2. Limited resources
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:
Double wide Single wide
Selling price $70,000 $40,000
Total variable cost $45,000 $20,000

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:

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4. Standard cost system-overhead variances
Assume the following data for John Company’s August operations.

Standard overhead per direct labor hour based on
normal monthly capacity of 30,000 hours:
Fixed( $270,000/30,000 hours) $9
Variable ($660,000/30,000 hours) 22 $31

Direct labor hours actually worked in August $28,000 hours
Actual overhead cost incurred ( including $270,000
fixed costs)



(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). $_______________

. Capital budgeting

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

Initial investment cost... $84,000 $96,000
Estimated useful life... 5 years 6 years
Estimated salvage value... $4,000 -0-
Estimated annual net income... $8,200 $8,000

The following information was taken from present value tables:

Present value

$1 due in 5 years , discounted at 12%.. . 567
$1 due in 6 years , discounted at 12%.. . 507
$1 received annually for 5 years , discounted at 12%... 3.605
$1 received annually for 5 years , discounted at 12%... 4.111



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?

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Ref:

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Thank you! So far I have computed the payback period

Proposal A = 84,000/8,2000 = 10.24 or 10 years

Proposal B= 96,000/8,000 = 12 years

Return on Avg inv: Proposal 1 as 8,200/( 84,000 + 4,000) /2 = 18.6%

Return on Avg inv: Proposal 2 as 8,000/96,000 /2 = 16.7%

Average Investment

proposal 1: 84,000 +4,000/2= 44,000

proposal 2: 96,000/2= 48,000

I am lost on answering A: Annual net cash flow and E: Net present value

I am totally lost on this question. Not sure how to start.

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