Question 1:
Kingdon Corporation's manufacturing overhead includes $7.10 per machine-hour for variable manufacturing overhead and $207,000 per period for fixed manufacturing overhead.
Required: What is the predetermined overhead rate for the denominator level of activity of 4,600 machine-hours?
Question 2: Pinkney Corporation has provided the following data concerning its direct labor costs for November:
Required: Show the journal entry to record the incurrence of direct labor costs Standard wage rate $12.20 per DLH Standard hours 5.3 DLHs per unit Actual wage rate $11.20 per DLH Actual hours 39,720 DLHs Actual output 7,900 units Final Examination 7
Question 3: Iba Industries is a division of a major corporation.
The following data are for the latest year of operations:
Required: What is the division's residual income?
Question 4: Tullius Corporation has received a request for a special order of 8,000 units of product C64 for $50.00 each.
The normal selling price of this product is $53.25 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product C64 is computed as follows:
Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs.
The customer would like some modifications made to product C64 that would increase the variable costs by $5.00 per unit and that would require a one-time investment of $43,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales.
The company has ample spare capacity for producing the special order.
Required: How much is the "effect" (incremental net operating income) on the company's total net operating income through accepting the special order?
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . $5,820,000
Net operating income . . . . . . . . . . . . . . $436,500
Avergae operating assets . . . . . . . . . . . $2,000,000
The company's minimum Required rate of return . . . . . . . . . . . . . 18%
Direct materials $18.10
Direct labor 7.40
Variable manufacturing overhead 5.20
Fixed manufacturing overhead 4.80
Unit product cost $35.50
Question 5:
Hinck Corporation is investigating automating a process by purchasing a new machine for $520,000 that would have an 8 year useful life and no salvage value. By automating the process, the company would save $134,000 per year in cash operating costs. The company's current equipment would be sold for scrap now, yielding $22,000. The annual depreciation on the new machine would be $65,000.
Required: What is the simple rate of return on the investment to the nearest tenth of a percent?
Question 6: (Ignore income taxes in this problem.) Schaad Corporation has entered into an 8 year lease for a piece of equipment. The annual payment under the lease will be $2,500, with payments being made at the beginning of each year.
Required: If the discount rate is 14%, what is the present value of the lease payments?