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1 Pronghorn Corp. manufactures and sells a nutrition drink for children. It wants to develop a standard cost per gallon. The following are required for production of a 100 gallon batch: 2,090 ounces of lime Kool-Drink at $.12 per ounce 53 pounds of powdered honey at $.60 per pound 76 kiwi fruit at $.50 each 100 protein tablets at $.90 each 5,300 ounces of water at $.003 per ounce Pronghorn estimates that 2% of the lime Kool-Drink is wasted, 20% of the powdered honey is lost, and 10% of the kiwis cannot be used.Compute the standard cost of the ingredients for one gallon of the nutrition drink. (Round intermediate calculations and final answer to 2 decimal places, e.g. 52.75.) Standard Cost per Gallon $enter the standard cost of the ingredients for one gallon in dollars rounded to 2 decimal places 2 The following direct materials data pertain to the operations of Swifty Co. for the month of December. Standard materials price $5.00 per pound Actual quantity of materials purchased and used 17,300 pounds The standard cost card shows that a finished product contains 4 pounds of materials. The 17,300 pounds were purchased in December at a discount of 4% from the standard price. In December, 4,190 units of finished product were manufactured.Calculate the materials variances. Identify whether each variance is favorable or unfavorable. Materials Price Variance $enter a dollar amount select an option Materials Quantity Variance $enter a dollar amount select an option Total Materials Variance $enter a dollar amount select an option 3 Martinez Manufacturing provided the following information about its standard costing system for 2022: Standard Data Actual Data Materials 10 lbs. @ $4 per lbs. Produced 4,090 units Labor 3 hrs. @ $21 per hr. Materials purchased 50,990 lbs. for $219,257 Budgeted production 3,590 units Materials used 41,900 lbs. Labor worked 11,180 hrs. costing $223,600 (a) Determine the amount of the materials price variance. Identify whether the variance is favorable or unfavorable. Materials Price Variance $enter the materials price variance in dollars select an option 4 Engines Done Right Co. is trying to establish the standard labor cost of a typical engine tune-up. The following data have been collected from time and motion studies conducted over the past month. Actual time spent on the tune-up 1.0 hour Hourly wage rate $16 Payroll taxes 10% of wage rate Setup and downtime 10% of actual labor time Cleanup and rest periods 20% of actual labor time Employee benefits 25% of wage rate (a) Determine the standard direct labor hours per tune-up. (Round answer to 2 decimal places, e.g. 15.10.) Standard direct labor hours per tune-up enter the standard direct labor hours per tune-up rounded to 2 decimal places hours 5 The following direct labor data pertain to the operations of Sheffield Corp. for the month of November: Actual labor rate $12.25 per hr. Actual hours used 19,920 Standard labor rate $12.00 per hr. Standard hours allowed 18,700 Calculate the labor variances. Identify whether each variance is favorable or unfavorable. Labor Price Variance $enter a dollar amount select an option Labor Quantity Variance $enter a dollar amount select an option Total Labor Variance $enter a dollar amount select an option 6 Bramble Company provided the following information about its standard costing system for 2022: Standard Data Actual Data Materials 10 lbs. @ $4 per lbs. Produced 4,250 units Labor 3 hrs. @ $21 per hr. Materials purchased 52,500 lbs. costing $225,750 Budgeted production 3,750 units Materials used 43,500 lbs. Labor worked 11,590 hrs. costing $231,800 Calculate the labor price variance and the labor quantity variance. Identify whether each variance is favorable or unfavorable. Labor Price Variance $enter a dollar amount select an option Labor Quantity Variance $enter a dollar amount select an option 7 Culver Manufacturing, which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (6 pounds at $2 per pound) $12 Direct labor (2 hours at $12 per hour) $24 During the month of April, the company manufactures 490 units and incurs the following actual costs. Direct materials purchased and used (3,180 pounds) $6,996 Direct labor (1,000 hours) $11,500 Compute the total, price, and quantity variances for materials and labor. Identify whether each variance is favorable or unfavorable. Materials Labor Total Variance $enter a dollar amount select an option $enter a dollar amount select an option Price Variance $enter a dollar amount select an option $enter a dollar amount select an option Quantity Variance $enter a dollar amount select an option $enter a dollar amount select an option 8 Blue Spruce Company has developed the following standard costs for its product for 2022: BLUE SPRUCECOMPANYStandard Cost Card Product A Cost Component Standard Quantity × Standard Price = Standard Cost Direct materials 4 pounds $3 $12 Direct labor 3 hours 24 Manufacturing overhead 3 hours 12 $48 The company expected to produce 32,400 units of Product A in 2022 using 97,200 direct labor hours. Actual results for 2022 are as follows: • 33,440 units of Product A were produced. • Actual direct labor costs were $805,240 for 98,200 direct labor hours worked. • Actual direct materials purchased and used during the year cost $379,500 for 138,000 pounds. • Actual variable overhead incurred was $169,000 and actual fixed overhead incurred was $220,000. Compute the following variances showing all computations to support your answers. Indicate whether the variances are favorable or unfavorable. (a) Materials Quantity Variance $enter a dollar amount select an option (b) Total Direct Labor Variance $enter a dollar amount select an option (c) Direct Labor Quantity Variance $enter a dollar amount select an option (d) Direct Materials Price Variance $enter a dollar amount select an option (e) Total Overhead Variance $enter a dollar amount select an option 9 Swifty Company uses a standard cost accounting system. In 2022, the company produced 27,800 units. Each unit took several pounds of direct materials and 1.6 standard hours of direct labor at a standard hourly rate of $12.00. Normal capacity was 50,500 direct labor hours. During the year, 131,400 pounds of raw materials were purchased at $0.95 per pound. All materials purchased were used during the year. (a) If the materials price variance was $5,256 favorable, what was the standard materials price per pound? (Round answer to 2 decimal places, e.g. 2.75.) Standard materials price per pound $enter the standard materials price per pound in dollars rounded to 2 decimal places 10 Bonita Clothiers is a small company that manufactures tall-men’s suits. The company has used a standard cost accounting system. In May 2022, 10,600 suits were produced. The following standard and actual cost data applied to the month of May, when normal capacity was 15,000 direct labor hours. All materials purchased were used. Cost Element Standard (per unit) Actual Direct materials 8 yards at $4.10 per yard $332,670 for 85,300 yards ($3.90 per yard) Direct labor 1.20 hours at $13.00 per hour $179,816 for 13,520 hours ($13.30 per hour) Overhead 1.20 hours at $6.50 per hour (fixed $4.00; variable $2.50) $48,300 fixed overhead $36,500 variable overhead Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $60,000, and budgeted variable overhead was $37,500.(a)Compute the total, price, and quantity variances for (1) materials and (2) labor. (Round per unit values to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 52.) (1) Total materials variance $enter a dollar amount select an option Materials price variance $enter a dollar amount select an option Materials quantity variance $enter a dollar amount select an option (2) Total labor variance $enter a dollar amount select an option Labor price variance $enter a dollar amount select an option Labor quantity variance $enter a dollar amount select an option (b)Compute the total overhead variance. Total overhead variance $enter the total overhead variance in dollars select an option 11 Vaughn Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the company’s customers are governmental agencies, prices are strictly regulated. Therefore, Vaughn Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test. Direct materials (2 test tubes @ $1.90 per tube) $3.80 Direct labor (1 hour @ $30 per hour) 30.00 Variable overhead (1 hour @ $7.00 per hour) 7.00 Fixed overhead (1 hour @ $12.00 per hour) 12.00 Total standard cost per test $52.80 The lab does not maintain an inventory of test tubes. As a result, the tubes purchased each month are used that month. Actual activity for the month of November 2022, when 1,100 tests were conducted, resulted in the following. Direct materials (2,310 test tubes) $4,158 Direct labor (1,155 hours) 33,495 Variable overhead 7,106 Fixed overhead 13,101 Monthly budgeted fixed overhead is $17,400. Revenues for the month were $73,700, and selling and administrative expenses were $4,500. (a) Compute the price and quantity variances for direct materials and direct labor. Materials price variance $enter a dollar amount select an option Materials quantity variance $enter a dollar amount select an option Labor price variance $enter a dollar amount select an option Labor quantity variance $enter a dollar amount select an option 12 Wildhorse Service Center just purchased an automobile hoist for $37,300. The hoist has an 8-year life and an estimated salvage value of $3,600. Installation costs and freight charges were $3,400 and $900, respectively. Wildhorse uses straight-line depreciation.The new hoist will be used to replace mufflers and tires on automobiles. Wildhorse estimates that the new hoist will enable its mechanics to replace 5 extra mufflers per week. Each muffler sells for $73 installed. The cost of a muffler is $39, and the labor cost to install a muffler is $14.(a)Compute the cash payback period for the new hoist. Cash payback period enter the cash payback period in years years (b)Compute the annual rate of return for the new hoist. (Round answer to 2 decimal places, e.g. 10.52%.) Annual rate of return enter the annual rate of return in percentages rounded to 2 decimal places % 13 Corn Doggy, Inc. produces and sells corn dogs. The corn dogs are dipped by hand. Austin Beagle, production manager, is considering purchasing a machine that will make the corn dogs. Austin has shopped for machines and found that the machine he wants will cost $279,200. In addition, Austin estimates that the new machine will increase the company’s annual net cash flows by $43,000. The machine will have a 12-year useful life and no salvage value. (a) Calculate the cash payback period. (Round answer to 2 decimal places, e.g. 15.21.) Cash payback period enter the cash payback period in years rounded to 2 decimal places years 14 Ayayai Manufacturing Company is considering three new projects, each requiring an equipment investment of $28,900. Each project will last for 3 years and produce the following cash flows. Year AA BB CC $9,300 $12,200 $13,300 11,300 12,200 12,300 17,300 12,200 11,300 Total $37,900 $36,600 $36,900 The salvage value for each of the projects is zero. Ayayai uses straight-line depreciation. Ayayai will not accept any project with a payback period over 2.3 years. Ayayai’s minimum required rate of return is 12%. (a) Compute each project’s payback period. (Round answers to 2 decimal places, e.g. 52.75.) AA BB CC Payback period enter a number of years rounded to 2 decimal places years enter a number of years rounded to 2 decimal places years enter a number of years rounded to 2 decimal places years Indicating the most desirable project and the least desirable project using this method. Most desirable select a project Least desirable select a project 15 Cynthia’s Pet Shop is considering the purchase of a new delivery van. Cynthia Smith, owner of the shop, has compiled the following estimates in trying to determine whether the delivery van should be purchased: Cost of the van $39,100 Annual net cash flows 6,600 Salvage value 4,600 Estimated useful life 8 years Cost of capital 10% Present value of an annuity of 1 5.33493 Present value of 1 0.46651 Cynthia’s assistant manager is trying to convince Cynthia that the van has other benefits that she hasn’t considered in the initial estimates. These additional benefits, including the free advertising the store’s name painted on the van’s doors will provide, are expected to increase net cash flows by $540 each year. (a) Calculate the net present value of the van, based on the initial estimates. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 0 decimal places, e.g. 5,275.) Net present value $enter the net present value in dollars rounded to 0 decimal places Should the van be purchased? Van select an option be purchased. (a) Calculate the net present value of the van, based on the initial estimates. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 0 decimal places, e.g. 5,275.) Net present value $enter the net present value in dollars rounded to 0 decimal places Should the van be purchased? Van select an option be purchased. 16 Wildhorse Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $176,000 $191,000 $214,000 Annual net income: Year 1 15,260 19,620 29,430 2 15,260 18,530 25,070 3 15,260 17,440 22,890 4 15,260 13,080 14,170 5 15,260 9,810 13,080 Total $76,300 $78,480 $104,640 Depreciation is computed by the straight-line method with no salvage value. The company’s cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)Click here to view PV table. (a) Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) Project Bono enter the number of years rounded to 2 decimal places years Project Edge enter the number of years rounded to 2 decimal places years Project Clayton enter the number of years rounded to 2 decimal places years 17 Sandhill Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Sandhill, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Sandhill has gathered the following investment information. 1. Five used vans would cost a total of $73,932 to purchase and would have a 3-year useful life with negligible salvage value. Sandhill plans to use straight-line depreciation. 2. Ten drivers would have to be employed at a total payroll expense of $47,200. 3. Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,000, Maintenance $3,700, Repairs $4,000, Insurance $4,300, and Advertising $2,500. 4. Sandhill has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 15%. Use this rate for cost of capital. 5. Sandhill expects each van to make 10 round trips weekly and carry an average of 6 students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12 for a round-trip ticket. Click here to view PV table.(a)Determine the annual (1) net income and (2) net annual cash flows for the commuter service. (Round answers to 0 decimal places, e.g. 125.) Net income $enter a dollar amount rounded to 0 decimal places Net annual cash flows $enter a dollar amount rounded to 0 decimal places (b)Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, e.g. 10.50.) Cash payback period enter the cash payback period in years rounded to 2 decimal places years Annual rate of return enter the annual rate of return in percentages rounded to 2 decimal places (c)Compute the net present value of the commuter service. (Round answer to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value $enter the net present value in dollars rounded to 0 decimal places 18 Sunland Clinic is considering investing in new heart-monitoring equipment. It has two options. Option A would have an initial lower cost but would require a significant expenditure for rebuilding after 4 years. Option B would require no rebuilding expenditure, but its maintenance costs would be higher. Since the Option B machine is of initial higher quality, it is expected to have a salvage value at the end of its useful life. The following estimates were made of the cash flows. The company’s cost of capital is 7%. Option A Option B Initial cost $155,000 $262,000 Annual cash inflows $70,700 $80,400 Annual cash outflows $32,000 $25,700 Cost to rebuild (end of year 4) $48,300 $0 Salvage value $0 $8,100 Estimated useful life 7 years 7 years Click here to view PV table. (a) Compute the (1) net present value, (2) profitability index, and (3) internal rate of return for each option. (Hint: To solve for internal rate of return, experiment with alternative discount rates to arrive at a net present value of zero.) (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answers for present value and IRR to 0 decimal places, e.g. 125 and round profitability index to 2 decimal places, e.g. 12.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net Present Value Profitability Index Internal Rate of Return Option A $enter a dollar amount rounded to 0 decimal places enter the number rounded to 2 decimal places enter percentages rounded to 0 decimal places % Option B $enter a dollar amount rounded to 0 decimal places enter the number rounded to 2 decimal places enter percentages rounded to 0 decimal places % 19 Oriole’s Auto Care is considering the purchase of a new tow truck. The garage doesn’t currently have a tow truck, and the $60,020 price tag for a new truck would represent a major expenditure. Oriole Austen, owner of the garage, has compiled the following estimates in trying to determine whether the tow truck should be purchased. Initial cost $60,020 Estimated useful life 8 years Net annual cash flows from towing $7,960 Overhaul costs (end of year 4) $5,980 Salvage value $12,000 Oriole’s good friend, Rick Ryan, stopped by. He is trying to convince Oriole that the tow truck will have other benefits that Oriole hasn’t even considered. First, he says, cars that need towing need to be fixed. Thus, when Oriole tows them to her facility, her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Oriole the cost of plowing her parking lot. (Rick will give her a used plow blade for free if Oriole will plow Rick’s driveway.) Third, he notes that the truck will generate goodwill; people who are rescued by Oriole’s tow truck will feel grateful and might be more inclined to use her service station in the future or buy gas there. Fourth, the tow truck will have “Oriole’s Auto Care” on its doors, hood, and back tailgate—a form of free advertising wherever the tow truck goes. Rick estimates that, at a minimum, these benefits would be worth the following. Additional annual net cash flows from repair work $3,010 Annual savings from plowing 750 Additional annual net cash flows from customer “goodwill” 960 Additional annual net cash flows resulting from free advertising 740 The company’s cost of capital is 9%.Click here to view PV table. (a) Calculate the net present value, ignoring the additional benefits described by Rick. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value $enter the net present value in dollars rounded to 0 decimal places Should the tow truck be purchased? The tow truck select an option be purchased. 20 Carla Vista Corp. is thinking about opening a soccer camp in southern California. To start the camp, Carla Vista would need to purchase land and build four soccer fields and a sleeping and dining facility to house 150 soccer players. Each year, the camp would be run for 8 sessions of 1 week each. The company would hire college soccer players as coaches. The camp attendees would be male and female soccer players ages 12–18. Property values in southern California have enjoyed a steady increase in value. It is expected that after using the facility for 20 years, Carla Vista can sell the property for more than it was originally purchased for. The following amounts have been estimated. Cost of land $330,300 Cost to build soccer fields, dorm, and dining facility $660,600 Annual cash inflows assuming 150 players and 8 weeks $1,012,920 Annual cash outflows $924,840 Estimated useful life 20 years Salvage value $1,651,500 Discount rate 8% Click here to view PV table. (a) Calculate the net present value of the project. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value $enter the net present value in dollars Should the project be accepted? The project select an option be accepted.

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