Acct 505 Final Exam

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This pack of ACCT 505 Final Exam consists of: 1. Nelson Company's activity for the first six months of 2004 is as follows: 2. In the decision to replace an old machine with a new machine, which of the following would be considered a relevant cost? 3. Clarkson Industries produces an electronic calculator that sells for $75 per unit. Variable costs are $45 per unit and fixed costs are $150,000 annually. The company has been averaging an annual income of $100,000 over the past five years. The break-even point for Clarkson Industries would be: 4. Contribution margin is the amount remaining after 5. The Pohl Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of machine hours. For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine hours: 6. Newmax Co. is a manufacturing business. When it pays the workers who assemble its products, the cash account should be decreased and what account should be increased? 7. The Talbot Company produces wheels that are used in the production of bicycles. Talbot's costs to produce 100,000 wheels annually are: 8. The cost of goods sold in a merchandising firm typically would be classified as a 9. Questions 9 and 10 refer to the following: 10. Ignoring income taxes, what is the net present value of this project? 11. The individual generally responsible for explaining the direct-labor efficiency variance is the: 12. Allen Company collects 25% of a month's sales in the month of sale, 70% in the month following sale, and 4% in the second month following sale. The remainder is uncollectible. Budgeted sales for the next three months are 13. Young Enterprises has budgeted sales in units for the next four months as follows 14. The Collins Company applies overhead to production orders on the basis of machine hours. At the beginning of 2002, the company made the following estimates 15. The purpose of a flexible budget is to: 16. Following is information relating to Kew Co.'s Vale Division for 2001: 17. The labor time required to assemble a product is an example of a 18. Anola Company has two products: A and B. The company uses activity- based costing to determine product costs. The estimated overhead costs and expected activity for each of the company's three overhead activity centers are as follows: 19. A standard is 20. Which of the following would be most appropriate for evaluating a cost center?

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General Questions - General General Questions 1. (TCO C) Silver City, Inc., has collected the following operating information below for its current month's activity. Using this information, prepare a flexible budget analysis to determine how well Silver City 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 2. (TCO D) Globe Co. manufactures automatic door openers. The company uses 15,000 electronic hinges per year as a component in the assembly of the openers. You have been engaged by Globe to assist with an evaluation of whether the company should continue producing the hinges or purchase them from an outside vendor. The Accounting Department provided the following detail regarding the annual cost to produce electronic hinges: Direct materials $54,000 Direct labor 60,000 Variable manufacturing overhead 36,000 Fixed manufacturing overhead 90,000 Total costs $240,000 The Procurement Department provided the following supplier pricing: Supplier A price per hinge $11.00 Supplier B price per hinge $10.75 Supplier C price per hinge $10.50 The supplier pricing was obtained in response to a formal request for proposal (RFP). Procurement has determined these suppliers meet Globe's technical specifications and quality requirements. If Globe stops producing the part internally, 10% of the fixed manufacturing overhead would be eliminated. Required: Prepare a make-or-buy analysis showing the annual advantage or disadvantage (in dollars) of accepting an outside supplier's offer. Should the company buy the parts? If so, from which supplier? 3. (TCO E) Mesa 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 Variable manufacturing costs are $4 per unit. Fixed factory overhead totals $18,000 for the year. This 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. 4. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of the White Sands Corporation for the just-completed year. Sales 1,150 Raw materials inventory, beginning 15 Raw materials inventory, ending 40 Purchases of raw materials 150 Direct labor 250 Manufacturing overhead 300 Administrative expenses 500 Selling expenses 300 Work in process inventory, beginning 100 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? 1. (TCO F) Farmington Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below. Work in process, beginning: Units in beginning work-in-process inventory 400 Materials costs $6,900 Conversion costs $2,500 Percentage complete for materials 80% Percentage complete for conversion 15% Units started into production during the month 6,000 Units transferred to the next department during the month 5,000 Materials costs added during the month $112,500 Conversion costs added during the month $210,300 Ending work in process: Units in ending work-in-process inventory 1,200 Percentage complete for materials 60% Percentage complete for conversion 30% Required: Calculate the equivalent units for materials (using the weighted-average method) for the month in the first processing department. 2. (TCO G) - (Ignore income taxes in this problem.) Tennessee Co. is considering the production of an exterior paint that will require the purchase of new mixing machinery. The machinery will cost $700,000, is expected to have a useful life of 12 years, and is expected to have a salvage value of $100,000 at the end of 12 years. The machinery will also need a $40,000 overhaul at the end of Year 7. A $50,000 increase in working capital will be needed for this investment project. The working capital will be released at the end of the 12 years. The new paint is expected to generate net cash inflows of $120,000 per year for each of the 12 years. Tennessee’s discount rate is 14%. Required: a. What is the net present value of this investment opportunity? b. Based on your answer to (a) above, should Tennessee go ahead with the new paint? 3. (TCO B) Winslow Corporation produces and sells a single product. Data concerning that product appear below. Selling price per unit $130.00 Variable expense per unit $27.30 Fixed expense per month $165,3 Required: a) Determine the monthly break-even in unit sales. Show your work! b) Determine the monthly break-even in dollar sales. Show your work! 1. (TCO F) Manchester, Inc. bases its predetermined overhead rate on the estimated machine hours for the upcoming year. Data for the upcoming year appear below. Estimated machine hours 85,000 Estimated variable manufacturing overhead $5.55 per machine hour Estimated total fixed manufacturing overhead $951,888 Required: Compute the company's predetermined overhead rate. 2. (TCO F) Memphis Corporation is preparing its cash budget for February. The budgeted beginning cash balance is $27,000. Budgeted cash receipts total $136,000 and budgeted cash disbursements total $128,000. The desired ending cash balance is $50,000. The company can borrow up to $110,000 at any time from a local bank, with interest not due until the following month. Required: Prepare the company's cash budget for February in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance.

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