ACCT 212 Quiz 4 Relevant Costing and Capital Budgeting solutions complete answers

ACCT 212 Quiz 4 Relevant Costing and Capital Budgeting solutions complete answers

 

Ted Company is considering an investment of $54,000 that provides net cash flows of $18,000 annually for four years. The investment’s payback period is 3.0 years.

 

Projects with shorter payback periods have higher risk of being unprofitable investments over the long run.

 

Incremental revenues refer to the additional revenues generated by selecting a certain course of action over another.

 

An out-of-pocket cost requires a future outlay of cash and is relevant for decision making.

 

Chang Industries has 1,200 defective units of product that already cost $50 each to produce. A salvage company will purchase the defective units as is for $23 each. Chang's production manager reports that the defects can be corrected for $42 per unit, enabling them to be sold at their regular market price of $39. The $50 per unit is a: 

 

Evaluating and rewarding managers based on absorption costing income can lead to overproduction.

 

Conversion costs consist of direct materials and factory overhead.

 

Both direct and selling costs are recorded on individual job cost sheets.

 

A company applies overhead using direct labor hours as its activity base. If the company estimates total direct labor hours of 40,000 and total overhead costs of $1,200,000 for the year, then the company’s predetermined overhead rate would equal $30 per direct labor hour.

 

Period costs for a manufacturing company flow directly to:

 

Using the information below, calculate the cost of goods manufactured for the period:

 

Coffer Company is analyzing two potential investments.

If the company is using the payback period method, and it requires a payback period of three years or less, which project(s) should be selected?

 

GSP Manufacturing uses machine hours to allocate overhead costs to products. Budgeted information for the current year follows:

The overhead cost allocated to a job that uses 4 machine hours is:

 

Belle Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.

Given Belle Company's data, compute cost of finished goods in inventory under absorption costing.

 

Cameroon Corporation manufactures and sells electric staplers for $16 each. If 10,000 units were sold in December, and management forecasts 4% growth in sales each month, the number of units of electric stapler sales budgeted for March should be:

 

Cameroon Corporation manufactures and sells electric staplers for $15.50 each. If 10,000 units were sold in December, and management forecasts 4% growth in sales each month, the dollar amount of electric stapler sales budgeted for February should be:

 

The following company information is available. The direct materials quantity variance is:

 

A company’s fixed budget (based on  units) follows. Compute total fixed costs.

 

Two investment centers at Marshman Corporation have the following current-year income and asset data:

The return on investment (ROI) for Investment Center A is:

The return on investment (ROI) for Investment Center B is:

 

Wren Pork Company uses the value basis method of allocating joint costs in its production of pork products. Relevant information for the current period follows:

The total joint cost for the current period was $43,000. How much of this cost should Wren Pork allocate to Loin chops?

 

Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $9.80; direct labor, $13.80, and incremental overhead $2.80. An outside supplier has offered to sell the product to Paxton for $34.20. Compute the net incremental cost or savings of buying the component.

 

Soar Incorporated is considering eliminating its mountain bike division, which reported a loss for the recent year of $4,600 as shown below.

If the mountain bike division is dropped, all $876,000 of its variable costs are avoidable, and $65,580 of its fixed costs are avoidable. The impact on income for eliminating this business segment would be:

 

Hoops Incorporated sells basketballs. Each basketball requires direct materials of $10.00, direct labor of $3.50, variable overhead of $4.50, and variable selling, general, and administrative costs of $2.00. The company has fixed overhead of $26,500 and fixed selling, general, and administrative costs of $33,500. The company has a target profit of $20,000. It expects to produce and sell 20,000 basketballs. The selling price per unit under the variable cost method is:

 

Factor Company estimates that producing a unit of product would require $8 per unit of direct materials and $24 per unit of direct labor. Factor Company normally applies overhead using a predetermined overhead rate of 150% of direct labor cost. Factor Company estimates incremental overhead of $16 per unit of product. An outside supplier offers to provide Factor Company with all the units it needs at a price of $46 per unit. Factor Company should choose to:

 

Kobe Company has manufactured 200 partially finished cabinets at a cost of $100,000. These can be sold as is for $120,000. Instead, the cabinets can be stained and fitted with hardware to make finished cabinets. Further processing costs would be $24,000, and the finished cabinets could be sold for $160,000. If Kobe Company processes the cabinets further, incremental income is:

 

The following relates to a proposed equipment purchase:

The annual income amount used to calculate the accounting rate of return is:

 

A company is considering the purchase of new equipment for $48,000. The projected annual net cash flows are $20,100. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 11% return on investment. The present value of an annuity of $1 for various periods follows:

What is the net present value of this machine (rounded to the nearest whole dollar) assuming all cash flows occur at year-end?

 

A company is planning to purchase a machine that will cost $50,400, have a six-year life, and will have no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the payback period for this machine?

 

A project requires a $2,800,000 initial investment for new machinery with a five-year life and a salvage value of $300,000. The project is expected to yield annual income of $199,950 per year and net cash flows of $700,000 per year for the next five years. The project’s accounting rate of return is:

 

A project requires a $28,000 initial investment and is expected to generate end-of-period annual cash inflows as follows:

Assuming a discount rate of 10%, what is the net present value (rounded to the nearest whole dollar) of this investment? Selected present value factors for a single sum are shown in the table below.

 

A company is considering purchasing a machine for $100,000. The machine will generate income of $4,600 per year. Annual depreciation expense would be $1,500. The machine has no salvage value. What is the accounting rate of return?

 

 

The discount rate that yields a net present value of zero is the:

 

The payback period is a method used to evaluate investment decisions by measuring the expected amount of time to recover the initial investment amount.

 

If the internal rate of return (IRR) of an investment is lower than the hurdle rate, the project should be rejected.

 

Avoidable costs are costs that cannot be eliminated by choosing one action over another.

 

Which of the following is false pertaining to controllable costs?

 

When a standard cost system is used, managers apply overhead costs to products and services using a standard overhead rate.

 

The time value of money concept:

 

Porter Company is analyzing two potential investments.
 

 
Project X
Project Y
Initial investment
$ 68,000
$ 60,000
Net cash flow:
 
 
Year 1
24,000
4,000
Year 2
24,000
26,000
Year 3
24,000
26,000
Year 4
0
20,000

If the company is using the payback period method, and it requires a payback of three years or less, which project(s) should be selected?

 

Capital budgeting decisions usually involve analysis of:

 

An advantage of the break-even time (BET) method over the payback period method is that it recognizes the time value of money.

 

Which methods of evaluating a capital investment project use cash flows as a measurement basis?

 

A project requires a $30,000 initial investment and is expected to generate end-of-period annual cash inflows as follows:
 

Year 1
Year 2
Year 3
Total
$ 12,000
$ 8,000
$ 10,000
$ 30,000

Assuming a discount rate of 10%, what is the net present value (rounded to the nearest whole dollar) of this investment? Selected present value factors for a single sum are shown in the table below:
 

i = 10%
i = 10%
i = 10%
n = 1
n = 2
n = 3
0.9091
0.8264
0.7513
 

Which methods of evaluating a capital investment project ignore the time value of money?

 

Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $14,200 and will produce cash flows as follows:
 

End of Year
Investment
A
B
1
$ 9,800
$ 0
2
9,800
0
3
9,800
29,400

The present value factors of $1 each year at 15% are:
 

1
0.8696
2
0.7561
3
0.6575
 
The present value of an annuity of $1 for 3 years at 15% is 2.2832. The net present value (rounded to the nearest whole dollar) of Investment A is:

 

Vextra Corporation is considering the purchase of new equipment costing $35,500. The projected annual cash inflow is $11,100, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Vextra requires a 12% return on its investments. The present value of an annuity of $1 for different periods follows:
 

Periods
12%
1
0.8929
2
1.6901
3
2.4018
4
3.0373
 
Compute the net present value of this investment (rounded to the nearest whole dollar).

 

Carmel Corporation is considering the purchase of a machine costing $54,000 with a 7-year useful life and no salvage value. Carmel assumes that the annual net cash flows from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment?

 

Costs already incurred in manufacturing the units of a product that do not meet quality standards are relevant costs in a scrap or rework decision.

 

Listmann Corporation processes four different products that can either be sold as is or processed further.
 
Listed below are sales and additional cost data:
 

Product
Sales Value with no further Processing
Additional Processing Costs
Sales Value after further processing
Premier
$ 1,350
$ 900
$ 2,700
Deluxe
450
225
630
Super
900
450
1,800
Basic
90
45
180

Which product(s) should not be processed further?

 

Maxim has already spent $28,000 to manufacture a hamster food product called Green Health. Maxim currently has 10,000 bags of Green Health on hand that can be sold for $90,000. Alternatively, Maxim can process it further into a different product, Premium Green, at an additional cost of $6,000. If Maxim processes further, the Premium Green can be sold for $98,000. This would result in revenue of:

 

Kobe Company has manufactured 200 partially finished cabinets at a cost of $100,000. These can be sold as is for $120,000. Instead, the cabinets can be stained and fitted with hardware to make finished cabinets. Further processing costs would be $24,000, and the finished cabinets could be sold for $160,000. If Kobe Company processes the cabinets further, incremental income is:

 

Factor Company estimates that producing a unit of product would require $8 per unit of direct materials and $24 per unit of direct labor. Factor Company normally applies overhead using a predetermined overhead rate of 150% of direct labor cost. Factor Company estimates incremental overhead of $16 per unit of product. An outside supplier offers to provide Factor Company with all the units it needs at a price of $46 per unit. Factor Company should choose to:

 

Chang Industries has 1,700 defective units of product that already cost $40 each to produce. A salvage company will purchase the defective units as is for $18 each. Chang's production manager reports that the defects can be corrected for $32 per unit, enabling them to be sold at their regular market price of $34. The $40 per unit is a: 

 

Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $9.20; direct labor, $13.20, and incremental overhead $2.20. An outside supplier has offered to sell the product to Paxton for $31.80. Compute the net incremental cost or savings of buying the component.

 

Lattimer Company had the following results of operations for the past year:
 

Contribution margin income statement
Per Unit
Annual Total
Sales (17,700 units)
$ 12.00
$ 212,400
Variable costs
 
 
Direct materials
1.50
26,550
Direct labor
4.00
70,800
Overhead
1.00
17,700
Contribution margin
5.50
97,350
Fixed costs
 
 
Fixed overhead
1.00
17,700
Fixed selling and administrative expenses
1.40
24,780
Income
$ 3.10
$ 54,870

A foreign company offers to buy 5,900 units at $7.50 per unit. In addition to variable costs, selling these units would add a $0.25 selling expense for export fees. Lattimer’s annual production capacity is 27,700 units. If Lattimer accepts this additional business, the special order will yield a:

 

An investment center has sales of $30,000,000, income of $9,000,000, and average assets of $40,000,000. Return on investment for this investment center is 75%.

 

Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. The direct materials quantity variance is:
 

Direct materials standard (7 Kilogram @ $2/Kilogram)
$ 14
per finished unit
Actual cost of materials purchased
$ 322,500
 
Actual direct materials purchased and used
150,000
Kilogram
 

The sales budget for Modesto Corporation shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of Product B is 3,000 units. Total budgeted sales of both products for the year would be:

 

Southland Company is preparing a cash budget for August. The company has $17,000 cash at the beginning of August and anticipates $120,800 in cash receipts and $134,500 in cash payments during August. Southland Company wants to maintain a minimum cash balance of $10,000. To maintain the minimum cash balance of $10,000, the company must borrow:

 

Clear Company reports the following information for its first year of operations:
 

Units produced this year
50,000
units
Units sold this year
49,000
units
Direct materials
$ 7
per unit
Direct labor
$ 3
per unit
Variable overhead
$ 4.20
per unit
Fixed overhead
?
in total

If the company's cost per unit of finished goods using absorption costing is $19.30, what is total fixed overhead?

 

Galaxy, Incorporated, a manufacturer of telescopes, began operations on June 1 of the current year. During this time, the company produced 60,000 units and sold 40,000 units at a sales price of $600 per unit. Cost information for this year is shown in the following table:
 

Direct materials
$ 90
per unit
Direct labor
$ 75
per unit
Variable overhead
$ 4
per unit
Fixed overhead
$ 420,000
in total
Variable selling and administrative
$ 80,000
in total
Fixed selling and administrative
$ 520,000
in total

Given the Galaxy Incorporated data, what is income using variable costing?

 

The contribution margin ratio is the percent by which the margin of safety exceeds the break-even point.

 

A cost that includes both fixed and variable cost components is called a:

 

Zoe Company reports the following for its overhead cost for the year.
 

Activity
Budgeted Cost
Budgeted Activity Usage
Engineering support
$ 98,000
70
design changes
Electricity
136,000
3,400
machine hours
Setup
210,000
350
setups

Compute the activity rate for engineering support using activity-based costing.

A single cost pool is used when allocating overhead using the activity-based costing method.

 

Richards Corporation uses the weighted-average method of process costing. The following information is available for October in its Fabricating department:

 

 
Units
Direct materials Percent Complete
Conversion Percent Complete
Beginning work in process inventory
80,000
60%
20%
Units started and completed
250,000
 
 
Units completed and transferred out
330,000
 
 
Ending work in process inventory
30,000
40%
10%
 
Production cost information for the Fabricating department follows.

 

Beginning work in process
 
 
Direct materials
$ 98,760
 
Conversion
79,700
$ 178,460
Costs added this period
 
 
Direct materials
$ 646,800
 
Conversion
919,300
1,566,100
 
Calculate the equivalent units of production for conversion.

 

Williams Company computed its cost per equivalent unit for direct materials to be $2.60 and its cost per equivalent unit for conversion to be $3.75. A total of 250,000 units of product were completed and transferred out as finished goods during the month. The ending Work in Process inventory consists of 36,000 equivalent units of direct materials and 36,000 equivalent units of conversion costs. The amount that should be reported in ending Work in Process Inventory is:

 

At the current year-end, Ruiz Company found that its overhead was underapplied by $2,500, and this amount was not considered material. Based on this information, Ruiz should:

 

A company that uses job order costing uses $24,000 of raw materials as indirect materials and uses $64,000 of raw materials as direct materials. The journal entry to record the use of direct materials consists of a debit to Work in Process Inventory for $64,000 and a credit to Raw Materials Inventory for $64,000.

 

Current information for the Healey Company follows:
 

Beginning raw materials inventory
$ 15,200
Raw material purchases
60,000
Ending raw materials inventory
16,600
Beginning work in process inventory
22,400
Ending work in process inventory
28,000
Direct labor
42,800
Total factory overhead
30,000
 
All raw materials used were direct materials. Healey Company's direct materials used for the year is:

 

A company manufactures motorcycles. Compute the total amount of direct materials costs from the following costs.
 

Cost item
a. Tires, $10,000
b. Motorcycle seats, $17,000
c. Handlebars, $6,000
d. Factory accounting, $10,000
e. Factory equipment depreciation, $5,000
f. Assembly worker wages, $15,000
g. Factory rent, $60,000
h. Assembly worker benefits, $5,000
i. Bike frames, $14,000
 

Accounting rate of return gives managers an estimate of how soon they will recover their initial investment.

 

If the straight-line depreciation method is used, the annual average investment amount used in calculating the accounting rate of return is calculated as (beginning book value + ending book value)/2.

 

Sunk costs are irrelevant to future decisions as they cannot be changed or avoided.

 

The production budget cannot be prepared until the direct materials and direct labor budgets are prepared.

 

Which of the following best describes costs assigned to the product under the absorption costing method?
Direct labor (DL)
Direct materials (DM)
Variable selling and administrative (VSA)
Variable manufacturing overhead (VOH)
Fixed selling and administrative (FSA)
Fixed manufacturing overhead (FOH)

 

The predetermined overhead rate is revised many times during the period to compensate for inaccurate estimates previously made.

 

Which of the following is the correct formula for calculating days’ sales in raw materials inventory for a manufacturer?

 

Madison Corporation sells three products (M, N, and O) in the following sales mix: 3:1:2. Unit price and cost data are:

 

Total fixed costs are $340,000. The contribution margin per composite unit for the current sales mix (round to the nearest cent) is:

 

Coomb's Fashions forecasts sales of $125,000 for the quarter ended December 31. Its gross profit rate is 20% of sales, and its September 30 inventory is $32,500. If the December 31 inventory is targeted at $41,500, budgeted purchases for this quarter should be:

 

Milltown Company sells used cars. During the month, the dealership sold 22 cars at an average price of $15,000 each. The budget for the month was to sell 20 cars at an average price of $16,000. Compute the dealership's sales volume variance for the month.

 

Graham Corp. has 1,000 cartons of oranges that were harvested at a cost of $29,400. The oranges can be sold as is for $34,800. The oranges can be processed further into orange juice at an additional cost of $12,875 and be sold at a price of $51,250. The net benefit (additional income) from processing the oranges into orange juice instead of selling as is would be:

 

Gordon Corporation produced 10,000 digital watches in the current year. Variable costs are $8 per watch. Overhead assigned is $2.25 per watch. A supplier offers the watches for $9.50 each. Gordon's production manager reports the incremental overhead is $1.25 per watch. Gordon should:

 

A company is planning to purchase a machine that will cost $54,000 with a six-year life and no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the payback period for this machine?

 

The following relates to a proposed equipment purchase:

 

Ignoring income taxes, the annual net income amount used to calculate the accounting rate of return is:

 

Porter Co. is analyzing two potential investments.

 

If the company is using the payback period method and it requires a payback of three years or less, which project(s) should be selected?

 

Poe Company is considering the purchase of new equipment costing $81,000. The projected annual cash inflows are $31,200, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of $1 and present value of an annuity of $1 for different periods is presented below. Compute the net present value of the machine.

 

Question 1
Cleveland Choppers manufactures two types of motorcycles, a Base and a Loaded model. The following activity and costs have been gathered:
 

The number of components and number of setups are chosen as activity-cost drivers for overhead. Assuming an ABC costing system is being used, what is the total overhead cost assigned to the Base model?

 

Question 2
Over recent decades, overhead costs have steadily decreased while direct labor costs have increased as a percentage of total manufacturing costs.
 

Question 3
The following information relates to the manufacturing operations of the JNR Printing Company for the year:
 

The raw materials used in manufacturing during the year totaled $118,000. Raw materials purchased during the year amount to:

 

Question 4
Which of the following items does not represent a difference between financial and managerial accounting?
 

Question 5
CWN Company uses a job order costing system and last period incurred $80,000 of actual overhead and $100,000 of direct labor. CWN estimates that its overhead next period will be $75,000. It also expects to incur $100,000 of direct labor. If CWN bases applied overhead on direct labor cost, its predetermined overhead rate for the next period should be:
 

Question 6
If actual overhead incurred during a period exceeds applied overhead, the difference will be a debit balance in the Factory Overhead account at the end of the period.
 

Question 7
Richards Corporation uses the FIFO method of process costing. The following information is available for October in its Fabricating Department:
 

Calculate the equivalent units of conversion.

 

Question 8
Metaline Corp. uses the weighted average method for inventory costs and had the following information available for the year. The number of units transferred to finished goods during the year is:
 

Question 9
Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month. In the next month, the company expects sales volume to increase by 8%. The degree of operating leverage and the expected percent change in income, respectively, are:
 

Question 10
A company manufactures and sells a product for $120 per unit. The company's fixed costs are $68,760, and its variable costs are $90 per unit. The company's break-even point in dollars is:
 

Question 11
Which of the following best describes costs assigned to the product under the variable costing method?
 

Question 12
When setting long-term sales prices for products, the sales price must cover all costs, including fixed costs.
 

Question 13
Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are collected in the second month. Compute the amount of accounts receivable reported on the company’s budgeted balance sheet for June 30.
 

Question 14
To develop the sales budget, companies must estimate both unit sales and the production cost per unit.
 

Question 16
Milltown Company specializes in selling used cars. During the month, the dealership sold 22 cars at an average price of $15,000 each. The budget for the month was to sell 20 cars at an average price of $16,000. Compute the dealership's sales price variance for the month.
 

Question 17
Chang Industries has 1,200 defective units of product that have already cost $13.20 each to produce. A salvage company will purchase the defective units as they are for $4.20 each. Chang's production manager reports that the defects can be corrected for $6.80 per unit, enabling them to be sold at their regular market price of $19.40. The incremental income or loss on reworking the units is:
 

Question 18
Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $5,000. The division sales for the year were $1,052,000 and the variable costs were $862,000. The fixed costs of the division were $195,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:
 

Question 20
In a make or buy decision, management should focus on costs that are the same under the two alternatives.
 

Question 21
If a company has the capacity to produce either 10,000 units of Product A or 10,000 units of Product B; assuming fixed costs are the same, production restrictions are the same for both products, and the markets for both products are unlimited; the company should commit 100% of its capacity to the product that has the higher contribution margin per unit of operating capacity.
 

Question 22
Assume markup percentage equals desired profit divided by total costs. What is the correct calculation to determine the dollar amount of the markup per unit?
 

Question 23
An opportunity cost is the potential benefit lost by taking a specific action when two or more alternative choices are available.
 

Question 24
An out-of-pocket cost requires a future outlay of cash and is relevant for current and future decision making.
 

Question 25
Costs already incurred in manufacturing the units of a product that do not meet quality standards are relevant costs in a scrap or rework decision.
 

Question 26
Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $14,800 and will produce cash flows as follows:
 

The net present value of Investment B is:

 

Question 27
Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,800 and will produce cash flows as follows:
 

The net present value of Investment A is:

 

Question 28
Poe Company is considering the purchase of new equipment costing $81,500. The projected annual cash inflows are $31,700, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of $1 and present value of an annuity of $1 for different periods is presented below. Compute the net present value of the machine.
 

Question 29
Capital budgeting decisions are not affected by return on investment considerations.
 

Question 30
In business decision-making, managers typically examine the two fundamental factors of:
 

Question 31
When computing payback period, the year in which a capital investment is made is year 1.
 

Question 32
The process of analyzing alternative long-term investments and deciding which assets to acquire or sell is known as:
 

Question 33
The payback period method, unlike the net present value method, does not ignore cash flows after the point of cost recovery.
 

Question 34
If two projects have the same risks, the same payback periods, and the same initial investments, they are equally attractive.
 

Question 35
A hurdle rate is the minimum acceptable rate of return for an investment.
 

Question 36
A company's required rate of return, typically its cost of capital is called the:
 

Question 37
Accounting rate of return is the simplest capital budgeting method. It gives managers an estimate of how soon they will recover their initial investment.
 

Question 38
The process of restating future cash flows in today's dollars is known as:
 

Question 39
Wren Pork Company uses the value basis of allocating joint costs in its production of pork products. Relevant information for the current period follows:
 

The total joint cost for the current period was $43,000. How much of this cost should Wren Pork allocate to Loin chops?

 

Question 40
Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period:
 

The amount of salaries that should be allocated to Drilling for the current period is:

 

Question 
The following data relates to Spurrier Company's estimated amounts for next year.
 

What is the company's plantwide overhead rate if direct labor hours are the allocation base? (Round your answer to two decimal places.)

 

Question 
If the cost of the beginning work in process inventory is $60,000, direct materials cost is $350,000, direct labor cost is $216,000, and overhead cost is $319,000, and the ending work in process inventory is $55,000, calculate the cost of goods manufactured:
 

Question 
The ending inventory of finished goods has a total cost of $9,000 and consists of 600 units. If the overhead applied to these goods is $3,000, and the overhead rate is 75% of direct labor, how much direct materials cost was incurred in producing these units?
 

Question 
Andrews Corporation uses the weighted-average method of process costing. The following information is available for February in its Polishing Department:
 

The cost per equivalent unit of production for direct materials is:

 

Question 
A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. What is the firm's break-even point in units of Regular and Ultra?
 

Question 
Zhang Industries is preparing a cash budget for June. The company has $25,000 cash at the beginning of June and anticipates $95,000 in cash receipts and $111,290 in cash disbursements during June. The company has no loans outstanding on June 1. Compute the amount the company must borrow, if any, to maintain a $20,000 cash balance.
 

Question 
Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct labor requirement per unit is 0.50 hours. Labor is paid at the rate of $21 per hour. The total cost of direct labor for the month of August is:
 

Question 
Fletcher Company collected the following data regarding production of one of its products. Compute the direct materials quantity variance.
 

Question 
Ship Co. produces storage crates that require 1.2 meters of material at $.85 per meter and 0.1 direct labor hours at $15.00 per hour. Overhead is applied at the rate of $9 per direct labor hour. What is the total standard cost for one unit of product that would appear on a standard cost card?
 

Question 
Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $9.70; direct labor, $13.70, variable overhead $2.70 and fixed overhead, $7.70. An outside supplier has offered to sell the product to Paxton for $33.80. Compute the net incremental cost or savings of buying the component.
 

Question 
Chang Industries has 1,800 defective units of product that have already cost $13.80 each to produce. A salvage company will purchase the defective units as they are for $4.80 each. Chang's production manager reports that the defects can be corrected for $6.20 per unit, enabling them to be sold at their regular market price of $20.60. The incremental income or loss on reworking the units is:
 

Question 
Ahngram Corp. has 1,000 defective units of a product that cost $2.50 per unit in direct costs and $6.00 per unit in indirect cost when produced last year. The units can be sold as scrap for $3.50 per unit or reworked at an additional cost of $2.00 and sold at full price of $10.50. The incremental net income (loss) from the choice of reworking the units would be:
 

Question 
Chang Industries has 2,000 defective units of product that have already cost $14 each to produce. A salvage company will purchase the defective units as they are for $5 each. Chang's production manager reports that the defects can be corrected for $6 per unit, enabling them to be sold at their regular market price of $21. Chang should:
 

Question 
The following data concerns a proposed equipment purchase:
 

Ignoring income taxes, the annual net income amount used to calculate the accounting rate of return is:

 

Question 
Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,100 and will produce cash flows as follows:
 

The net present value of Investment B is:

 

Question 
Vextra Corporation is considering the purchase of new equipment costing $36,000. The projected annual cash inflow is $11,200, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Vextra requires a 12% return on its investments. The present value of an annuity of $1 for different periods follows:
 

What is the net present value of the machine?

 

Question 
If beginning and ending work in process inventories are $5,000 and $15,000, respectively, and cost of goods manufactured is $170,000, what is the total manufacturing cost for the period?
 

Question 
Craigmont Company's direct materials costs are $3,000,000, its direct labor costs total $7,000,000, and its factory overhead costs total $5,000,000. Its conversion costs total:
 

Question 
A company has an overhead application rate of 125% of direct labor costs. How much overhead would be allocated to a job if it required total labor costing $20,000?
 

Question 
Pitt Enterprises manufactures jeans. All materials are introduced at the beginning of the manufacturing process in the Cutting Department. Conversion costs are incurred uniformly throughout the manufacturing process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Information for the Cutting Department for the month of May follows.
Work in Process, May 1 (50,000 units, 100% complete for direct materials, 40% complete with respect to conversion costs; includes $70,500 of direct material cost; $34,050 of conversion costs).
 

If Pitt Enterprises uses the weighted average method of process costing, compute the equivalent units for direct materials and conversion respectively for May.

 

Question 
A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000. The total product cost per unit under absorption costing is:
 

Question 
A company is currently operating at 75% capacity and producing 3,000 units. Current cost information relating to this production is shown in the table below:
 

The company has been approached by a customer with a request for a 200-unit special order. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

 

Question 
Justin Company's budget includes the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Justin Company expect to collect in November as a result of current and past credit sales?
 

Question 
If a merchandiser’s budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and cost of goods sold is expected to be $10,260, then budgeted purchases should be $11,360.
 

Question 
Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $2.70 per unit. Bluebird currently produces and sells 75,000 units at $6.70 each. This level represents 80% of its capacity. These bird feeders would be marketed under the wholesaler’s name and would not affect Bluebird’s sales through its normal channels. Production costs for these units are $3.65 per unit, which includes $2.10 variable cost and $1.55 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:
 

Question 
Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3 per unit. Bluebird currently produces and sells 75,000 units at $7.00 each. This level represents 80% of its capacity. These bird feeders would be marketed under the wholesaler’s name and would not affect Bluebird’s sales through its normal channels. Production costs for these units are $3.50 per unit, which includes $2.25 variable cost and $1.25 fixed cost. If Bluebird accepts this additional business, the incremental cost will be:
 

Question 
The following present value factors are provided for use in this problem.
 

Xavier Co. wants to purchase a machine for $36,300 with a four year life and a $1,200 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are $11,300 in each of the four years. What is the machine's net present value?

 

Question 
Carmel Corporation is considering the purchase of a machine costing $48,000 with a 8-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment?
 

In calculating the accounting rate of return using the straight-line method of depreciation, the annual average investment is calculated as (beginning book value + ending book value)/2.

 

A postaudit is:

 

The overhead cost variance is:

 

Which of the following is not a product cost under variable costing?

 

A time ticket is a source document used to record the total number of hours worked and serves as a source document for entries to record direct labor costs.

 

Which of the following is the correct formula for calculating cost of goods manufactured?

 

A company uses the FIFO method for inventory costing. At the beginning of a period, the production department had 20,000 units in beginning Work in Process inventory which were 40% complete; the department completed and transferred 165,000 units. At the end of the period, 22,000 units were in the ending Work in Process inventory and are 75% complete. Compute the number of equivalent units produced by the department.

 

Kent Co. manufactures a product that sells for $50.00. Fixed costs are $260,000 and variable costs are $24.00 per unit. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the revised break-even point in dollars with the purchase of the new machine.

 

Kent Co. manufactures a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the contribution margin per unit if the machine is purchased.

 

Wichita Industries' sales are 10% for cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 50% in the next month, and 20% in the second following month. Wichita Industries' had $12,000 from November sales and $42,000 from December sales. Assume that total sales for January and February are budgeted to be $50,000 and $100,000, respectively. What are the expected cash receipts for February from current and past sales?

 

Claymore Corp. has the following information about its standards and production activity for September. The volume variance is:

 

Chang Industries has 2,100 defective units of product that already cost $16 each to produce. A salvage company will purchase the defective units as is for $6 each. Chang's production manager reports that the defects can be corrected for $8 per unit, enabling them to be sold at their regular market price of $22. The $16 per unit is a: 

 

Markson Company had the following results of operations for the past year:

 

A foreign company offers to buy 2,000 units at $14.90 per unit. In addition to variable manufacturing and administrative costs, selling these units would increase fixed overhead by $1,660 for the purchase of special tools. Markson’s annual productive capacity is 12,000 units. If Markson accepts this additional business, its profits will:

 

Chang Industries has 2,000 tables that cost $115 each to produce. Each table can be sold as is for $221 or finished with a stain or paint. The cost to add a finish to each table is $75. Finished tables can be sold for $310. Chang should: