ACCT 505 Final Examination – latest 2016

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ACCT 505 Final Examination – latest 2016

1. (TCO E) Designing a new product is a(n) (Points : 5)

batch-level activity.

product-level activity.

unit-level activity.

organization sustaining activity.

Question 2.2. (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)

6.0%

15.0%

12.5%

20.0%

1. RspGF=”font-family:’Arial’;font-size:10pt;”(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! (Points : 25)

2. 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
Ending work in process:
Units in ending work-in-process inventory	800
Percentage complete for materials	70%
Percentage complete for conversion	30%

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

1. 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

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)

2. 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? (Points : 30)

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	1,300
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? (Points : 25)

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)

6. (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.

(Points : 30)

7. 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. (Points : 25)