Variable Cost and New Conditioning Shampoo

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Variable Cost and New Conditioning Shampoo
1. (TCO F) Bingham Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below.

Work in process, beginning: Units in beginning work-in-process inventory | 400 | Materials costs | \$6,900 | Conversion costs | \$2,500 | Percentage complete for materials | 80% | Percentage complete for conversion | 15% | Units started into production during the month | 6,000 | Units transferred to the next department during the month | 5,000 | Materials costs added during the month | \$112,500 | Conversion costs added during the month | \$210,300 |
Ending work in process: Units in ending work-in-process inventory | 1,200 | Percentage complete for materials | 60% | Percentage complete for conversion | 30% |

Required: Calculate the equivalent units for materials (using the weighted-average method) for the month in the first processing department. (Points : 25) |

2. (TCO G) - (Ignore income taxes in this problem.) Axillar Beauty Products Corporation is considering the production of a new conditioning shampoo that will require the purchase of new mixing machinery. The machinery will cost \$375,000, is expected to have a useful life of 10 years, and is expected to have a salvage value of \$50,000 at the end of 10 years. The machinery will also need a \$35,000 overhaul at the end of Year 6. A \$40,000 increase in working capital will be needed for this investment project. The working capital will be released at the end of the 10 years. The new shampoo is expected to generate net cash inflows of \$85,000 per year for each of the 10 years. Axillar's discount rate is 16%.

Required:
(a) What is the net present value of this investment opportunity?
(b) Based on your answer to (a) above, should Axillar go ahead with the new conditioning shampoo? (Points : 35) |

(TCO C) Nic Saybin Enterprises Accounting Department collects all pertinent monthly

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