# Use the cost relationship determined in part a to estimate the total manufacturing overhead costs for July 2012, given that 7,250 machine-hours are scheduled.

Final Project

HIGH-LOW METHOD

The following information is available regarding the total manufacturing overhead costs of Paymore, Inc., for five months in 2012:

Machine-Hours Mfg Overhead Costs

February 6,900 $6,250

March 5,000 $5,375

April 6,300 $6,025

May 9,333 $7,975

June 6,833 $6,050

Using the high-low method, compute the following:

The variable element of overhead cost per machine-hour:

$____________________ per machine-hour

The fixed element of monthly overhead cost: $__________________

Use the cost relationship determined in part a to estimate the total manufacturing overhead costs for July 2012, given that 7,250 machine-hours are scheduled. $___________________

LIMITED RESOURCES

Portable Enterprises produces two lines of mobile homes: double-wide and single-wide. Unit cost and revenue data pertaining to each product are shown below:

Double-wide Single-wide

Selling price…………………………………………….. $70,000 $70,000

Total variable costs…………………………………… 45,000 20,000

Each double-wide home requires 350 different labor hours and 125 machine hours. Each single-wide home requires 175 direct labor hours and 150 machine hours. Demand for each line of homes far exceeds the company’s total production capacity.

If Portable’s production capacity is constrained by limited direct labor hours, which line of homes should it produce? ___________________

If Portable’s total production capacity is constrained by machine hours, which line of homes should it produce? ____________________

Computations:

USING A RESPONSIBILITY INCOME STATEMENT

Shown below is the current monthly income statement of Metro Video, by profit centers:

METRO VIDEO

Income Statement by Profit Centers

For the Month Ended April 30, 20__

Segments

Metro Video Equipment Sales Video Rentals

Dollars % Dollars % Dollars %

Sales $560,000 100 $280,000 100 $280,000 100

Variable Costs (268,800) ( 48) (198,800) ( 71) ( 70,000) ( 36)

Contribution margin $291,200 52 $81,200 29 $210,000 75

Fixed costs traceable to departments ( 67,200) (12) (25,200) (09) ( 42,000) (15)

Departments responsibility margins $224,000 40 $56,000 20 $168,000 60

Common fixed costs ( 61,600) (11)

Income from operations $162,400 29

On the basis of this information, compute the increase in monthly income from operations that may be expected to result from each of the following actions:

Spending $5,000 per month in advertising is expected to increase sales in the Equipment Sales Department by 35%. $________________

Closing the Equipment Sales Department and allowing the Video Rentals Department to expand is expected to increase the revenue of the Video Rentals Department by $105,000 per month. This action also is expected to increase fixed costs traceable to the Video Rentals Department by $40,000 per month. $_______________

STANDARD COST SYSTEM-OVERHEAD VARIANCES

Assume the following data for John Company’s August operations.

Standard overhead per direct labor hour based on normal monthly capacity of 30,000 hours:

Fixed ($270,000/30,000 hours)………………………………………… $9

Variable ($660,000/30,000 hours)…………………………………….. 22 $31

Direct labor hours actually worked in August………………………….. 28,000 hours

Actually overhead costs incurred (including $270,000 fixed costs)………………………………………………………………………………… $824,000

Compute the amount of overhead applied to Work-in-Process during August. $_______________

Compute the total manufacturing overhead budgeted based on hours worked during August. $_______________

Compute the overhead spending variance for August. Indicate whether favorable (F) or unfavorable (U). $_______________

Compute the overhead volume variance for August. Indicate whether favorable (F) or unfavorable (U). $_______________

CAPITAL BUDGETING

Mason Co. is evaluating two alternative investment proposals. Below are data for each proposal:

Proposal A Proposal B

Initial investment cost…………………………………………….. $84,000 $96,000

Estimated useful life………………………………………………. 5 years 6 years

Estimated salvage value………………………………………… $4,000 -0-

Estimated annual net income………………………………….. $8,200 $8,000

The following information was taken from present value tables:

Present Value

$1 due in 5 years, discounted at 12%………………………………………….. .567

$1 due in 6 years, discounted at 12%………………………………………….. .507

$1 received annually for 5 years, discounted at 12%……………………… 3.605

$1 received annually for 6 years, discounted at 12%……………………… 4.111

All revenue and expenses other than depreciation will be received and paid in cash. The company uses a discount rate of 12% in evaluating all capital investments.

Compute the following for each proposal (round payback period to the nearest tenth of a year and round return on average investment to the nearest tenth of a percent):

Proposal A Proposal B

a. Annual net cash flow: $ $

b. Payback period (in years):

c. Average investment: $ $

d. Return on average investment: % %

e. Net present value: $ $

f. Based on your analysis, which proposal appears to be the best investment?

##### “Looking for a Similar Assignment? Order now and Get a Discount!

The post Use the cost relationship determined in part a to estimate the total manufacturing overhead costs for July 2012, given that 7,250 machine-hours are scheduled. appeared first on Premium Academic Affiliates.