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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
Set 2
Required: Calculate the equivalent units for conversion for the month
in the first processing department. (Points : 25)
Additional Information:
Cost Total Cost Number of Units Unit Cost
Manufacturing costs:
Variable $442,000 17,000 $26
Fixed 170,000 17,000 10
Total $612,000 $36
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)
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)
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)
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
The actual machine hours for the year turned out to be 35,000.
Set 3
(TCO E) Preparing purchase orders is a(n) (Points : 5)
batch-level activity.
product-level activity.
unit-level activity.
organization sustaining activity.
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
just-completed year.
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.
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
Required: Calculate the equivalent units for conversion for the month
in the first processing department. (Points : 25)
Additional Information:
Cost Total Cost Number of Units Unit Cost
Manufacturing costs:
Variable $442,000 17,000 $26
Fixed 170,000 17,000 10
Total $612,000 $36
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)
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)
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)
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
The actual machine hours for the year turned out to be 35,000.
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
just-completed year.
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.
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
Fixed costs:
Fixed manufacturing overhead $275,000
Fixed selling and admin $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)
Fixed costs:
Fixed manufacturing overhead $275,000
Fixed selling and admin $200,000
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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
Fixed costs:
Fixed manufacturing overhead $275,000
Fixed selling and admin $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
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ACCT 505 Midterm Exam (New) Set 2
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Multiple Choice 10 9
Essay 4
incremental cost.
opportunity cost.
opportunity cost.
period cost.
product cost.
Fixed costs:
Fixed manufacturing overhead $275,000
Fixed selling and admin $200,000
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ACCT 505 Week 1 Case Study (Devry)
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Top Switch Inc. designs and manufactures switches used in
telecommunications. Serious flooding throughout the state of
Tennessee affected Top Switchs facilities. Inventory was completely
ruined, and the companys computer system, including all accounting
records, was destroyed.
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.
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 managers 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)
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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
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
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
Required:
What was the cost per equivalent unit for conversion costs for the
month? (Round to three decimal places.)
$8.070
$5.928
$4.584
finished goods.
work in process.
manufacturing overhead.
For each company, indicate whether the company is most likely to use
job-order costing or process costing.
Compute the unit product cost that would appear on the job cost sheet
for this job.
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
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.
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ACCT 505 Week 5 Course Project 1 LBJ Company (New)
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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:
Reference
Garrison, R.H., Noreen, E.C, & Brewer, Brewer, P.C. (2015).
Managerial Accounting (15th ed.). New York, NY: McGraw-Hill.
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ACCT 505 Week 6 Quiz Segment Reporting and Relevant
Costs for Decisions (Devry)
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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:
Required:
Required:
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:
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:
Required:
Required:
Sales $360,000
Variable Expenses $158,000
Fixed Manufacturing Expenses $119,000
Fixed Selling and Administrative Expenses $94,000
Required:
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!
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.
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: