One of the packed absorption columns on your processing line requires significant maintenance with a total cost of $435,250. With this maintenance, the column is expected to operate for an additional 10 years before requiring additional maintenance that is estimated to cost $263,425. The additional maintenance will further extend the lifetime of the column for another 10 years. The current operating costs for the column are $2,745 per month.

As an alternative, your company could purchase a new packed absorption column with a total cost of $675,815 including removal of the old column and installation of the new column. The new column is expected to operate for 20 years with proper maintenance, which costs $1,275 per month. The operating costs for the new column are expected to be $2,545 per month.

a. Calculate the total present value of each option assuming an annual interest rate of 1.15% compounded monthly, and select the most economical option.

b.Convert the total present value to an equivalent uniform monthly cost for the 20- year lifetime of each option.

Morningside Technologies Inc. uses flexible budgets that are based on the following data:

Prepare a flexible selling and administrative expenses budget for April for sales volumes of $90,000, $115,000, and $135,000. Enter all amounts as positive numbers.

Suppose that two firms form an oligopoly in a market with the demand function P = 200 − 2Q, where the market output (Q) is the sum of the outputs of the two firms: Q = q₁ + q₂. Firm 1 has total fixed cost of TFC1 = 50 and total variable cost of TVC1 = 20q₁. Similarly, firm 1 has total fixed cost of TFC2 = 50 and total variable cost of TVC₂ = 20q₂. Assume that the features of the Cournot duopoly model (simultaneous move) apply.

Answer the following questions, and write your answers in the Answer Sheet.

• What is the profit function for each firm (Π1 and Π2, each should be a function of q1 and/or q2)?

• What is the profit-maximizing output of each firm (q1 and q2)?

• What is the resulting market output (Q)?

• What is the price (P) associated with that output?

• What is the profit of each firm (Π1 and Π2), based on their profit-maximizing choices?

• Note: the profit functions should be equations, but the other answers should be numbers.

Cloud Productivity Inc. uses flexible budgets that are based on the following data: Sales commissions 15% of sales Advertising expense 18% of sales Miscellaneous administrative expense $8,500 per month plus 12% of sales Office salaries expense $30,000 per month Customer support expenses $13,000 per month plus 20% of sales Research and development expense $32,000 per month Prepare a flexible selling and administrative expenses budget for March for sales volumes of $400,000, $500,000, and $600,000. (Use Exhibit 5 as a model.) Cloud Productivity Inc. Flexible Selling and Administrative Expenses Budget For the Month Ending March 31 Total sales $400000 $500000 $600000 Variable cost: Sales commissions $ $ $ Advertising expense Miscellaneous administrative expense Customer support expenses Total variable cost $ $ $ Fixed cost: Miscellaneous administrative expense $ $ $ Office salaries expense Customer support expenses Research and development expense Total fixed cost $ $ $ Total selling and administrative expenses $ $ $

Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below:

Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:

Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

What is the product margin for Product M5 under activity-based costing?

Auto valet Manufacturing uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labour cost in Department A, direct labour hours in Department B and machine hours in Department C. The following estimates were used in establishing the predetermined overhead rates for 2017.

Department

A B C

Manufacturing Overhead $840,000 $902,000 $850,000

Direct Labour Cost $600,000 $100,000 $600,000

Direct Labour Hours 50,000 41,000 50,000

Machine Hours 100,000 120,000 170,000

(a) Calculate Auto valet predetermined overhead rate for each department.

(b)During January 2017, the job cost sheets showed the following costs and production data:

Department

A B C

Direct materials used $88,000 $85,000 $69,000

Direct Labour Cost $50,000 $37,400 $48,600

Direct Labour Hours 4,000 3,500 4,200

Machine Hours 8,000 10,500 12,800

Manufacturing overhead incurred $78,000 $69,500 $67,200

Calculate the total manufacturing cost assigned to jobs in January in each department.

(c) Calculate the Manufacturing Overhead variance for each department.

(d)Using the total figures, state the journal entries necessary to record:

i) Total direct materials used

ii) Total direct labour costs incurred

iii) Total manufacturing overhead incurred

iv) Total manufacturing overhead applied

(e) Prepare the Manufacturing Overhead account, showing the overhead costs incurred and applied in each department. What is the balance on the account before closing?

(f) State the journal entries necessary to dispose of the variance.

Cost of Production Report: Weighted average method

Sunrise Coffee Company roasts and packs coffee beans. The process begins in the Roasting Department. From the Roasting Department, the coffee beans are transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at December 31:

ACCOUNT Work in Process-Roasting DepartmentACCOUNT NO.

DateItemDebitCreditBalance

DebitCredit

Dec.1Bal., 15,200 units, 80% completed   28,120  

31Direct materials, 263,000 units276,150  304,270  

31Direct labor151,077  455,347  

31Factory overhead217,403  672,750  

31Goods transferred, 265,200 units  ??  

31Bal., ? units, 30% completed   ?  

Required:

Prepare a cost of production report, using the weighted average method, and identify the missing amounts for Work in Process—Roasting Department. Assume that direct materials are placed in process during production. If required, round your cost per equivalent unit answer to two decimal places.

Sunrise Coffee Company

Cost of Production Report-Roasting Department

For the Month Ended December 31

Unit Information

Units charged to production:

Inventory in process, December 1

Received from materials storeroom

Total units accounted for by the Roasting Department

Units to be assigned costs:

Whole UnitsEquivalent Units of Production

Transferred to Packing Department in December

Inventory in process, December 31

Total units to be assigned costs

Cost Information

Cost per equivalent unit:

Costs

Total costs for December in Roasting Department$

Total equivalent units

Cost per equivalent unit$

Costs assigned to production:

Inventory in process, December 1$

Costs incurred in December

Total costs accounted for by the Roasting Department$

Costs allocated to completed and partially completed units:

Transferred to Packing Department in December$

Inventory in process, December 31

Total costs assigned by the Roasting Department$

. The relationship between marginal and average costs

Consider the following scenario to understand the relationship between marginal and average values. Suppose Van is a professional basketball player, and his game log for free throws can be summarized in the following table.

Fill in the columns with Van’s free-throw percentage for each game and his overall free-throw average after each game.

On the following graph, use the orange points (square symbol) to plot Van’s free-throw percentage for each game individually, and use the green points (triangle symbol) to plot his overall average free-throw percentage after each game.

Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.

Game Free-Throw PercentageAverage Free-Throw Percentage0123451009080706050403020100FREE-THROW PERCENTAGEGAME

You can think of the result in any one game as being Van’s marginal free-throw percentage. Based on your previous answer, you can deduce that when Van’s marginal free-throw percentage is below the average, the average must be   .

You can now apply this analysis to production costs. For a U-shaped average total cost (ATC) curve, when the marginal cost curve is below the average total cost curve, the average total cost must be   . Also, when the marginal cost curve is above the average total cost curve, the average total cost must be   . The

Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage

Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:

It is expected that 12,000 units will be sold at a price of $240 a unit. Maximum sales within the relevant range are 18,000 units.

Required:

1. Prepare an estimated income statement for 20Y7.

2. What is the expected contribution margin ratio?
%

3. Determine the break-even sales in units and dollars.

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?

5. What is the expected margin of safety in dollars and as a percentage of sales?

6. Determine the operating leverage.