Name:

Student ID:
Thomas Edison State College
Principles of Managerial Accounting (ACC-102)
Section no.:
Semester and year:

Final Project

1. High-low method (15 points)

The following information is available regarding the total manufacturing overhead costs of
Paymore, Inc., for five months in 2010:

(a) Using the high-low method, compute the following:

(1) The variable element of overhead cost per machine-hour:

$____________________ per machine-hour

(2) The fixed element of monthly overhead cost: $__________________

(b) Use the cost relationship determined in part a to estimate the total manufacturing overhead
costs for July 2010, given that 7,250 machine-hours are scheduled. $___________________

ACC-102, Final Project (v3), page1

2. Limited resources (20 points)

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:

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.

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

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

Computations:

ACC-102, Final Project (v3), page2

3. Using a responsibility income statement (20 points)

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__

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:

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

(b) 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. $_______________

ACC-102, Final Project (v3), page3

4. Standard cost system-overhead variances (20 points)

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

(a) Compute the amount of overhead applied to Work-in-Process during August.

$_______________

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

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

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

ACC-102, Final Project (v3), page4

5. Capital budgeting (25 points)

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

The following information was taken from present value tables:

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?

ACC-102, Final Project (v3), page5