Factory overhead cost variance report

Instructions

Amount Descriptions

Factory Overhead Cost Variance Report

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Instructions

Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May of the current year. The company expected to operate the department at 100% of normal capacity of 8,500 hours.

During May, the department operated at 8,820 standard hours, and the factory overhead costs incurred were indirect factory wages, $31,462; power and light, $24,428; indirect materials, $18,260; supervisory salaries, $20,400; depreciation of plant and equipment, $35,300; and insurance and property taxes, $20,800.

Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 8,820 hours. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter all variances as positive amounts.

Problem 16-7AA FIFO: Process cost summary, equivalent units, cost estimates LO C2, C3, C4, P4

[The following information applies to the questions displayed below.]

Dengo Co. makes a trail mix in two departments: roasting and blending. Direct materials are added at the beginning of each process, and conversion costs are added evenly throughout each process. The company uses the FIFO method of process costing. During October, the roasting department completed and transferred 26,000 units to the blending department. Of the units completed, 4,900 were from beginning inventory and the remaining 21,100 were started and completed during the month. Beginning work in process was 100% complete with respect to direct materials and 30% complete with respect to conversion. The company has 4,300 units (100% complete with respect to direct materials and 70% complete with respect to conversion) in process at month-end. Information on the roasting department’s costs of beginning work in process inventory and costs added during the month follows.

Problem 16-7A Part 1

Required:
1. Prepare the roasting department's process cost summary for October using the FIFO method. (Round "Cost per EUP" to 2 decimal places.)

Problem 16-7A Part 2

2. Prepare the journal entry dated October 31 to transfer the cost of completed units to the blending department. (Do not round your intermediate calculations.)

• Record the transfer of goods from Roasting to Blending.

Exhibit 4
County Hospital Cost Allocation Data

Support Departments Housekeeping Direct Cost Space (Sq. Ft)

Housekeeping $500,000 8,000

General Administration $750,000 12,000

Maintenance $600,000 15,500

TOTAL SUPPORT DEPTS. $1,850,000 35,000

Patient Service Departments Direct Cost Space (sq. ft) revenues

Medicine $800,000 10,000 $970,000

Surgery $1,200,000 20,000 $3,600,000

Outpatient Adult $560,000 15,000 $720,000

Outpatient Pediatrics $470,000 12,000 $630,000

Total Patient Service Depts. $3,030,000   57,000   $5,920,000

County Hospital Totals $4,880,000   92,500 $5,920,000

27. Assume that managers want to allocate housekeeping costs to the patient service departments. What is the value of the housekeeping cost pool? (2 points)

1. 8,000 sq feet

2. 57,000 sq feet

3. $500,000

4. $1,850,000

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28. Assume that space will be the cost driver and that managers want to use the direct cost allocation method. What is the total amount for the cost driver? (2 points)

1. 57,000 sq feet

2. 35,500 sq feet

3. 92,500 sq feet

4. None of the above

29. What is the appropriate allocation rate for the housekeeping cost pool if space is the cost driver and using the direct cost allocation method? (2 points)

1. $5.40 per sq foot

2. $14.08 per sq foot

3. $8.77 per sq foot

4. None of the above

30. Assuming that the cost driver for housekeeping costs is space and using the direct cost allocation method, what is the allocation of housekeeping costs to the Medicine Department? (2 points)

a. $ 87,720
b. $ 54,000
c. $ 140,800
d. None of the above

Unit price: $50
Variable cost: $30
Fixed Cost: $430,000
Expected Sales: 42,000 units per year

However, you recognize that some of these estimates are subject to error. Suppose that each variable may turn out to be either 10% high or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1.9 million, which will be depreciate straight line over the project life to a final value of zero. The firm’s tax rate is 35% and the required rate of return is 10%.

1. What is project NPV in the best case scenario, that is, assuming all variables take on the best possible value?
2. What is project NPV in the worst case scenario?

Unit price: $50
Variable cost: $30
Fixed Cost: $430,000
Expected Sales: 42,000 units per year
However, you recognize that some of these estimates are subject to error. Suppose that each variable may turn out to be either 10% high or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1.9 million, which will be depreciate straight line over the project life to a final value of zero. The firm’s tax rate is 35% and the required rate of return is 10%.

1. What is project NPV in the best case scenario, that is, assuming all variables take on the best possible value?
2. What is project NPV in the worst case scenario?

Compute the cost of the ending inventory and the cost of goods sold under FIFO and average-cost.

1.   Williams Furniture Company has the following data:

        Williams Furniture

         Balance Sheet

      December 31, 201x

Assets:

Cash                                                $50,000

Marketable Securities            80,000

Accounts Receivable        3,000,000

Inventory                                1,000,000

Gross plant &

                  Equipment           6,000,000

                  Less Accum

                  Depreciation       2,000,000

Total Assets                            8,130,000

Liabilities And Equity

Accounts Payable               $2,200,000

Accrued Expense                        150,000

Notes Payable (current)        400,000

Bonds Payable                          2,500,000

Common Stock (1.7

Million shares, par $1)     1,700,000

Retained Earnings                  1,180,000

Total Liabilities &

    Equity                                       8,130,000

          Williams Furniture

           Income Statement

           Year ended Dec 31, 201x

Sales (credit)                                            $7,000,000

Fixed costs*                                             2,100,000

Variable costs (.60)                              4,200,000

Earnings before interest and

                  Taxes                                                700,000

Less interest                                                   250,000

Earnings before taxes                               450,000

Less Taxes (35%)                                          157,500

Earnings after taxes                                   292,500

Dividends (40% payout)                         117,000

Increased retained earnings                 175,500

*Fixed costs include a) lease expense of $200,000 and 9b) depreciation of $500,000.

Williams Furniture has a $65,000 per year sinking fund obligation associated with its bond issues. The sinking fund represents an annual repayment of the principal amount of the bond. It is not tax deductible.

a. Calculate the following and compare to industry average. Be thorough and specific with weak points, strong points and your recommendation on how to improve the company’s performance.

                                                      Williams                                  Industry

Profit Margin                                                                              5.75%

Return on Assets                                                                       6.90%

Return on Equity                                                                      9.20%

Receivables Turnover                                                             4.35x

Inventory Turnover                                                                 6.50x

Fixed Asset Turnover                                                              1.85x    

Current Ratio                                                                              1.45x

Quick Ratio                                                                                  1.10x

Interest Coverage                                                                     5.35x

Debt to total assets                                                                 25.05%

b. Calculate break even in sales dollars. Calculate DOL .

2. Litten Oil and Gas Company is a large company with common stock listed on the New York Stock Exchange and bonds traded over the counter.

The vice president of finance is planning to sell $75 million of bonds this year. Present market yields are 12.1%. Litten has $90 million of 7.5% non callable preferred stock outstanding and has no intentions of selling any preferred stock at any time in the future. The preferred stock is currently priced at $80 per share and its dividend per share is $7.80.

The company has had volatile earnings but its dividend per share had had 8% growth and this will continue. The expected dividend is $1.90 per share and common stock is selling for $40 per share. The company’s flotation costs are $2.50 per share preferred stock and $2.20 per share for common stock.

Litten keeps its debt at 50% of assets and its equity at 50%. Litten sees no need to sell common or preferred stock in the near future as is has generated enough internal funds for investment needs. The tax rate for the company is 40%

Calculated the following cost of capital:

a. bond

b. preferred stock

c. common stock in retained earnings

d. new common stock

e. weighted average cost of capital.

3. Smith Corporation is considering two new investments. Project A and Project B are listed below

Project A will cost $20,000 and has the following cash flow

Yr 1 5,000

Yr 2 6,000

Yr 3 7,000

Yr 4 10,000

Project B will also cost $20,000 has the following cash flow

Yr 1 16000

Yr 2    5000

Yr 3    4000

Calculate specific payback for each

Calculate NPV of each. Use the weighted cost of capital of 8%.

In two wards for elderly patients in a local hospital the following levels of hemoglobin (grams per liter) were found for a simple random sample of patients from each ward.: Ward A: ```{r} ward_a <- c(12.2, 11.1, 14.0, 11.3, 10.8, 12.5, 12.2, 11.9, 13.6, 12.7, 13.4, 13.7) ``` Ward B: ```{r} ward_b <- c(11.9, 10.7, 12.3, 13.9, 11.1, 11.2, 13.3, 11.4, 12.0, 11.1) ``` 2.a) [2 points] Make two box plots to compare the hemoglobin values for Ward A and Ward B. Overlay the boxplots with their raw data. Notice the similarities/differences portrayed by the plots, keeping in mind that the sample size is relatively small for these two wards. ```{r make-data-frame} hemoglobin <- data.frame(hemo_level = c(ward_a, ward_b), ward = c(rep("Ward A", 12), rep("Ward B", 10))) ``` ```{r make-box-plot} # Your code here. ``` 2.b) [2 points] What two assumptions do you need to make to use any of the t-procedures? Because each ward has a rather small sample size (n < 12 for both), what two characteristics of the data would you need to check for to ensure that the t procedures can be applied? Assumtion 1: Assumption 2: 2.c) [4 points] Using only `dplyr` and `*t` functions, create a 95% confidence interval for the mean difference between Ward A and Ward B. You can do this by using `dplyr` to calculate the inputs required to calculate the 95% CI, and then plugging these values in on a separate line of code (or using your calculator). Use a degrees of freedom of 19.515 (You don't need to calculate the degrees of freedom, you can use this value directly). Show your work and interpret the mean difference and its 95% CI. ```{r} # Your code here. ``` Write your 1-2 sentence answer here. 2.d) [4 points] Perform a two-sided t-test for the difference between the two samples. Start by writing down the null and alternate hypotheses, then calculate the test statistic by hand (showing your work) and p-value. Continue to assume that the degrees of freedom is 19.515. Verify the p-value by running the t-test using R's built in function. Show the output from that test. Hint: to perform the t-test using R's built in function, you need to pass the function an x and y argument, where x includes that values for Ward A and Y includes the values for Ward B. `dplyr`'s `filter()` and `pull()` functions will be your friends. $H_{0}$ $H_{A}$ Test statistic = P-value = ```{r} # Your t-test code here. ```

Headquartered in Mumbai, India, Tata Motors is one of the largest multinational manufacturing companies.
It manufactures commercial and passenger vehicles—cars, trucks, vans, coaches, buses, construction
equipment, and military vehicles. Tata Motors has several auto manufacturing and assembly plants,
and research and development centers located across India, including in Jameshedpur, Lucknow, and
Pune. With a solid base in the country, Tata Motors has also built its operations in Argentina, South
Africa, Thailand, and the United Kingdom. In 2014, the company was ranked the world’s 287th biggest
corporation in Fortune’s Global 500 list. Marketing its products through dealership, sales, services, and
spare parts network, the company produces well-known models like the Nano, Safari, Aria, Zest, Bolt,
and Venture brand names, as well as Xenon XT brand name.
For a fourth straight quarter, the decline in China sales of Jaguar Land Rover (JLR), a subsidiary
of Tata Motors, dragged down the company’s profits. Jaguar’s net income fell 49 percent to 27.7 billion
rupees ($434 million) in the quarter ended in June, 2015. Its retail sales plunged 33 percent in
China that quarter, which lead to a 1 percent decline in worldwide deliveries. The luxury unit has cut
its sales targets and prices in China as all automakers brace for a slowdown in the world’s biggest auto
market. Tata Motors’ earnings for the second quarter of 2015 were also hurt by a prolonged slump in
sales of its light commercial vehicles in India. Tata’s revenue fell 5.7 percent to 610.2 billion rupees.
Sales at the luxury unit declined 6.5 percent to 5 billion pounds. Shares of Tata Motors stock has
slumped 29 percent over the past six months making it the second-worst performer on the S&P BSE
Sensex, which has lost 1.7 percent in the period. Sales of the Tata’s Evoque sport utility vehicle were
also lower in China.
The company’s vision statement, posted on the corporate website, states that by 2025, the company’s
commitment to delivering improved quality of life will be available to 25 percent of the global
population, making Tata one of the 25 most admired global brands and one of the most valuable companies
in the world. Its mission is to use its leadership experience, long-term value creation, and the
trust it has built to improve the quality of life of its consumers around the world.
Questions
1. How has the value of the Indian rupee changed compared to China’s yuan and the US dollar in
the last six months? How does this impact Tata?
2. In the About Us section of the company’s website, go to the corporate governance section and
click on the values and purpose link. Evaluate Tata’s vision and mission statement mentioned in
this section. Discuss the potential implications of Tata’s vision and mission on the firm’s competitive
advantages.

Case study

Margaret is a 75 year old woman living in an aged care facility for residents with low-care needs. Margaret had polio as a young child and has one shortened leg requiring a built-up shoe. She also now has arthritis in her hands, back, hips and knees, which is making movement, transfers and balance difficult and painful. Margaret also has emphysema and requires oxygen via nasal tubes, medication via a nebuliser, tablets for her arthritis and she receives injections.

Following is a list of supports outlined on Margaret’s care plan.

Washing: Margaret can sit on a shower chair and independently wash the top half of her body, including genital area. She requires assistance to wash feet, legs and hair.

Margaret must be supervised and may need direction when stepping in and out of shower and transferring in and out of the shower chair.

She needs full assistance with drying herself, as she becomes breathless.

Dressing / undressing: Margaret needs assistance with dressing and undressing as she has difficulty moving and becomes breathless with exertion. She must have a built-up shoe on her left foot.

Grooming: Margaret likes to direct her own grooming and can do her make-up independently. She needs assistance with drying and styling her hair.

Nail care: Margaret needs regular monitoring and treatment for ingrown toenails and corns. She takes care of her fingernails independently.

Oral hygiene: Margaret has upper dentures and requires assistance to clean these and to open lids of cleaning fluid and containers.

Mobility: Margaret uses a four-wheeled walker at all times.

Transfer: Margaret requires direction to use handrails and chair arms, to transfer in and out of chairs.

Toileting: Margaret can use the toilet independently but wears incontinence padding due to difficulty getting to the bathroom in time, which results in occasional leakage.

Eating and drinking: Margaret has all meals in the facility dining room. She requires modified large-handled cutlery due to arthritis in hands.

1. What are the risks for Margaret’s safety that need to be considered when using the equipment and/or aids?

2. What are the risks for a support worker’s safety that need to be made for use of this equipment, and what strategies should be employed to eliminate or reduce the risks?

3. What are the work health and safety risks associated with Margaret transferring in and out of the shower chair?

4. The left side handbrake on Margaret’s four-wheeled walker has a stretched cable and is not working effectively. What action is required to address this problem?

5. What infection control procedures should the support worker adopt in providing routine support for Margaret?