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slamgirl [31]
2 years ago
8

Tamar Co. manufactures a single product in one department. All direct materials are added at the beginning of the manufacturing

process. Conversion costs are added evenly throughout the process. During May, the company completed and transferred 25,200 units of product to finished goods inventory. Its 3,600 units of beginning work in process consisted of $20,400 of direct materials and $248,940 of conversion costs. It has 2,700 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. During the month, $677,100 of direct material costs and $2,350,260 of conversion costs were charged to production.
1. Prepare the company’s process cost summary for May using the weighted-average method.
2. Prepare the journal entry dated May 31 to transfer the cost of completed units to finished goods inventory. (Do not round intermediate calculations.)
Business
1 answer:
likoan [24]2 years ago
7 0

Answer:

Required 1

<u>Process cost summary for May</u>

Inputs

                                                     Units            Dollars

Beginning Work In Process        3,600        $269,340

Started                                       24,300      $3,027,360

Totals                                         27,900      $3,296,700

Output

                                                     Units            Dollars

Transfer to Finished Goods      25,200     $3,024,000

Closing  Work In Process            2,700         $272,700

Total                                            27,900     $3,296,700

Required 2

May 31

Finished Goods Inventory 3,024,000 (debit)

Work In Process 3,024,000 (credit)

Explanation:

<u></u>

Equivalent Units of Production Calculation

<u>Materials</u>

Units Completed and Transferred ( 25,200 × 100%) = 25,200

Units in Closing Work In Process ( 2,700 × 100%)     =    2,700

Total Equivalent Units of Production                          =  27,900

<u>Conversion Cost</u>

Units Completed and Transferred ( 25,200 × 100%) = 25,200

Units in Closing Work In Process ( 2,700 × 80%)       =    2,160

Total Equivalent Units of Production                          =  27,360

Calculation of Cost per Equivalent Unit of Production

Cost per Equivalent Unit = Total Cost / Total Equivalent Units of Production

Materials = ( $20,400 + $677,100) / 27,900

               = $25.00

Conversion Cost = ( $248,940 + $2,350,260) / 27,360

                            = $95.00

Total Cost per Equivalent Unit = $120.00

The cost of completed units to finished goods inventory = 25,200 × $120.00 = $3,024,000.

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Answer:

Explanation:

From the given information:

The current price = \dfrac{Dividend(D_o) \times (1+ Growth  \ rate) }{\text{Cost of capital -Growth rate}}

15 = \dfrac{0.50 \times (1+ Growth rate)}{8\%-Growth rate}

15 \times (8 -Growth \  rate) = 0.50 +(0.50 \times growth  \  rate)

1.20 - (15 \times Growth \ rate) = 0.50 + (0.50 \times growth \ rate)

0.70 = (15 \times growth  \ rate) \\ \\ Growth  \ rate = \dfrac{0.70}{15.50} \\ \\ Growth  \ rate = 0.04516 \\ \\ Growth  \ rate \simeq 4.52\% \\ \\

2. The value of the stock  

Calculate the earnings at the end of  5 years:

Earnings (E_o) \times Dividend \  payout  \ ratio = Dividend (D_o) \\ \\ Earnings (E_o) \times 35\% = \$0.50 \\ \\ Earnings (E_o) =\dfrac{\$0.50}{35\%} \\ \\ = \$1.42857

Earnings (E_5) year \  5  = Earnings (E_o) \times (1 + Growth \ rate)^{no \ of \ years} \\ \\ Earnings (E_5) year \  5  = \$1.42857 \times (1 + 12\%)^5 \\ \\ Earnings (E_5) year \ 5  = \$2.51763

Terminal value year 5 = \dfrac{Earnings (E_5) \times (1+ Growth \ rate)}{Interest \ rate - Growth \ rate}

=\dfrac{\$2.51763\times (1+0.04516)}{8\%-0.04516}

=$75.526

Discount all potential future cash flows as follows to determine the stock's value:

\text{Value of stock today} =\bigg( \sum \limits ^{\text{no of years}}_{year =1} \dfrac{Dividend (D_o) \times 1 +Growth rate ) ^{\text{no of years}}}{(1+ interest rate )^{no\ of\ years} }

+ \dfrac{Terminal\ Value }{(1+interest \ rate )^{no \ of \ years}} \Bigg)

\implies \bigg(\dfrac{\$0.50\times (1 + 12\%)^1) }{(1+ 8\%)^{1} }+ \dfrac{\$0.50\times (1+12\%)^2 }{(1+8\% )^{2}}+ \dfrac{\$0.50\times (1+12\%)^3 }{(1+8\% )^{3}}  + \dfrac{\$0.50\times (1+12\%)^4 }{(1+8\% )^{4}} + \dfrac{\$0.50\times (1+12\%)^5 }{(1+8\% )^{5}} + \dfrac{\$75.526}{(1+8\% )^{5}} \bigg )

\implies \bigg(\dfrac{\$0.5600}{1.0800}+\dfrac{\$0.62720}{1.16640}+\dfrac{\$0.70246}{1.2597}+\dfrac{\$0.78676}{1.3605}+\dfrac{\$0.88117}{1.4693}+ \dfrac{\$75.526}{1.4693} \bigg)

=$ 54.1945

As a result, the analysts value the stock at $54.20, which is below their own estimates.

3. The value of the stock  

Calculate the earnings at the end of  5 years:

Earnings (E_o) \times Dividend payout ratio = Dividend (D_o) \\ \\ Earnings (E_o) \times 35\% = \$0.50 \\ \\ Earnings (E_o) =\dfrac{\$0.50}{35\%}\\ \\ = \$1.42857

Earnings (E_5) year  \ 5  = Earnings (E_o) \times (1 + Growth \ rate)^{no \ of \ years} \\ \\ Earnings (E_5) year  \ 5  = \$1.42857 \times (1 + 12\%)^5 \\ \\ Earnings (E_5) year \  5  = \$2.51763 \\ \\

Terminal value year 5 =\dfrac{Earnings (E_5) \times (1+ Growth \ rate)\times dividend \ payout \ ratio}{Interest \ rate - Growth \ rate}

=\dfrac{\$2.51763\times (1+ 7 \%) \times 20\%}{8\%-7\%}

=$53.8773

Discount all potential cash flows as follows to determine the stock's value:

\text{Value of stock today} =\bigg( \sum \limits ^{\text{no of years}}_{year =1} \dfrac{Dividend (D_o) \times 1 + Growth rate ) ^{\text{no of years}}}{(1+ interest rate )^{no \ of\ years} }+ \dfrac{Terminal \ Value }{(1+interest \ rate )^{no \ of \ years }}   \bigg)

\implies \bigg( \dfrac{\$0.50\times (1 + 12\%)^1) }{(1+ 8\%)^{1} }+ \dfrac{\$0.50\times (1+12\%)^2 }{(1+8\% )^{2}}+ \dfrac{\$0.50\times (1+12\%)^3 }{(1+8\% )^{3}}  + \dfrac{\$0.50\times (1+12\%)^4 }{(1+8\% )^{4}} + \dfrac{\$0.50\times (1+12\%)^5 }{(1+8\% )^{5}} + \dfrac{\$53.8773}{(1+8\% )^{5}} \bigg)

\implies \bigg (\dfrac{\$0.5600}{1.0800}+\dfrac{\$0.62720}{1.16640}+\dfrac{\$0.70246}{1.2597}+\dfrac{\$0.78676}{1.3605}+\dfrac{\$0.88117}{1.4693}+ \dfrac{\$53.8773}{1.4693} \bigg)

=$39.460

As a result, the price is $39.460, and the other strategy would raise the value of the shareholders. Not this one, since paying a 100% dividend would result in a price of $54.20, which is higher than the current price.

Notice that the third question depicts the situation after 5 years, but the final decision will be the same since we are discounting in current terms. If compounding is used, the future value over 5 years is just the same as the first choice, which is the better option.

The presumption in the second portion is that after 5 years, the steady growth rate would be the same as measured in the first part (1).

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Grouper Corp. retires its $640000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying v
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