Purchase Solution

# Description of Managerial Accounting Questions

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1. Grogan Manufacturing is working on two jobs. Cost is accumulated under a job order cost system, and overhead is applied on the basis of direct labor hours. The company estimated that overhead would be \$32,000 and 10,000 direct labor hours would be worked. Both projects were started and completed in the current accounting period. The following transactions were completed during the period:
(a) Used \$5,000 of direct material on Project I and \$3,400 of direct material on Project II.
(b) Labor costs for the two jobs amounted to the following: Project I, \$12,000 (2,000 hours); Project II, \$22,000 (6,000 hours).
(c) Project II was sold during the period for \$60,000.
How do I calculate the ending balance in work in process?

2. Crown Company is considering purchase of equipment that costs \$60,000. If the useful life is expected to be 5 years and Crown's required rate of return is 10%, what is the minimum annual cash inflow that the equipment must offer for the investment to be acceptable? Please show calculations.
a. \$15,027
b. \$15,828
c. \$16,644
d. \$18,928

3. Graves Company is considering purchase of equipment that costs \$60,000 and is expected to offer annual cash inflows of \$19,000. Graves' minimum required rate of return is 10%. How many years must the cash flows last, for the investment to be acceptable? (Round to nearest whole year.) Please show calculations.
a. 1
b. 2
c. 3
d. 4

##### Solution Summary

A description of managerial account questions are given. Project II being sold during the period are given.

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