Acct 505 final exam (new) all 3 set

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Multiple Choice 2 Short 2 Essay 7

Question 1 : (TCO E) Designing a new product is a(n)

2. Question : (TCO G) Given the following data, what would ROI be?

Sales $70,000 Net operating income $10,000 Contribution margin $20,000 Average operating assets $50,000 Stockholder's equity $25,000

1. Question : (TCO C) Longiotti Corporation produces and sells a single product. Data concerning that product appear below.

Selling price per unit $375.00 Variable expense per unit $144.00 Fixed expense per month $1,686,300 Required: Determine the monthly breakeven in units or dollar sales. Show your work!

2. Question : (TCO B) Maverick 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 Percent complete for materials 80% Percent complete for conversion 15% Units started into production during the month 6,000 Units transferred to the next department during the month 5,600 Materials costs added during the month $112,500 Conversion costs added during the month $210,300 1. Question : (TCO D) Topple Company produces a single product.

Operating data for the company and its absorption costing income statement for the last year are presented below.

Units in beginning inventory 2,000 Units produced 9,000 Units sold 10,000 Sales $100,000 Less cost of goods sold: Beginning inventory 12,000 Add cost of goods manufactured 54,000

Goods available for sale 66,000 Less ending inventory 6,000 Cost of goods sold 60,000 Gross margin 40,000 Less selling and admin. expenses 28,000 Net operating income $12,000

2. Question : (TCO I) (Ignore income taxes in this problem.) Bill Anders retires in 8 years.

He has $650,000 to invest and is considering a franchise for a fast-food outlet. He would have to purchase equipment costing $500,000 to equip the outlet and invest an additional $150,000 for inventories and other working capital needs. Other outlets in the fast-food chain have an annual net cash inflow of about $160,000. Mr. Anders would close the outlet in 8 years.

He estimates that the equipment could be sold at that time for about 10% of its

original cost. Mr. Anders' required rate of return is 16%.

Required: Part A: What is the investment's net present value when the discount rate is 16%?

Part B: Refer to your calculations. Is this an acceptable investment?

Why or why not?

3. Question : (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just-completed year.

Sales 1,300 Raw materials inventory, beginning 25 Raw materials inventory, ending 30 Purchases of raw materials 250 Direct labor 350 Manufacturing overhead 500

Administrative expenses 300 Selling expenses 250 Work in process inventory, beginning 150 Work in process inventory, ending 100 Finished goods inventory, beginning 80 Finished goods inventory, ending 110 Use the above data to prepare (in thousands of dollars) a schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold for the year.

In addition, what is the impact on the financial statements if the ending finished goods inventory is overstated or understated?

4. Question : (TCO F) Walker Corporation is preparing its cash budget for November. The budgeted beginning cash balance is $43,000. Budgeted cash receipts total $117,000 and budgeted cash disbursements total $122,000. The desired ending cash balance is $55,000. The company can borrow up to $100,000 at

any time from a local bank, with interest not due until the following month.

Required: Prepare the company's cash budget for November in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance

5. Question : (TCO F) Bella Lugosi Holdings, Inc. (BLH), has collected the following operating information for its current month's activity. Using this information, prepare a flexible budget analysis to determine how well BLH performed in terms of cost control.

Static Budget Activity level (in units) 5,250 5,178 Variable costs: Indirect materials $24,182 $23,476 Utilities $22,356 $22,674

Fixed costs: Administration $63,450 $65,500 Rent $65,317 $63,904 6. Question : (TCO H) Lindon Company uses 7,500 units of Part Y each year as a component in the assembly of one of its products. The company is presently producing Part Y internally at a total cost of $119,000 as follows.

Direct materials $26,000 Direct labor 28,000 Variable manufacturing overhead 20,000 Fixed manufacturing overhead 45,000

Total costs $119,000 An outside supplier has offered to provide Part Y at a price of $12 per unit. If Lindon stops producing the part internally, one third of the fixed manufacturing overhead would be eliminated.

Required: Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer. Please state clearly whether the part should be made or bought and share your work.

7. Question : (TCO B) Sandler Corporation bases its predetermined overhead rate on the estimated machine hours for the upcoming year. Data for the upcoming year appear below.

Estimated machine hours 75,000 Estimated variable manufacturing overhead $4.50 per machine hour Estimated total fixed manufacturing

overhead $825,000 The actual machine hours for the year turned out to be 77,000.

Required: Compute the company's predetermined overhead rate.

Set 2

1. (TCO C) Madlem, Inc., produces and sells a single product whose selling price is $120.00 per unit and whose variable expense is $46.20 per unit. The company's fixed expense is $405,900 per month.

Required: Determine the monthly breakeven in either unit or total dollar sales. Show your work! (Points : 25)

Question 2.2. (TCO B) Industrial Supply Corporation uses the weightedaverage 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 Percent complete for materials 80% Percent complete for conversion 15% Units started into production during the month 6,000 Units transferred to the next department during the month 5,200 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 75% Percentage complete for conversion 30%

Required: Calculate the equivalent units for conversion for the month in the first processing department. (Points : 25)

Question 1.1. (TCO D) The following absorption costing income statement and additional data are available from the accounting records of Bernon Co. for the month ended May 31, XXXX. During the accounting period, 17,000 units were manufactured and sold at a price of $60 per unit. There were no beginning inventories.

Bernon Co. Absorption Costing Income Statement for the Month Ended May 31, XXXX Sales (17,000 @ $60) $1,020,000 Cost of goods sold

612,000

Gross profit $ 408,000 Selling and administrative expenses

66,000

Income from operations $ 342,000

Additional Information: Cost Total Cost Number of Units Unit Cost

Manufacturing costs: Variable $442,000 17,000 $26 Fixed 170,000 17,000 10 Total $612,000 $36

Selling and administrative expenses: Variable ($2 per unit sold) $34,000 Fixed 32,000 Total $66,000

Required: Prepare a new income statement for the year using variable costing. Comment on the differences, if any, between the absorption costing and the variable costing income statements. (Points : 30)

Question 2.2. (TCO I) (Ignore income taxes in this problem.) Simpson 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 $700,000, is expected to have a useful life of 10 years, and is expected to have a salvage value of

$70,000 at the end of 10 years. The machinery will also need a $45,000 overhaul at the end of Year 5. A $60,000 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 $150,000 per year for each of the 10 years.

Simpson's discount rate is 18%.

Items Year(s) Amount 18% Factor Present Value Cost of machinery Now ($700,000) 1 ($700,000) Working capital increase Now ($60,000) 1 ($60,000) Annual cash inflows 1–10 $150,000 4.494 674,100 Overhaul 5 ($45,000) 0.437 ($19,665) Salvage value 10 $70,000 0.191 13,370 Working capital release 10 $60,000 0.191 11,460 Net present value

($80,735)

Required: (a) What is the net present value of this investment opportunity? (b) Based on your answer to (a) above, should Simpson go ahead with the new conditioning shampoo? (Points : 30)

Question 3.3. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the Maroon Corporation for the just-completed year.

Sales 1,700 Raw materials inventory, beginning 50 Raw materials inventory, ending 25 Purchases of raw materials 210 Direct labor 360 Manufacturing overhead 330 Administrative expenses 400 Selling expenses 200 Work-in-process inventory, beginning 120 Work-in-process inventory, ending 150 Finished goods inventory, beginning 80 Finished goods inventory, ending 120

Use the above data to prepare (in thousands of dollars) a schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold for the year. In addition, what is the impact on the financial statements if the ending finished goods inventory is overstated or understated?

(Points : 25)

Question 4.4. (TCO F) Walker Corporation is preparing its cash budget for November. The budgeted beginning cash balance is $43,000.

Budgeted cash receipts total $117,000 and budgeted cash disbursements total $122,000. The desired ending cash balance is $55,000. The company can borrow up to $100,000 at any time from a local bank, with interest not due until the following month.

Required:

Prepare the company's cash budget for November in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance(Points : 25)

Question 5.5. (TCO F) The following overhead data are for a department of a large company.

Actual Costs Incurred Static Budget Activity level (in units) 360 340

Variable costs: Indirect materials $4,182 $4,148 Electricity $2,536 $2,414 Fixed costs: Administration $6,540 $6,500 Rent $6,310 $6,400

Required: Construct a flexible budget performance report that would be useful in assessing how well costs were controlled in this department. (Points : 25)

Question 6.6. (TCO H) McMullen Co. uses 10,000 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $125,000 as follows.

Direct materials $40,000 Direct labor 30,000

Variable manufacturing overhead 25,000 Fixed manufacturing overhead 30,000 Total costs $125,000

An outside supplier has offered to provide Part X at a price of $10 per unit. If McMullen stops producing the part internally, one third of the fixed manufacturing overhead would be eliminated.

Required: Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer.

Please state clearly whether the part should be made or bought and share your work. (Points : 30)

Question 7.7. (TCO B) Buckhorn Corporation bases its predetermined overhead rate on the estimated machine hours for the upcoming year.

Data for the upcoming year appear below.

Estimated machine hours 37,000 Estimated variable manufacturing overhead $7.77 per machine hour Estimated total fixed manufacturing overhead $888,000

The actual machine hours for the year turned out to be 35,000.

Required: Compute the company's predetermined overhead rate.

(Points : 25)

Set 3 (TCO E) Preparing purchase orders is a(n) (Points : 5) batch-level activity. product-level activity. unit-level activity. organization sustaining activity.

2. (TCO G) Given the following data, what would ROI be?

Sales $70,000 Net operating income $10,000

Contribution margin $20,000 Average operating assets $50,000 Stockholder's equity $25,000 (Points : 5) 28.6% 20.0% 40.0% 50.0%

3. (TCO C) Heckaman Corporation produces and sells a single product.

Data concerning that product appear below.

Selling price per unit $115.00 Variable expense per unit $56.35 Fixed expense per month $299,115

4. TCO B) Industrial Supply 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 Percent complete for materials 80% Percent complete for conversion 15%

5. (TCO D) Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year are presented below.

Units in beginning inventory 0 Units produced 9,000 Units sold 7,000 Sales $100,000

Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totals $18,000 for the year. The fixed manufacturing

overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold.

Required: Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements. (Points : 30)

6. (TCO I) (Ignore income taxes in this problem.) Simpson 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 $700,000, is Required: Part A: What is the net present value of this investment opportunity?

Part B: Based on your answer to (a) above, should Simpson go ahead with the new conditioning shampoo? (Points : 30)

PART B: Simpson should not go ahead and purchase the shampoo machine since the NPV is negative.

7. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Karmana Corporation for the justcompleted year.

8. (TCO F) Matuseski Corporation is preparing its cash budget for October. The budgeted beginning cash balance is $54,000. Budgeted cash receipts total $127,000 and budgeted cash disbursements total $99,000. The desired ending cash balance is $100,000. The company can borrow up to $150,000 at any time from a local bank, with interest not due until the following month.

Required: Prepare the company's cash budget for October in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance. (Points : 25)

9. (TCO F) Bella Lugosi Holdings, Inc. (BLH), has collected the following operating information for its current month's activity. Using this information, prepare a flexible budget analysis to determine how well BLH performed in terms of cost control.

Actual Costs Incurred Static Budget Activity level (in units) 5,250 5,178

Variable costs: Indirect materials $24,182 $23,476 Utilities $22,356 $22,674 Fixed costs: Administration $63,450 $65,500 Rent $65,317 $63,904 (Points : 25)

10. (TCO H) Lindon Company uses 10,000 units of Part Y each year as a component in the assembly of one of its products. The company is presently producing Part Y internally at a total cost of $100,000 as follows.

Direct materials............................................... $20,000 Direct labor...................................................... 40,000 Variable manufacturing overhead...................... 16,000 Fixed manufacturing overhead.......................

24,000 Total costs.......................................................100,000

An outside supplier has offered to provide Part Y at a price of $10 per unit. If Lindon stops producing the part internally, one third of the fixed manufacturing overhead would be eliminated.

11. (TCO B) Wahr Corporation bases its predetermined overhead rate on the estimated labor hours for the upcoming year. At the beginning of the most recently completed year, the company estimated the labor hours for the upcoming year at 35,000. The estimated variable manufacturing overhead was $7.25 per labor hour and the estimated total fixed manufacturing overhead was $585,000. The actual labor hours for the year turned out to be 33,000.