1) Silmon Corporation makes a product with the following standard costs: 
Inputs 
Standard Quantity or Hours 
Standard Price or Rate 
Direct materials 
6.0 
grams 
$ 
9.00 
per gram 
Direct labor 
0.5 
hours 
$ 
16.00 
per hour 
Variable overhead 
0.5 
hours 
$ 
3.00 
per hour 

In June the company produced 5,300 units using 32,530 grams of the direct material and 2,690 direct laborhours. During the month the company purchased 25,200 grams of the direct material at a price of $8.80 per gram. The actual direct labor rate was $16.60 per hour and the actual variable overhead rate was $2.90 per hour. The materials price variance is computed when materials are purchased. Variable overhead is applied on the basis of direct laborhours. 
Required: 
Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase: (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank – be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Omit the “$” sign in your response.) 



(Choices: F, U, None) 
a. 
Direct materials quantity variance 
$ 

b. 
Direct materials price variance 
$ 

c. 
Direct labor efficiency variance 
$ 

e. 
Direct labor rate variance 
$ 

d. 
Variable overhead efficiency variance 
$ 

f. 
Variable overhead rate variance 
$ 

2) Gilde Industries is a division of a major corporation. Last year the division had total sales of $23,826,400, net operating income of $2,835,342, and average operating assets of $9,164,000. The company’s minimum required rate of return is 19%. 
Required: 
a. 
What is the division’s margin? (Round your answer to 2 decimal places. Omit the “%” sign in your response.) 
b. 
What is the division’s turnover? (Round your answer to 2 decimal places.) 
c. 
What is the division’s return on investment (ROI)? (Round you intermediate calculations and final answers to 2 decimal places. Omit the “%” sign in your response.) 
3)
Nutall Corporation is considering dropping product N28X. Data from the company’s accounting system appear below: 



Sales 
$ 
660,000 
Variable expense 
$ 
285,000 
Fixed manufacturing expenses 
$ 
244,000 
Fixed selling and administrative expense 
$ 
192,000 

All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that $195,500 of the fixed manufacturing expenses and $110,500 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued. 
Required: 
a. 
According to the company’s accounting system, what is the net operating income earned by product N28X? (Input the amount as a positive value. Omit the “$” sign in your response.) 
Net operating loss/income? 
$ 
b1. 
What would be the effect on the company’s overall net operating income of dropping product N28X? (Input the amount as a positive value. Omit the “$” sign in your response.) 
Net operating income would be (increase/decrease?) by $ . 
b2. 
Should the product be dropped? 




4)
Tranter, Inc., is considering a project that would have a nineyear life and would require a $1,680,000 investment in equipment. At the end of nine years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows: (Ignore income taxes.) 





Sales 


$ 
2,000,000 
Variable expenses 



1,350,000 





Contribution margin 



650,000 
Fixed expenses: 




Fixed outofpocket cash expenses 
$ 
350,000 


Depreciation 

130,000 

480,000 





Net operating income 


$ 
170,000 






Click here to view Exhibit 13B2, to determine the appropriate discount factor(s) using tables. 
All of the above items, except for depreciation, represent cash flows. The company’s required rate of return is 10%. 
Required: 
a. 
Compute the project’s net present value. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the “$” sign in your response.) 
b. 
Compute the project’s internal rate of return. (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate. Omit the “%” sign in your response.) 
Internal rate of return 
% 
c. 
Compute the project’s payback period. (Round your answer to 1 decimal place.) 
d. 
Compute the project’s simple rate of return. (Round your final answer to the closest interest rate. Omit the “%” sign in your response.) 
5)
A company is considering purchasing an asset for $61,000 that would have a useful life of 10 years and would have a salvage value of $6,000. For tax purposes, the entire original cost of the asset would be depreciated over 10 years using the straightline method and the salvage value would be ignored. The asset would generate annual net cash inflows of $37,000 throughout its useful life. The project would require additional working capital of $9,000, which would be released at the end of the project. The company’s tax rate is 40% and its discount rate is 13%. 
Required: 
What is the net present value of the asset? (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answer to the nearest dollar amount. Omit the “$” sign in your response.) 
http://lectures.mhhe.com/connect/0078111005/Exhibit/Exhibit 13B1.jpg
http://lectures.mhhe.com/connect/0078111005/Exhibit/Exhibit 13B2.jpg
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