ACCT 505 Managerial Accounting Entire Course

Add cost of goods manufactured 54,000
Goods available for sale 66,000
Less ending inventory 6,000
Cost of goods sold 60,000
Gross margin 40,000
Less selling and admin. expenses 28,000
Net operating income $12,000
Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totals $18,000 for the year. The fixed
manufacturing 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)
2. TCO I) (Ignore income taxes in this problem.) Bill Anders retires in 8 years. He has $650,000 to invest and is
considering a franchise for a fast-food outlet. He would have to purchase equipment costing $500,000 to equip the
outlet and invest an additional $150,000 for inventories and other working capital needs. Other outlets in the fast-food
chain have an annual net cash inflow of about $160,000. Mr. Anders would close the outlet in 8 years. He estimates
that the equipment could be sold at that time for about 10% of its original cost. Mr. Anders’ required rate of return is
16%.
Required:
Part A: What is the investment’s net present value when the discount rate is 16%?
Part B: Refer to your calculations. Is this an acceptable investment? Why or why not? (Points : 30)
3. TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the
Maroon Corporation for the just-completed year.
Sales 1,300
Raw materials inventory, beginning 25
Raw materials inventory, ending 30
Purchases of raw materials 250
Direct labor 350
Manufacturing overhead 500
Administrative expenses 300
Selling expenses 250
Work in process inventory, beginning 150
Work in process inventory, ending 100
Finished goods inventory, beginning 80
Finished goods inventory, ending 110
Use the above data to prepare (in thousands of dollars) a schedule of Cost of Goods Manufactured and a Schedule
of Cost of Goods Sold for the year. In addition, what is the impact on the financial statements if the ending finished
goods inventory is overstated or understated? (Points : 25)