Question

Given the following data for Glennon Company, compute (A) total manufacturing costs and (B) costs of goods manufactured:

A B

Direct materials used $270,000 Beginning work in process $40,000

Direct labor 200,000 Ending work in process 20,000

Manufacturing overhead 300,000 Beginning finished goods 50,000

Operating expenses 350,000 Ending finished goods 30,000

A) $750,000 $790,000

B) $770,000 $750,000

C) $790,000 $810,000

D) $770,000 $790,000

2) Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below:

Project Soup Project Nuts
Initial investment $400,000 $600,000
Annual net income 30,000 46,000
Net annual cash inflow 110,000 146,000
Estimated useful life 5 years 6 years
Salvage value -0- -0-
The company requires a 10% rate of return on all new investments.

Present Value of an Annuity of 1
Periods 9% 10% 11% 12%
5 3.890 3.791 3.696 3.605
6 4.486 4.355 4.231 4.111
The annual rate of return for Project Soup is:

A) 55%.

B) 7.5%.

C) 27.5%.

D) 15.0%.

Answer 1

1. Glennon Company

Total manufacturing costs and costs of goods sold:

C) $790,000 $810,000

2. Carr Company

Annual Rate of Return for Project Soup:

B) 7.5%.

Step-by-step explanation:

1A) Total Manufacturing costs

Direct materials used $270,000

Beginning work in process 40,000

Direct labor 200,000

Ending work in process (20,000 )

Manufacturing overhead 300,000

Total manufacturing costs $790,000

1B) Costs of goods sold:

Beginning finished goods 50,000

Costs of goods manufactured 790,000

less Ending finished goods (30,000)

Cost of goods sold $810,000

2) Project Soup Project Nuts

Initial investment $400,000 $600,000

Annual net income 30,000 46,000

Net annual cash inflow 110,000 146,000

Annual Rate of Return = Annual net income/Initial Investment

= $30,000/$400,000 x 100 = 7.5%