-8900=97800
e. overhead rate=3450
problem 3
a. April=450 unit
may=1800 unit
b. pounds of april= 1800 pound
c. labour cost=450*3*10=13500
Problem 5
a. payback period
cumulative inflow
1. 6500
2. 17200
3. 32200
4. 45000
payback= 2 year+ [(30000-17200)/15000]*12=2 year 10 months
b. Net present value= -30000+(6500*0.909)+(10700*.8264)+(15000*.7513)+(12800*.6830)=4762.88
c.. yes should accept the project as NPV is positive.