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Accounting

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1.It is the payment for the us of someone's money for a specific length of time. a) Principal b) Rate of interest c) Interest d) Future Value.

2.

Technics Inc., a manufacturing company, utilizes job order costing. Each division establishes its own estimates regarding overhead which are as follows:

	Division A	Division B
Total estimated overhead	$128,000	$261,000
Total estimated machine hours	16,000	72,500
Total estimated direct labor hours	10,000	15,000
Total actual overhead	$130,000	$250,000
Total actual machine hours	17,000	25,000
Total actual direct labor hours	18,000	14,000

Division A allocates overhead on the basis of machine hours

Division B allocates overhead on the basis of direct labor costs

Required:

For Division A and Division B,

1. Calculate the overhead application rate for the year. (3 marks)
2. What is the amount of applied overhead for the year? (3 marks)
3. What is the amount of under or overapplied overhead for the year? Indicate whether it is over- or underapplied (3 marks)

3.Hansell Company’s management wants to prepare budgets for one of its products, duraflex, for July 2010.
The firm sells the product for $80 per unit and has the following expected sales (in units) for these months
in 2010:

April May June July August September
5,000 5,400 5,500 6,000 7,000 8,000

The production process requires 4 pounds of dura-1000 and 2 pounds of flexplas. The firm’s policy is to
maintain an ending inventory each month equal to 10 percent of the following month’s budgeted sales, but
in no case less than 500 units. All materials inventories are to be maintained at 5 percent of the production
needs for the next month, but not to exceed 1,000 pounds. The firm expects all inventories at the end of
June to be within the guidelines. The purchase department expects the materials to cost $1.25 per pound and
$5.00 per pound for dura-1000 and flexplas, respectively.
The production process requires direct labor at two skill levels. The rate for labor at the K102 level is $50
per hour and for the K175 level is $20 per hour. The K102 level can process one batch of duraflex per hour;
each batch consists of 100 units. The manufacturing of duraflex also requires one-tenth of an hour of K175
workers’ time for each unit manufactured.
Variable manufacturing overhead is $1,200 per batch plus $80 per direct labor-hour. The company uses
an actual cost system with a LIFO cost-flow assumption.
Required On the basis of the preceding data and projections, prepare the following budgets:
a. Sales budget for July (in dollars).
b. Production budget for July (in units).
c. Production budget for August (in units).
d. Direct materials purchases budget for July (in pounds).
e. Direct materials purchases budget for July (in dollars).
f. Direct manufacturing labor budget for July (in dollars).

4.

A new electricity transmission line is planned to supply an outlying area and two different conductor sizes are being considered. The capital cost of the line is estimated at $15,600,000 for conductor A and $18,700,000 for conductor B. The energy losses in the line in the first year are estimated at $146,000 for conductor A and $75,000 for conductor B. If conductor A is used the load capacity of the line will be reached in 13 years. The line will then need to be upgraded by replacing conductor A with conductor B at a present day cost of $5,700,000.

The estimated inflation rate for the costs involved is 2% p.a. The company borrows funds at an interest rate of 5% p.a.

(The cost of energy will decrease because of increased renewable energy in the system, but the actual losses will increase because of the increased electrical load. For the purpose of this question, assume that these two effects can be ignored because they cancel each other out.)

Which conductor should be used?