1. (TCO F) Buckhorn Corporation bases its predetermined overhead rate on the estimated machine hours for the upcoming year. Data for the upcoming year appear below.
Estimated machine hours 85,000
Estimated variable manufacturing overhead $5.55 per machine hour
Estimated total fixed manufacturing overhead $951,888
Required: Compute the company's predetermined overhead rate. (Points : 25)
Total manufacturing overhead =
Pretermined overhead =
Estimated overhead / machine hours
Matuseski Corporation is preparing its cash budget for October. The budgeted beginning cash balance is $17,000. Budgeted cash receipts total $187,000 and budgeted cash disbursements total $177,000. The desired ending cash balance is $40,000. The company can borrow up to $120,000 at any time from a local bank, with interest not due until the following month.
Required: Prepare the company's cash budget for October in good form. (Points : 25)
(TCO D) McMullen Co. manufactures automatic door openers. The company uses 15,000 electronic hinges per year as a component in the assembly of the openers. You have been engaged by McMullen to assist with an evaluation of whether the company should continue producing the hinges or purchase them from an outside vendor.
The Accounting Department provided the following detail regarding the annual cost to produce electronic hinges.
Variable manufacturing overhead
Fixed manufacturing overhead
The Procurement Department provided the following supplier pricing.
Supplier A price per hinge
Supplier B price per hinge
Supplier C price per hinge
The supplier pricing was obtained in response to a formal request for proposal (RFP). Procurement has determined these suppliers meet McMullen's technical specifications and quality requirements.
If McMullen stops producing the part internally, 10% of the fixed manufacturing overhead would be eliminated.
Required: Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting an outside supplier's offer. (Points : 30)
(TCO E) Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year are presented below.
Units in beginning inventory
Less cost of goods sold:
Add cost of goods manufactured
Goods available for sale
Less ending inventory
Cost of goods sold
Less selling and admin. expenses
Net operating income
Variable manufacturing costs are $4 per unit. Fixed factory overhead totals $18,000 for the year. This overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold.
Required: Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements. (Points : 30)