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ACCT 505 Week 1-7 All Discussion Questions ACCT 505 Week 1 Case Study ACCT 505 Week 2 Quiz Job Order and Process Costing Systems ACCT 505 Week 2 Quiz Set 2 ACCT 505 Week 3 Case Study II ACCT 505 Week 4 Midterm Exam ACCT 505 Week 5 Course Project 1 LBJ Company (New) ACCT 505 Week 5 Measuring Performance - Course Project A ACCT 505 Week 6 Quiz Segment Reporting and Relevant Costs for Decisions ACCT 505 Week 6 Quiz Set 2 ACCT 505 Week 7 Capital Budgeting Course Project ACCT 505 Week 7 Course Project 2 Capital Budgeting Decision (New) ACCT 505 Final Exam Guide (New) Set 1 ACCT 505 Final Exam Guide (New) Set 2 ACCT 505 Final Exam Guide (New) Set 3 ACCT 505 Midterm Exam (New) Set 1 ACCT 505 Midterm Exam (New) Set 2 ===========================================

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ACCT 505 Final Exam (Devry) ===========================================

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Score 248/250 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 Manufacturing costs: Variable $442,000 17,000 $26 Fixed 170,000 17,000 10 Total $612,000 $36

Unit Cost

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 Fixed manufacturing overhead Total costs $125,000

25,000 30,000

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 Percent complete for conversion

80% 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 (Points : 25)

$63,904

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. ===========================================

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Score 248/250 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. ===========================================

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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)

additional data are available from the accounting records of Bernon Co. for the Question 1.1. (TCO D) The following absorption costing income statement and 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 Manufacturing costs: Variable $442,000 17,000 $26 Fixed 170,000 17,000 10 Total $612,000 $36

Unit Cost

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) Salvage value 10 $70,000 Working capital release 10 Net present value

0.437 ($19,665) 0.191 13,370 $60,000 0.191 11,460 ($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 Fixed manufacturing overhead Total costs $125,000

25,000 30,000

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)


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(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.


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ACCT 505 Midterm Exam (New) Set 1 FOR MORE CLASSES VISIT www.acct505outlet.com

Score 144/150 Multiple Choice 10Essay 4

1. (TCO A) Direct material cost is a part of (Points : 6) Conversion Cost NO.... Prime Cost NO. Conversion Cost YES.... Prime Cost NO. Conversion Cost YES.... Prime Cost YES. Conversion Cost NO.... Prime Cost YES.

Question 2.2. (TCO A) Total fixed costs (Points : 6) will increase with increases in activity. will decrease with increases in activity. are not affected by activity. should be ignored in making decisions because they can never change.


Question 3.3. (TCO A) Property taxes on a company's factory building would be classified as a(n) (Points : 6) variable cost. opportunity cost. period cost. product cost.

Question 4.4. (TCO C) When the activity level is expected to increase within the relevant range, what effects would be anticipated with respect to each of the following? (Points : 6) Fixed costs per unit decrease and variable costs per unit do not change. Fixed costs per unit increase and variable costs per unit do not change. Fixed costs per unit do not change and variable costs per unit do not change. Fixed costs per unit do not change and variable costs per unit increase.

Question 5.5. (TCO B) Which of the following statements is true? I. Overhead application may be made slowly as a job is worked on. II. Overhead application may be made in a single application at the time of completion of the job.


III. Overhead application should be made to any job not completed at year end in order to properly value the work in process inventory. (Points : 6) Only statement I is true. Only statement II is true. Both statements I and II are true. Statements I, II, and III are true.

Question 6.6. (TCO B) Under a job-order costing system, the product being manufactured (Points : 6) is homogeneous. passes from one manufacturing department to the next before being completed. can be custom manufactured. has a unit cost that is easy to calculate by dividing total production costs by the units produced.

Question 7.7. (TCO F) Equivalent units for a process costing system using the FIFO method would be equal to (Points : 6) units completed during the period, plus equivalent units in the ending work-in-process inventory.


units started and completed during the period, plus equivalent units in the ending work-in-process inventory. units completed during the period and transferred out. units started and completed during the period, plus equivalent units in the ending work-in-process inventory, plus work needed to complete units in the beginning work-in-process inventory.

Question 8.8. (TCO C) The contribution margin equals (Points : 6) sales - expenses. sales - variable costs. sales - cost of goods sold. sales - fixed costs.

Question 9.9. (TCO C) Which of the following would not affect the break-even point? (Points : 6) Variable expense per unit Number of units sold Total fixed expenses Selling price per unit


Question 10.10. (TCO D) Under variable costing, (Points : 6) inventory costs will be lower than under absorption costing. inventory costs will be higher than under absorption costing. net operating income will always be lower than under absorption costing. net operating income will always be higher than under absorption costing.

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

$950

Purchases of raw materials Direct labor

$225

$250

Manufacturing overhead

$295

Administrative expenses

$150

Selling expenses

$140

Raw materials inventory, beginning $30 Raw materials inventory, ending

$45

Work-in-process inventory, beginning Work-in-process inventory, ending

$55

Finished goods inventory, beginning $100

$20


Finished goods inventory, ending

$135

Prepare a Schedule of Cost of Goods Manufactured statement in the text box below. (Points : 15)

Schedule of cost of goods manufactured Direct materials:

Question 2.2. (TCO B) The Nebraska Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below. Percentage Completed Units Materials

Conversion

Work in process, June 1

140,000

65%

45%

Work in process, Jun 30

120,000

75%

65%

The department started 580,000 units into production during the month and transferred 600,000 completed units to the next department.

Question 3.3. (TCO C) A tile manufacturer has supplied the following data. Boxes of tile produced and sold

625,000


Sales revenue $2,975,000 Variable manufacturing expense

$1,720,000

Fixed manufacturing expense $790,000 Variable selling and admin expense

$152,000

Fixed selling and admin expense

$133,000

Net operating income $180,000

Question 4.4. (TCO D) The Hampton Company produces and sells a single product. The following data refer to the year just completed. Selling price

$450

Units in beginning inventory 0 Units produced Units sold

25,000

22,000

Variable costs per unit: Direct materials Direct labor

$150

$75

Variable manufacturing overhead Variable selling and admin

$15

$25


Fixed costs: Fixed manufacturing overhead Fixed selling and admin

$275,000

$200,000

Required: Compute the cost of a single unit of product under both the absorption costing and variable costing approaches. Prepare an income statement for the year using absorption costing. Prepare an income statement for the year using variable costing. (Points : 30)

Extra questions ===========================================

ACCT 505 Midterm Exam (New) Set 2 FOR MORE CLASSES VISIT www.acct505outlet.com

Multiple Choice Essay 4

10

9


Question 1. Question : advertising costs is a

(TCO A) The variable portion of

Student Answer:

Conversion YES... Period NO.

Conversion YES .... Period YES. Conversion NO.... Period NO. Conversion NO.... Period YES.

Question 2. Question : (TCO A) A cost incurred in the past that is not relevant to any current decision is classified as a(n) Student Answer:

period cost.

incremental cost. opportunity cost. None of the above

Question 3. Question : (TCO A) Property taxes on a company's factory building would be classified as a(n) Student Answer:

variable cost.

opportunity cost. period cost.


product cost.

Question 4. Question : (TCO C) Within the relevant range, variable costs can be expected to Student Answer: changes in the activity level.

vary in total in direct proportion to

remain constant in total as the activity level changes. increase on a per-unit basis as the activity level increases. increase on a per-unit basis as the activity level decreases. None of the above

Question 5. Question : (TCO B) Which of the following statements is true? I. Overhead application may be made slowly as a job is worked on. II. Overhead application may be made in a single application at the time of completion of the job. III. Overhead application should be made to any job not completed at year end in order to properly value the work in process inventory.


Student Answer:

Only statement I is true.

Only statement II is true. Both statements I and II are true. Statements I, II, and III are true.

Question 6. Question : (TCO B) A job-order cost system is employed in those situations when Student Answer: many different products, jobs, or batches of production are being produced each period. manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis. the product moves from department to department before being completed. the unit cost of production is computed by dividing the total production costs by the number of units produced.

Question 7. Question : (TCO B) The FIFO method only provides a major advantage over the weighted-average method in that Student Answer: the calculation of equivalent units is less complex under the FIFO method. the FIFO method treats units in the beginning inventory as if they were started and completed during the current period.


the FIFO method provides measurements of work done during the current period. the weighted-average method ignores units in the beginning and ending work-in-process inventories.

Question 8. Question : always increases when the Student Answer:

(TCO C) The contribution margin ratio

fixed expenses increase.

fixed expenses decrease. variable expenses as a percentage of net sales increase. variable expenses as a percentage of net sales decrease.

Question 9. Question : (TCO C) Which of the following would not affect the break-even point? Student Answer:

Variable expense per unit

Number of units sold Total fixed expenses Selling price per unit


Question 10. Question : Student Answer: under absorption costing.

(TCO D) Under variable costing, inventory costs will be lower than

inventory costs will be higher than under absorption costing. net operating income will always be lower than under absorption costing. net operating income will always be higher than under absorption costing.

Question 1. Question : (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larden Corporation for the just-completed year. Sales $950 Purchases of raw materials $170 Direct labor $225 Manufacturing overhead $220 Administrative expenses $180 Selling expenses $140 Raw materials inventory, beginning $90 Raw materials inventory, ending $80 Work-in-process inventory, beginning $30 Work-in-process inventory, ending $20 Finished goods inventory, beginning $100 Finished goods inventory, ending $70


Prepare a Schedule of Cost of Goods Manufactured statement in the text box below.

Question 2. Question : (TCO B) The Florida Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below. Percentage Completed

Question 3. Question : (TCO C) Drake Company's income statement for the most recent year appears below. Sales (45,000 units) $1,350,000 Less: variable expenses 750,000 Contribution margin 600,000 Less: fixed expenses 375,000 Net operating income $225,000

Question 4. Question : (TCO D) The Hampton Company produces and sells a single product. The following data refer to the year just completed. Selling price $450 Units in beginning inventory 0 Units produced 25,000 Units sold 22,000 Variable costs per unit:


Direct materials $150 Direct labor $75 Variable manufacturing overhead Variable selling and admin $15

$25

Fixed costs: Fixed manufacturing overhead $275,000 Fixed selling and admin $200,000 ==============================================

ACCT 505 Week 1 Case Study (Devry) FOR MORE CLASSES VISIT www.acct505outlet.com

Top Switch Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout the state of Tennessee affected Top Switch’s facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed. Before the unfortunate incident, recovery specialists cleaned the buildings. The company controller is very nervous and anxious to recover whatever records he can to support the insurance claim for the destroyed inventory. After consulting with the cost accountant, they decide to retrieve the previous year’s annual report for the beginning inventory numbers. In addition, they also agreed that they need first quarter cost data. The cost accountant was working on the first quarter results before the storm hit, and to his surprise, the report was still in his desk drawer.


After reviewing the data , the information shows the following information: Material purchases were $ 325,000; Direct Labor was $ 220,000. Further discussions between the controller and the cost accountant revealed that sales were $ 1,350,000 and the gross margin was 30% of sales. The cost accountant also discovered, while sifting through the information, that cost of goods available for sale was $ 1,020,000 at cost. While assessing the damage, the controller determined that the prime costs were $ 545,000 up to the time of the damage and that manufacturing overhead is 65% of conversion cost. The cost accountant is not sure about all of this, but he decides to see what he can do with the information. The beginning inventory numbers are as follows: Raw Materials, $ 41,000 Work in Process, $ 56,000 Finished Goods, $ 35,000 Required: Determine the amount of cost in the Raw Materials, Work in Process, and Finished Goods Inventory as of the date of the storm. ( Hint: You may wish to reconstruct the various schedules and statements that would have been affected by the company’s accounts during the period.) Grading Rubric for Case Study I: Category Points % Description Documentation & Formatting 10 22% Worksheet will be done in Excel and will contain formulas to receive maximum credit Organization and Cohesiveness 15


33% Calculations for all parts should be organized and correctly labeled. Content 20 45% A quality case study will have all required work completed and will be correct. Total 45 100% A quality project will meet or exceed all of the above requirements. ===========================================

ACCT 505 Week 1-7 All Discussion Questions (Devry) FOR MORE CLASSES VISIT www.acct505outlet.com

Week 1DQ 1 Cost Terms, Classifications, and Behavior Week 1DQ 2 Research and Application Week 2DQ 1 Job Order and Process Costing Systems Week 2DQ 2 Research and Application Week 3DQ 1 Variable Costing and CVP Concepts Week 3DQ 2 Research and Application Week 4DQ 1 Budgeting Case Study Week 4DQ 2 Exam Review Week 5DQ 1 Standards, Variances, Flexible Budgets Week 5DQ 2 Research and Application Week 6DQ 1 Segment Reporting and Relevant Costs Week 6DQ 2 Research and Application Week 7DQ 1 Capital Budgeting


Week 7DQ 2 Exam Review ===========================================

ACCT 505 Week 2 Case 3-29 Ethics and the Manager FOR MORE CLASSES VISIT www.acct505outlet.com

CASE 3–29 Ethics and the Manager [Course Objective B] Terri Ronsin had recently been transferred to the Home Security Systems Division of National Home Products. Shortly after taking over her new position as divisional controller, she was asked to develop the division’s predetermined overhead rate for the upcoming year. The accuracy of the rate is important because it is used throughout the year and any overapplied or underapplied over- head is closed out to Cost of Goods Sold at the end of the year. National Home Products uses direct laborhours in all of its divisions as the allocation base for manufacturing overhead. To compute the predetermined overhead rate, Terri divided her estimate of the total manufacturing overhead for the coming year by the production manager’s estimate of the total direct labor-hours for the coming year. She took her computations to the division’s general manager for approval but was quite surprised when he suggested a modification in the base. Her conversation with the general manager of the Home Security Systems Division, Harry Irving, went like this: Ronsin: Here are my calculations for next year’s predetermined overhead rate. If you approve, we can enter the rate into the computer on


January 1 and be up and running in the job-order costing system right away this year. Irving: Thanks for coming up with the calculations so quickly, and they look just fine. There is, how- ever, one slight modification I would like to see. Your estimate of the total direct labor-hours for the year is 440,000 hours. How about cutting that to about 420,000 hours? Ronsin: I don’t know if I can do that. The production manager says she will need about 440,000 direct labor-hours to meet the sales projections for the year. Besides, there are going to be over 430,000 direct laborhours during the current year and sales are projected to be higher next year. Irving: Teri, I know all of that. I would still like to reduce the direct labor-hours in the base to some- thing like 420,000 hours. You probably don’t know that I had an agreement with your predecessor as divisional controller to shave 5% or so off the estimated direct labor-hours every year. That way, we kept a reserve that usually resulted in a big boost to net operating income at the end of the fiscal year in December. We called it our Christmas bonus. Corporate headquarters always seemed as pleased as punch that we could pull off such a miracle at the end of the year. This system has worked well for many years, and I don’t want to change it now. Required: Assume the following information: Direct Materials $40 per unit Direct Labor $20 per unit Total Estimated Manufacturing Overhead


$8,400,000

Manufacturing overhead is allocated based on estimated direct-labor hours. Each unit of product requires 1 direct labor hour.

1. Calculate the cost of one unit of product, assuming that the overhead per unit is based on Terri Ronson’s estimate of 440,000 hours. (Round all dollar figures to two decimal places.) a. If 441,000 units were produced, how much overhead was applied to work in process.

2. Calculate the cost of one unit of product, assuming that the overhead per unit is based on her supervisors preferred estimate of 420,000 hours. (Round all dollar figures to two decimal places.) a. If 441,000 units were produced, how much overhead was applied to work in process.

3. During the year, the company produced and sold 441,000 units, and incurred actual overhead of $8,500,000, what is the under/overapplied overhead if: a. The estimated Direct Labor Hours is 440,000. b. The estimated Direct Labor Hours is 420,000.


c. All over-applied and under-applied overhead applied directly to cost of goods sold. Assume that the company had $1,000,000 in net operating income before the over/under applied overhead adjustment is made. What is the revised net income after the over/underapplied overhead adjustment? 4. Should Terri Ronson go along with the general manager’s request to reduce the direct labor hours in the predetermined overhead rate computation to 420,000 hours? Be sure to discuss the operational and ethical issues related to this decision.

Deliverables: 1. Submit an Excel spreadsheet that documents the calculations made for steps 1-3 above. All items should be clearly labeled, and appropriate formulas should be used to perform your calculations. 2. For step 4, submit a 5-7 minute narrated PowerPoint (preferably using VoiceThread) that highlights your discussion of the operational and ethical issues that Teri is facing as a result of the request to reduce the direct labor hours. Be sure to make a recommendation in regard to making this decision. The presentation should be 3-4 slides. 3. Post your PowerPoint and workbook on behalf of your team to the Week 2 Dropbox for the case study. 4. NOTE: as a team project, a team collaboration tool (such as Cisco Spark) should be used for the students to collaborate on the project!

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ACCT 505 Week 2 Quiz Job Order and Process Costing Systems (Devry) FOR MORE CLASSES VISIT www.acct505outlet.com

1. Question : (TCO F) For which situation(s) below would an organization be more likely to use a job-order costing system of accumulating product costs rather than a process costing system? 2. Question : (TCO F) Process costing would be appropriate for each of the following except: 3. Question : (TCO F) Lucas Company uses the weighted-average method in its process costing system. The company adds materials at the beginning of the process in the Forming Department, which is the first of two stages in its production process. Information concerning operations in the Forming Department in October follows: Units Material Cost Work in process on October 1 6,000 $3,000 Units started in October 50,000 $25,560 Units completed and transferred to next Department during October 44,000


What was the materials cost of work in process at on October 31? 4. Question : (TCO F) In a job-order costing system, the use of direct materials that have been previously purchased is recorded as a debit to: 5. Question : (TCO F) During December at Ingrim Corporation, $74,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $6,000. The journal entry to record the requisition from the storeroom would include a: 6. Question : (TCO F) Valles Corporation had $22,000 of raw materials on hand on February 1. During the month, the company purchased an additional $75,000 of raw materials. The journal entry to record the purchase of raw materials would include a: 1. Question : (TCO F) Whether a company uses process costing or job-order costing depends on its industry. A number of companies in different industries are listed below: i. Brick manufacturer ii. Contract printer that produces posters, books, and pamphlets to order iii. Natural gas production company iv. Dairy farm v. Coal mining company vi. Specialty coffee roaster (roasts small batches of specialty coffee beans)


For each company, indicate whether the company is most likely to use job-order costing or process costing. i. Brick manufacturer Process Costing ii. Contract printer that produces posters, books, and pamphlets to order Job Order Costing iii. Natural gas production company Process Costing iv. Dairy farm Process Costing v. Coal mining company Process Costing vi. Specialty coffee roaster (roasts small batches of specialty coffee beans) Job Order Costing 2. Question : (TCO F) Job 484 was recently completed. The following data have been recorded on its job cost sheet: Direct materials $57,240 Direct labor hours 1,692 DLHs Direct labor wage rate $12 per DLHS Number of units completed 3,600 units

The company applies manufacturing overhead on the basis of direct labor-hours. The predetermined overhead rate is $24 per direct laborhour. Compute the unit product cost that would appear on the job cost sheet for this job. 3. Question : (TCO F) Miller Company manufactures a product for which materials are added at the beginning of the manufacturing process. A review of the company's inventory and cost records for the most recently completed year revealed the following information: Units Materials


Conversion Work in process. Jan. 1 (80% complete with respect to conversion costs) 100,000 $100,000 $157,500 Units started into production 500,000 Costs added during the year: Materials $650,000 Conversion $997,500 Units completed during the year 450,000

The company uses the weighted-average cost method in its process costing system. The ending inventory is 50% complete with respect to conversion costs. Required: i. Compute the equivalent units of production and the cost per equivalent units for materials and for conversion costs. ii. Determine the cost transferred to finished goods. iii. Determine the amount of cost that should be assigned to the ending work in process inventory. 4. Question : (TCO F) Weisinger Corporation has provided the following data for the month of January: Inventories Beginning


Ending Raw materials $28,000 $29,000 Work In process $16,000 $14,000 Finished goods $42,000 $54,000 Additional Information Raw material purchases $56,000 Direct labor costs $87,000 Manufacturing overhead cost incurred $51,000 Indirect materials included in manufacturing overhead costs incurred $3,000 Manufacturing overhead cost applied to work in process $55,000

Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold in good form. ===========================================

ACCT 505 Week 2 Quiz Set 2 FOR MORE CLASSES VISIT www.acct505outlet.com


Essay 4 Multiple Choice 6 Question 1. Question : (TCO B) Assume there is no beginning work in process inventory and the ending work in process inventory is 100% complete with respect to materials costs. The number of equivalent units with respect to materials costs under the weighted average method is Student Answer: completed.

the same as the number of units

less than the number of units put into production. the same as the number of units put into production. less than the number of units completed.

Question 2. Question : (TCO B) For which situation(s) below would an organization be more likely to use a job-order costing system of accumulating product costs rather than a process costing system? Student Answer: ore into steel bars

A steel factory that processes iron

A computer consulting firm A factory that processes sugar and other ingredients into candy All of the above


Question 3. Question : (TCO B) Luft Company uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below. Units Percent Complete With Respect to Conversion Beginning work in process inventory 11,000 90% Started in production during June 58,000 Ending work in process inventory 17,000 10% According to the company’s records, the conversion cost in beginning work in process inventory was $79,893 at the beginning of June. Additional conversion costs of $343,830 were incurred in the department during the month. What was the cost per equivalent unit for conversion costs for the month? (Round to three decimal places.) Student Answer:

$7.891

$8.070 $5.928 $4.584

Question 4. Question : (TCO B) In a job-order costing system, the use of direct materials that have been previously purchased is recorded as a debit to Student Answer:

raw materials.

finished goods. work in process.


manufacturing overhead.

Question 5. Question : (TCO B) During October, Crusan Corporation incurred $62,000 of direct labor costs and $4,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a Student Answer: $66,000.

debit to work in process of

credit to work in process of $66,000. credit to work in process of $62,000. debit to work in process of $62,000.

Question 6. Question : (TCO B) During February, Degan Inc. transferred $60,000 from work in process to finished goods and recorded a cost of goods sold of $65,000. The journal entries to record these transactions would include a Student Answer:

debit to finished goods of $65,000.

credit to cost of goods sold of $65,000. credit to work in process of $60,000. credit to finished goods of $60,000.

* Times are displayed in (GMT-07:00) Mountain Time (US & Canada) Grading Summary


These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the ―Details‖ section below. Date Taken: 5/15/2016 Time Spent: 1 h , 27 min , 22 secs Points Received: 71 / 90 (78.9%) Grade Details – All Questions Page: 1 2 Question 1. Question : (TCO B) Some companies use process costing and some use job-order costing. Which method a company uses depends on its industry. Several companies in different industries are listed below. 5. Frozen cranberry juice processor ii. Custom boat builder iii. Concrete block manufacturer iv. Winery that produces a number of specialty wines v. Aluminum refiner that makes aluminum ingots from bauxite ore vi. External auditing firm For each company, indicate whether the company is most likely to use job-order costing or process costing. Question 2. Question : (TCO B) Job 728 was recently completed. The following data have been recorded on its job cost sheet. Direct materials $89,925 Direct labor hours 1,220 labor hours Direct labor wage rate $15 per labor hour Machine hours 1,550 machine hours Number of units completed 4,500 units The company applies manufacturing overhead on the basis of machine hours. The predetermined overhead rate is $18 per machine hour.


Compute the unit product cost that would appear on the job cost sheet for this job.

Question 3. Question : (TCO B) Harmon Company uses the weighted average method in its process costing system. The Curing Department of Harmon Company reported the following information for the month of November. Units Percent complete with respect to materials Percentage complete with respect to conversion Work in process, November 1 10,000 100% 80% Units started 28,000 Completed and transferred out 30,000 Work in process, November 30 8,000 100% 30%

Costs for November Materials Conversion Work in process, November 1 $34,500 $48,600 Added during the month $146,000 $194,400 All materials are added at the beginning of the process. Required: Compute the following items using the weighted average method. 5. The equivalent units of production for materials ii. The cost per equivalent unit for conversion iii. The total cost assigned to units transferred out of the curing department during November iv. The cost assigned to work in process inventory as of November 30

Question 4. Question : (TCO A) Hunsicker Corporation has provided the following data for the month of January.


Inventories Beginning Ending Raw materials $30,000 $33,000 Work in process $20,000 $18,000 Finished goods $52,000 $50,000

Additional Information Raw material purchases $63,000 Direct labor costs $92,000 Manufacturing overhead cost incurred $75,000 Indirect materials included in manufacturing overhead costs incurred $6,000 Manufacturing overhead cost applied to work in process $72,000 Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold in good form. ==========================================

ACCT 505 Week 3 Case Study 4–20 Ethics and the Manager FOR MORE CLASSES VISIT www.acct505outlet.com

CASE 4–20 Ethics and the Manager, Understanding the Impact of Percentage Completion on Profit—Weighted-Average Method [Course Objective B] Gary Stevens and Mary James are production managers in the Consumer Electronics Division of General Electronics Company, which has several dozen plants scattered in locations throughout the


world. Mary manages the plant located in Des Moines, Iowa, while Gary manages the plant in El Segundo, California. Production managers are paid a salary and get an additional bonus equal to 5% of their base salary if the entire division meets or exceeds its target profits for the year. The bonus is determined in March after the company’s annual report has been prepared and issued to stockholders. Shortly after the beginning of the New Year, Mary received a phone call from Gary that went like this: Gary: How’s it going, Mary? Mary: Fine, Gary. How’s it going with you? Gary: Great! I just got the preliminary profit figures for the division for last year and we are within $200,000 of making the year’s target profits. All we have to do is pull a few strings, and we’ll be over the top! Mary: What do you mean? Gary: Well, one thing that would be easy to change is your estimate of the percentage completion of your ending work in process inventories. Mary: I don’t know if I can do that, Gary. Those percentage completion figures are supplied by Tom Winthrop, my lead supervisor, who I have always trusted to provide us with good estimates. Besides, I have already sent the percentage completion figures to corporate headquarters. Gary: You can always tell them there was a mistake. Think about it, Mary. All of us managers are doing as much as we can to pull this bonus out of the hat. You may not want the bonus check, but the rest of us sure could use it. The final processing department in Mary’s production facility began the year with no work in process inventories. During the year, 210,000 units


were transferred in from the prior processing department and 200,000 units were completed and sold. Costs transferred in from the prior department totaled $39,375,000. No materials are added in the final processing department. A total of $20,807,500 of conversion cost was incurred in the final processing department during the year. Required: 1. Tom Winthrop estimated that the units in ending inventory in the final processing department were 30% complete with respect to the conversion costs of the final processing department. If this estimate of the percentage completion is used, what would be the Cost of Goods Sold for the year? (Note: Since all units completed were sold, the cost of goods transferred out = Cost of Goods Sold.) 2. Gary is recommending that the completion percentage by adjusted by 10 percentage points in order to assist the team in making their bonus. a. Calculate the cost of goods sold if the ending inventory is 20% complete in regard to conversion costs. Would net income increase or decrease if this option was chosen over the 30% completion percentage? How much is the increase? b. Calculate the cost of goods sold if the ending inventory is 40% complete in regard to conversion costs. Would net income increase or decrease if this option was chosen over the 30% completion percentage? How much is the increase? c. Based on your calculations, which percentage is Gary suggesting that Mary use for her ending inventory calculations. 3. Do you think Mary James should go along with the request to alter estimates of the percentage completion? Why or why not?


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ACCT 505 Week 3 Case Study II (Devry) FOR MORE CLASSES VISIT www.acct505outlet.com

Springfield Express is a luxury passenger carrier in Texas. All seats are first class, and the following data are available: Number of seats per passenger train car 90 Average load factor (percentage of seats filled) 70% Average full passenger fare $160 Average variable cost per passenger $70 Fixed operating cost per month $3,150,000 What is the break-even point in passengers and revenues per month? What is the break-even point in number of passenger train cars per month? If Springfield Express raises its average passenger fare to $ 190, it is estimated that the average load factor will decrease to 60 percent. What will be the monthly break-even point in number of passenger cars? (Refer to original data.) Fuel cost is a significant variable cost to any railway. If crude oil increases by $ 20 per barrel, it is estimated that variable cost per passenger will rise to $ 90. What will be the new breakeven point in passengers and in number of passenger train cars? Springfield Express has experienced an increase in variable cost per passenger to $ 85 and an increase in total fixed cost to $ 3,600,000. The company has decided to raise the average fare to $ 205. If the tax rate is


30 percent, how many passengers per month are needed to generate an after-tax profit of $ 750,000? (Use original data). Springfield Express is considering offering a discounted fare of $ 120, which the company believes would increase the load factor to 80 percent. Only the additional seats would be sold at the discounted fare. Additional monthly advertising cost would be $ 180,000. How much pre-tax income would the discounted fare provide Springfield Express if the company has 50 passenger train cars per day, 30 days per month? Springfield Express has an opportunity to obtain a new route that would be traveled 20 times per month. The company believes it can sell seats at $ 175 on the route, but the load factor would be only 60 percent. Fixed cost would increase by $ 250,000 per month for additional personnel, additional passenger train cars, maintenance, and so on. Variable cost per passenger would remain at $ 70. Should the company obtain the route? How many passenger train cars must Springfield Express operate to earn pre-tax income of $ 120,000 per month on this route? If the load factor could be increased to 75 percent, how many passenger train cars must be operated to earn pretax income of $ 120,000 per month on this route? What qualitative factors should be considered by Springfield Express in making its decision about acquiring this route? Grading Rubric for Case Study II: Category Points % Description Documentation & Formatting 5 11% Case Study will be completed in Word or Excel and contain necessary formulas to receive maximum credit Organization & Cohesiveness 5 11%


Calculations for all parts should be organized and correctly labeled. In a quality case study, all questions should be addressed in a clear, concise manner. Editing 5 11% Quality work will be free of any spelling, punctuation or grammatical errors. Sentences and paragraphs ( where appropriate) will be clear, concise and factually correct Content 30 67% A quality project will have all of the required work completed and will be correct. Total 45 100% A quality project will meet or exceed all of the above requirements.

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ACCT 505 Week 4 Midterm Exam (Devry) FOR MORE CLASSES VISIT www.acct505outlet.com

1. Question : (TCO A) Wages paid to an assembly line worker in a factory are a 2. Question :


(TCO A) A cost incurred in the past that is not relevant to any current decision is classified as a(n) 3. Question : (TCO A) Depreciation of office buildings and office equipment is also known as 4. Question : (TCO A) When the activity level is expected to increase within the relevant range, what effects would be anticipated with respect to each of the following? 5. Question : (TCO F) Which of the following statements is true? I. Overhead application may be made slowly as a job is worked on. II. Overhead application may be made in a single application at the time of completion of the job. III. Overhead application should be made to any job not completed at year end in order to properly value the work in process inventory. 6. Question : (TCO F) A job-order cost system is employed in those situations where 7. Question : (TCO F) The FIFO method only provides a major advantage over the weighted-average method in that 8. Question : (TCO B) The contribution margin ratio always decreases when the 9. Question : (TCO B) Which of the following would not affect the break-even point? 10. Question :


(TCO E) In an income statement prepared using the variable costing method, variable selling and administrative expenses would 1. Question : (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larop Corporation for the just-completed year: Sales................................................................................. $910 Purchases of raw materials................................................ $225 Direct labor....................................................................... $245 Manufacturing overhead.................................................... $265 Administrative expenses.................................................... $150 Selling expenses................................................................ $140 Raw materials inventory, beginning..................................... $15 Raw materials inventory, ending......................................... $45 Work-in-process inventory, beginning................................. $20 Work-in-process inventory, ending..................................... $55 Finished goods inventory, beginning................................... $100 Finished goods inventory, ending....................................... $135 Required: Prepare a Schedule of Cost of Goods Manufactured in the text box below. 2. Question :


(TCO F) The Illinois Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below. Percentage Completed Units Materials Conversion Work in process, June 1 150,000 75% 55% Work in process, Jun 30 145,000 85% 75% The department started 475,000 units into production during the month and transferred 480,000 completed units to the next department. Required: Compute the equivalent units of production for the first department for June, assuming that the company uses the weightedaverage method of accounting for units and costs. 3. Question : (TCO B) A tile manufacturer has supplied the following data: Boxes of tile produced and sold 625,000 Sales revenue $2,975,000 Variable manufacturing expense $1,720,000 Fixed manufacturing expense $790,000 Variable selling and admin expense $152,000 Fixed selling and admin expense $133,000 Net operating income $180,000 Required: a. Calculate the company's unit contribution margin. b. Calculate the company's unit contribution ratio. c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be? 4. Question : (TCO E) Lehne Company, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 125 Units in beginning inventory


600 Units oroduced 3000 Units sold 3500 Units in ending inventory 100 Variable costs per unit: Direct materials $ 15 Direct labor $ 50 Variable manufacturing overhead $8 Variable selling and admin $ 12 Fixed costs: Fixed manufacturing overhead $ 75,000 Fixed selling and admin $ 20,000 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. Required: a. What is the unit product cost for the month under variable costing? b. What is the unit product cost for the month under absorption costing? c. Prepare an income statement for the month using the variable costing method. d. Prepare an income statement for the month using the absorption costing method. ===========================================


ACCT 505 Week 5 Course Project 1 LBJ Company (New) FOR MORE CLASSES VISIT www.acct505outlet.com

COURSE PROJECT 1 INSTRUCTIONS You have just been contracted as a budget consultant by LBJ Company, a distributor of bracelets to various retail outlets across the country. The company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. You have decided to prepare a cash budget for the upcoming fourth quarter in order to show management the benefits that can be gained from proper cash planning. You have worked with accounting and other areas to gather the information assembled below. The company sells many styles of bracelets, but all are sold for the same $10 price. Actual sales of bracelets for the last three months and budgeted sales for the next six months follow: The concentration of sales in the fourth quarter is due to the Christmas holiday. Sufficient inventory should be on hand at the end of each month to supply 40% of the bracelets sold in the following month.

Suppliers are paid $4 for each bracelet. Fifty-percent of a month's purchases is paid for in the month of purchase; the other 50% is paid for in the following month. All sales are on credit with no discounts. The company has found, however, that only 20% of a month's sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. Monthly operating expenses for the company are given below: Variable expenses:


Sales commissions 4% of sales Fixed expenses: Advertising $220,000 Rent $20,000 Salaries $110,000 Utilities $10,000 Insurance $5,000 Depreciation $18,000 Insurance is paid on an annual basis, in January of each year. The company plans to purchase $22,000 in new equipment during October and $50,000 in new equipment during November; both purchases will be for cash. The company declares dividends of $20,000 each quarter, payable in the first month of the following quarter.

Other relevant data is given below: Cash balance as of September 30 Inventory balance as of September 30 Merchandise purchases for September

$74,000 $112,000 $200,000

The company maintains a minimum cash balance of at least $50,000 at the end of each month. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. The company has an agreement with a bank that allows the company to borrow the exact amount needed at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $50,000 in cash. Required: Prepare a cash budget for the three-month period ending December 31. Include the following detailed budgets: 1. a. A sales budget, by month and in total.


b. A schedule of expected cash collections from sales, by month and in total. c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. 2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000. ===========================================

ACCT 505 Week 6 Case Study Balanced Scorecard Case (700 words Paper) FOR MORE CLASSES VISIT www.acct505outlet.com

ACCT505 – Managerial Accounting Team Case Study 3 – Week 6 Balanced Scorecard Case (Course Objective G) Many companies are using the Balanced Scorecard System to assist in their performance management. According to Garrison, Noreen, and Brewer (2015) a balanced scorecard ―consists of integrated set of performance measures that are derived from and support a company’s strategy‖ (p. 490). In a Balanced Scorecard System the company’s


strategy is translated into a system of performance measures that are used to monitor the company’s performance in meeting its strategic objectives. As part of a two-member team, your task is to identify and discuss the key performance measures of a balanced scorecard. Then, find three companies that are currently using a Balanced Scorecard System by doing an internet and library database search. Internet searches as well searches of financial databases, such as Yahoo Finance, should help you in your efforts. Then discuss in as much detail as possible the specifics of the balanced scorecard that is being used by these companies. Deliverable Your team should prepare a 700 words Paper, explaining the specifics of the balanced scorecard system of the three companies you selected in your research. This presentation should include your analysis of the advantages and disadvantages of each company’s Balanced Scorecard System. Be sure to clearly document the performance measures being used by each of the three companies. Your PowerPoint presentation should be narrated using Voice Thread or similar technology. All team members must participate in the narration of the PowerPoint presentation. APA standards are required to be followed for this presentation.

Reference Garrison, R.H., Noreen, E.C, & Brewer, Brewer, P.C. (2015). Managerial Accounting (15th ed.). New York, NY: McGraw-Hill. ==============================================


ACCT 505 Week 6 Quiz Segment Reporting and Relevant Costs for Decisions (Devry) FOR MORE CLASSES VISIT www.acct505outlet.com

Question :

(TCO D) Return on investment (ROI) is equal to the margin multiplied by

2.

Question :

(TCO D) For which of the following decisions are opportunity costs relevant?

The decision to make or buy a needed part

The desision to keep or drop a product line


(A)

Yes

Yes

(B)

Yes

No

(C)

No

Yes

(D)


No

No

3.

Question :

(TCO D) Last year, the House of Orange had sales of $826,650, net operating income of $81,000, and operating assets of $84,000 at the beginning of the year and $90,000 at the end of the year. What was the company's turnover, rounded to the nearest tenth?

1.

Question :

(TCO D) Data for December concerning Dinnocenzo Corporation's two major business segments-Fibers and Feedstocks-appear below:

Sales revenues, Fibers


$870,000

Sales revenues, Feedstocks

$820,000

Variable expenses, Fibers

$426,000

Variable expenses, Feedstocks

$344,000

Traceable fixed expenses, Fibers

$148,000

Traceable fixed expenses, Feedstocks


S156,000

Common fixed expenses totaled $314,000 and were allocated as follows: $129,000 to the Fibers business segment and $185,000 to the Feedstocks business segment.

Required:

Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.

2.

Question :

(TCO D) Wryski Corporation had net operating income of $150,000 and average operating assets of $500,000. The company requires a return on investment of 19%.

Required:

i. Calculate the company's current return on investment and residual income.


ii. The company is investigating an investment of $400,000 in a project that will generate annual net operating income of $78,000. What is the ROI of the project? What is the residual income of the project? Should the company invest in this project?

3.

Question :

(TCO D) Tjelmeland Corporation is considering dropping product S85U. Data from the company's accounting system appear below.

Sales

$360,000

Variable Expenses

$158,000

Fixed Manufacturing Expenses


$119,000

Fixed Selling and Administrative Expenses

$94,000

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $55,000 of the fixed manufacturing expenses and $71,000 of the fixed selling and administrative expenses are avoidable if product S85U is discontinued.

Required:

i. According to the company's accounting system, what is the net operating income earned by product S85U? Show your work!

ii. What would be the effect on the company's overall net operating income of dropping product S85U? Should the product be dropped? Show your work!


4.

Question :

(TCO D) Fouch Company makes 30,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows.

Direct Materials

$15.70

Direct Labor

$17.50

Variable Manufacturing Overhead

$4.50

Fixed Manufacturing Overhead


$14.60

Unit Product Cost

$52.30

An outside supplier has offered to sell the company all of these parts it needs for $51.90 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $219,000 per year.

If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $6.20 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.

Required:


i. How much of the unit product cost of $52.30 is relevant in the decision of whether to make or buy the part?

ii. What is the net total dollar advantage (disadvantage) of purchasing the part rather than making it?

iii. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 30,000 units required each year?

5.

Question :

(TCO D) Biello Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 15,000 medals each month; current monthly production is 14,250 medals. The company normally charges $115 per medal. Cost data for the current level of production are shown below.

Variable Costs

Direct Materials


$969,000

Direct Labor

$270,750

Selling and Administrative

$270,075

Fixed Costs

Manufacturing

$370,550

Selling and Administrative

$89,775


The company has just received a special one-time order for 600 medals at $102 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.

Required:

Should the company accept this special order? Why? ==============================================

ACCT 505 Week 6 Quiz Set 2 FOR MORE CLASSES VISIT www.acct505outlet.com

Multiple Choice Short 5

3

Question 1. Question : (TCO D) Return on investment (ROI) is equal to the margin multiplied by


Question 2. Question : (TCO D) For which of the following decisions are opportunity costs relevant? The decision to make or buy a needed part The decision to keep or drop a product line Question 3. Question : (TCO D) Last year, the House of Orange had sales of $826,650, net operating income of $81,000, and operating assets of $84,000 at the beginning of the year and $90,000 at the end of the year. What was the company's turnover, rounded to the nearest tenth?

Question 1. Question : (TCO D) Data for December concerning Dinnocenzo Corporation's two major business segments-Fibers and Feedstocks-appear below. Sales revenues, Fibers $870,000 Sales revenues, Feedstocks $820,000 Variable expenses, Fibers $426,000 Variable expenses, Feedstocks $344,000 Traceable fixed expenses, Fibers $148,000 Traceable fixed expenses, Feedstocks $156,000 Common fixed expenses totaled $314,000 and were allocated as follows: $129,000 to the Fibers business segment and $185,000 to the Feedstocks business segment. Required: Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.


Question 2. Question : (TCO D) Wryski Corporation had net operating income of $150,000 and average operating assets of $500,000. The company requires a return on investment of 19%. Required: i. Calculate the company's current return on investment and residual income. ii. The company is investigating an investment of $400,000 in a project that will generate annual net operating income of $78,000. What is the ROI of the project? What is the residual income of the project? Should the company invest in this project?

ii. Return on investment = Net operating income / Average operating assets = $78,000 / $400,000 = 19.5%

Question 3. Question : (TCO D) Tjelmeland Corporation is considering dropping product S85U. Data from the company's accounting system appear below.

Sales $360,000 Variable Expenses $158,000 Fixed Manufacturing Expenses $119,000 Fixed Selling and Administrative Expenses $94,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $55,000 of the fixed manufacturing expenses and $71,000 of the fixed


selling and administrative expenses are avoidable if product S85U is discontinued. Required: i. According to the company's accounting system, what is the net operating income earned by product S85U? Show your work! ii. What would be the effect on the company's overall net operating income of dropping product S85U? Should the product be dropped? Show your work! Question 4. Question : (TCO D) Rosiek Corporation uses part A55 in one of its products. The company's accounting department reports the following costs of producing the 4,000 units of the part that are needed every year. Per Unit Direct Materials $2.80 Direct Labor $6.30 Variable Overhead $8.50 Supervisor's Salary $2.60 Depreciation of Special Equipment $6.80 Allocated General Overhead $6.10 An outside supplier has offered to make the part and sell it to the company for $32.30 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $4,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part A55 could be used to make more of one of the company's other products,


generating an additional segment margin of $26,000 per year for that product. Required: i. Prepare a report that shows the effect on the company's total net operating income of buying part A55 from the supplier rather than continuing to make it inside the company. ii. Which alternative should the company choose?

Question 5. Question : (TCO D) A customer has asked Clougherty Corporation to supply 4,000 units of product M97, with some modifications, for $40.10 each. The normal selling price of this product is $48.00 each. The normal unit product cost of product M97 is computed as follows. Direct Materials $18.50 Direct Labor $1.20 Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $32.00

$8.40 $3.90

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product M97 that would increase the variable costs by $5.70 per unit and that would require a one-time investment of $31,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. Required:


Determine the effect on the company's total net operating income of accepting the special order. Show your work! ===========================================

ACCT 505 Week 7 Course Project 2 Capital Budgeting Decision (New) FOR MORE CLASSES VISIT www.acct505outlet.com

ACCT 505 Course Project 2 Hampton Company

Capital Budgeting Decision Hampton Company: The production department has been investigating possible ways to trim total production costs. One possibility currently being examined is to make the cans instead of purchasing them. The equipment needed would cost $1,000,000, with a disposal value of $200,000, and would be able to produce 27,500,000 cans over the life of the machinery. The production department estimates that approximately 5,500,000 cans would be needed for each of the next 5 years.

The company would hire six new employees. These six individuals would be full-time employees working 2,000 hours per year and earning $15.00 per hour. They would also receive the same benefits as other production employees, 15% of wages in addition to $2,000 of health benefits.


It is estimated that the raw materials will cost 30¢ per can and that other variable costs would be 10¢ per can. Because there is currently unused space in the factory, no additional fixed costs would be incurred if this proposal is accepted.

It is expected that cans would cost 50¢ each if purchased from the current supplier. The company’s minimum rate of return (hurdle rate) has been determined to be 11% for all new projects, and the current tax rate of 35% is anticipated to remain unchanged. The pricing for the company’s products as well as number of units sold will not be affected by this decision. The unit-of-production depreciation method would be used if the new equipment is purchased.

Required:

1. Based on the above information and using Excel, calculate the following items for this proposed equipment purchase.

o Annual cash flows over the expected life of the equipment

o Payback period

o Simple rate of return


o Net present value

o Internal rate of return

The check figure for the total annual after-tax cash flows is $271,150.

2. Would you recommend the acceptance of this proposal? Why or why not? Prepare a short, double-spaced paper in MS Word elaborating on and supporting your answers. ==============================================

ACCT 505 OUTLET Education Your Life--acct505outlet.com  

FOR MORE CLASSES VISIT www.acct505outlet.com ACCT 505 Week 1-7 All Discussion Questions ACCT 505 Week 1 Case Study ACCT 505 Week 2 Quiz Job...

ACCT 505 OUTLET Education Your Life--acct505outlet.com  

FOR MORE CLASSES VISIT www.acct505outlet.com ACCT 505 Week 1-7 All Discussion Questions ACCT 505 Week 1 Case Study ACCT 505 Week 2 Quiz Job...

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