ACCT434 Final Exam

BUY ACCT434 Final Exam

1. (TCO 1) A significant limitation of activity-based costing is the (Points : 5)

2. (TCO 1) Ireland Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $180,000. The budgeted number of nozzles to be inserted is 80,000. What is the budgeted indirect cost allocation rate for this activity? (Points : 5)

3. (TCO 2)Fixed overhead costs include (Points : 5)

4. (TCO 2) Information pertaining to Brenton Corporation's sales revenue ispresented in the following table:

February March April

Cash Sales $160,000 $150,000 $120,000
Credit Sales 300,000 400,000 280,000
Total Sales $460,000 $550,000 $400,000

Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 75% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month are 80% of the next month's projected total sales.All purchases of inventory are on account; 50% are paid in the month of purchase, and the remainder is paid in the month following the purchase.

Brenton's budgeted total cash receipts in April are

(Points : 5)

5. (TCO 2)Budgeting provides all of the following except (Points : 5)

6. (TCO 3) The cost function y = 1,000 + 5X (Points : 5)

7. (TCO 3) Which cost estimation method uses a formal mathematical method to develop cost functions based on past data? (Points : 5)

8. (TCO 4)Sunk costs (Points : 5)

9. (TCO 5) Through put contribution equals revenues minus (Points : 5)

10. (TCO 5) Producing more nonbottleneck output (Points : 5)

11. (TCO 6) What type of cost is the result of an event that results in more than one product or service simultaneously? (Points : 5)

12. (TCO 6) Which of the following is a disadvantage of the physical-measuremethod of allocating joint costs? (Points : 5)

13. (TCO 7) Life-cyclecosting is the name given to (Points : 5)

14. (TCO 7) Each month, Haddon Company has $300,000 total manufacturingcosts (20% fixed) and $125,000 distribution and marketing costs (75% fixed). Haddon's monthly sales are $500,000.

The markup percentage on variable costs to arrive at the existing (target) selling price is

(Points : 5)

15. (TCO 8) The costs used in cost-based transfer prices (Points : 5)

16. (TCO 8) Division A sells soybean paste internally to Division B, which in turn, produces soybean burgers that sell for $5 per pound. Division A incurs costs of $0.80 per pound while Division B incurs additional costs of $3 per pound.

What is Division A's operating income per pound, assuming the transfer price of the soybean paste is set at $1.25 per pound?

1.25-0.80 = 0.45

(Points : 5)

17. (TCO 8) When companies do not want to use market prices or find it too costly, they typically use ________ prices, even though suboptimal decisions may occur. (Points : 5)

18. (TCO 9) To guide cost allocation decisions, the benefits-received criterion (Points : 5)

19. (TCO 9) The Hassan Corporation has an electric mixer division and an electric lamp division. Of a $50,000,000 bond issuance, the electric mixer division used $24,000,000 and the electric lamp division used $26,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year. What amount of interest costs should be allocated to the electric lamp division? (Points : 5)

20. (TCO 10) The net present value method focuses on (Points : 5)

21. (TCO 10) The Zeron Corporation wants to purchase a new machine for its factory operations at a cost of $950,000. The investment is expected to generate $400,000 in annual cash flows for a period of four years. The required rate of return is 12%. The old machine can be sold for $50,000.The machine is expected to have zero value at the end of the four-year period.
What is the net present value of the investment? Would the company want to purchase the new machine? Income taxes are not considered. (Points : 5)

22. (TCO 11) The four cost categories in a cost of quality program are (Points : 5)

23. (TCO 11) Regal Products has a budget of $900,000 in 20X6 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $60,000 in variable costs. The new method will require $20,000 in training costs and $150,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 150,000 units. Appraisal costs for the year are budgeted at $600,000.The new prevention procedures will save appraisal costs of $30,000. Internal failure costs average $15 per failed unit of finished goods. The internal failure rate is expected to be 3% of all completed items. The proposed changes will cut the internal failure rate by one-third. Internal failure units are destroyed. External failure costs average $54 per failed unit. The company's average external failures average 3% of units sold. The new proposal will reduce this rate by 50%. Assume all units produced are sold and there are no ending inventories. What is the net change in the budget of prevention costs if the procedures are automated in 20X6? Will management agree with the changes? (Points : 5)

24. (TCO 12)Obsolescence is an example of which cost category? (Points : 5)

25. (TCO 12) Liberty Celebrations, Inc., manufactures a line of flags. The annual demand for its flag display is estimated to be 100,000 units. The annual cost of carrying one unit in inventory is $1.60, and the cost to initiate a production run is $100. There are no flag displays on hand but Liberty had scheduled 70 equal production runs of the display sets for the coming year, the first of which is to be run immediately. Liberty Celebrations has 250 business days per year.Assume that sales occur uniformly throughout the year and that production is instantaneous.

The estimated total setup cost for the flag displays for the coming year is

(Points : 5)

Page 2

Question 1.1. (TCO 2) Rossi Company has the following projected account balances for June 30, 20X9:

Accounts payable	$ 60,000	Sales	$ 800,000
Accounts receivable	$ 120,000	Capital stock	$ 420,000
Depreciation, factory	$ 24,000	Retained earnings	?
Inventories (5/31 & 6/30)	$ 180,000	Cash	$ 56,000
Direct materials used	$ 210,000	Equipment, net	$ 260,000
Office salaries	$ 92,000	Buildings, net	$ 400,000
Insurance, factory	$ 4,000	Utilities, factory	$ 16,000
Plant wages	$ 140,000	Selling expenses	$ 50,000
Bonds payable	$ 160,000	Maintenance, factory	$ 28,000

Prepare a budgeted income statement AND a budgeted balance sheet as of June 30, 20X9.

(Points : 25)

2.

(TCO 5) Steven's Medical Equipment Company manufactures hospital beds. Its most popular model, Deluxe, sells for $5,000. It has variable costs totaling $2,800 and fixed costs of $1,000 per unit, based on an average production run of 5,000 units. It normally has four production runs a year, with $600,000 in setup costs each time. Plant capacity can handle up to six runs a year for a total of 30,000 beds.

A competitor is introducing a new hospital bed similar to Deluxe that will sell for $4,000. Management believes it must lower the price to compete. Marketing believes that the new price will increase sales by 25% a year. The plant manager thinks that production can increase by 25% with the same level of fixed costs. The company sells all the Deluxe beds it can produce.

Question 3.3.

(TCO 7) Grace Greeting Cards Incorporated is starting a new business venture and is in the process of evaluating its product lines. Information for one new product, traditional parchment grade cards, is as follows:

∙ For 16 times each year, a new card design will be put into production. Each new design will require $200 in setup costs.

∙ The parchment grade card product line incurred $75,000 in development costs and is expected to be produced over the next four years.

∙ Direct costs of producing the designs average $0.50 each.

∙ Indirect manufacturing costs are estimated at $50,000 per year.

∙ Customer service expenses average $0.10 per card.

∙ Sales are expected to be 2,500 units of each card design. Each card sells for $3.50.

∙ Sales units equal production units each year.

What is the total estimated life-cycle operating income?