Unformatted text preview: Name Recitation Section: Quiz 3 Version 3 (Pink)Management 201 Spring 2011 A. ` EXTRA CORPORATION Extra Corporation can manufacture three types of candy bars at its plant. The plant capacity is limited to 120,000 machine hours per year. Cost data are as follows: Direct Direct Sales Price Materials Labor VOH FOH* Chocos $10.00 $4.00 $2.00 $2.00 $2.00 Vanillas $14.00 $4.50 $3.00 $3.50 $3.50 Rhubarbs $12.00 $5.00 $2.50 $2.50 $2.50 *FOH is allocated on the basis machine hours using the rate of $10/machine hour. All selling and administrative costs are fixed. If Extra can sell as many candy bars of each type as it can produce, which candy bar(s) should it make? Use the space below to compute your answer. Then explain your answer in the space at the bottom of the page; only one or two sentences are required. It is your explanation and supporting computations that will be graded; an answer without clear, readable, logical supporting computations will not receive any points. Space to provide clearly organized, logical computations: 1. This quiz consists of 2 problems. The point value for each problem is: A. B. EXTRA CORPORATION FULLEST BRUSH COMPANY TOTAL POINTS 12 points 8 points 20 points 2. You have 30 minutes for this exam; no notes are allowed. 3. No notes are allowed. communication. You may not use a calculator that allows storage of information or 4. Show all of your calculations. Correct answers, which are not accompanied by work indicating how the answer was derived, will not receive any credit. Even if the answer can be computed in your head, indicate your thought process on paper. Partial credit will be given only where the logic and handwriting can be easily followed. This means calculations must be labeled and presented in an orderly fashion. The grader will not search for your numbers; nor may one explain ex post how one got one's answer. 5. None of you would cheat; however, for completeness please recall the penalty for cheating is an F in the course. Extra should produce candy bar(s) because: B. FULLEST BRUSH COMPANY C. The Fullest Brush Company manufactures two styles of hairbrushes--the Plain and the Deluxe. Accounting profits for each are listed below: Plain Price per unit $ 2.50 Direct materials .35 Direct labor .50 Variable overhead* .25 Fixed overhead* 1.25 Gross Margin/Unit $ 0.15 *Allocated on the basis of direct labor hours. Deluxe $ 5.00 1.05 .50 .25 1.25 $1.95 Smithtone Company uses 8,000 units of a certain part in production each year. Presently, this part is purchased from an outside supplier at $12 per unit. The following information has been assembled on the per unit accounting costs of making this part internally: Direct materials $3.25 Direct labor 2.75 Overhead* 7.00 *Allocated on the basis of machine hours used to manufacture the product. The variable overhead rate is $4.00/MH; the fixed overhead rate is $10.00/MH If the part were manufactured, the company would need to hire a new supervisor at a salary of $48,000 per year. In addition, the space that is currently used to store inventory would be needed to manufacture the part; hence Smithtone would have to rent warehouse space at a cost of $12,000 per year and Smithtone would incur an additional $13,000 in handling costs per year to transport items to and from the warehouse. By how much would the company's cash profits per year change if Smithtone chooses to make the part instead of buying it outside? Fullest Brush pays its sales persons a sales commission of 10% of sales revenue. Total fixed selling and administrative costs for the company are $150,000. Since the Deluxe model is very profitable, the company has decided to spend $25,000 advertising the Deluxe. The ad campaign is expected to increase sales of the Deluxe brush by 20,000 brushes. However it is also thought that some people will purchase the Deluxe model in place of the Plain model; the ad campaign is expected to decrease sales of the Plain brush by 5,000 brushes. How much will a company's net cash profits change if it undertakes the advertising campaign? Cash profits will increase / decrease Work: (circle one) by A. FRACTIONS, INC. A3. What is the ending balance in the Finished Goods Inventory on December 31, 2013? Work: Fractions, Inc., is a large custom printer. Fractions uses normal costing in its financial records. On December 31, 2012, the only job not completed was Job No. 222; this job had a balance of $245. The remaining print jobs had all been sold; hence, there were no goods in the Finished Goods Inventory at this date. Fractions applies overhead to production on the basis of direct labor cost. For the year 2013, budgeted manufacturing overhead was $7,840; budgeted direct labor cost was $5,600. Actual results for the year 2013 are as follows: Direct materials used Direct labor Indirect labor Factory depreciation Other overhead Selling expenses Administrative expenses Income taxes $ 9,600 5,000 1,080 5,480 1,640 1,700 1,000 2,785 Direct materials ! A4. Overhead for the year 2013 was under- or over-applied? By how much? Work: At the end of the year 2013, there were no jobs unfinished. Job 485, containing $680 in direct material costs and $480 in direct labor charges, was the only job not sold. Cost of Goods Sold is adjusted for any under- or over- applied overhead. Required: A1. What is the company's predetermined overhead rate for the year 2013? Be sure your rate is clearly labeled. Work: A5. What is the company's adjusted Cost of Goods Sold (COGS) for the year? Work: A2. What is the Total Manufacturing Costs of the Period for the year 2013? Work: B. MORE FRACTIONS Why would a company like Fractions use normal costing in place of actual costing? Answer this question using the following format: For each reason you have for a company using normal costing, make a summary of your reason and underline this sentence. Under your summary sentence, elaborate on your main point. Then go on to your second reason for using normal costing. This is like making a series of bullet points with elaboration after each main point. Failure to follow this format will result in a point reduction. ...
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This note was uploaded on 02/23/2012 for the course MGMT 201 taught by Professor Rowe during the Spring '08 term at Purdue.
- Spring '08