ACCTG 211 Final: ACCTG211 Exam 4 2017 Fall
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Use the following information for questions 1-4: callie company makes curley. Cost information for each stuffed animal is shown below. Current annual production and sales volume is 180,000 curley. During its slowest month, ,000 in maintenance costs were incurred, resulting from 6,000 miles being driven. Using the high-low method, what maintenance cost would the company expect to incur at 20,000 miles of driving: ,000, ,667, ,000, ,500, the following information pertains to nova co. "s cost-volume-profit relationships: A calculation used in a cvp analysis is the breakeven point. All other budgeted costs and revenues were unchanged. How did this increase affect lake"s budgeted breakeven point: increase, decrease, no effect, a company is in the process of developing its sales budget. Product a can be sold for and product b can be sold for at the split-off point. Alternatively, both a and/or b can be processed further and sold for and ,500, respectively.
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The Walton Toy Company manufactures a line of dolls and a sewingkit. Demand for the companyâs products is increasing, andmanagement requests assistance from you in determining aneconomical sales and production mix for the coming year. Thecompany has provided the following data:
| Product | Demand Next year (units) | Selling Price per Unit | Direct Materials | Direct Labor | |||
| Debbie | 54,000 | $ | 23.00 | $ | 4.70 | $ | 5.40 |
| Trish | 46,000 | $ | 5.00 | $ | 1.50 | $ | 1.80 |
| Sarah | 39,000 | $ | 30.00 | $ | 7.04 | $ | 8.10 |
| Mike | 30,000 | $ | 14.00 | $ | 2.40 | $ | 6.30 |
| Sewing kit | 329,000 | $ | 8.40 | $ | 3.60 | $ | 1.35 |
The following additional information isavailable:
a. The companyâs plant has a capacity of 136,550 directlabor-hours per year on a single-shift basis. The companyâs presentemployees and equipment can produce all five products.
b. The direct labor rate of $9 per hour is expected to remainunchanged during the coming year.
c. Fixed manufacturing costs total $560,000 per year. Variableoverhead costs are $3 per direct labor-hour.
d. All of the companyâs nonmanufacturing costs are fixed.
e. The companyâs finished goods inventory is negligible and canbe ignored.
Required:
1. How many direct labor hours are used to manufacture one unitof each of the companyâs five products?
2. How much variable overhead cost is incurred to manufactureone unit of each of the companyâs five products?
3. What is the contribution margin per direct labor-hour foreach of the companyâs five products?
4. Assuming that direct labor-hours is the companyâsconstraining resource, what is the highest total contributionmargin that the company can earn if it makes optimal use of itsconstrained resource?
5. Assuming that the company has made optimal use of its 136,550direct labor-hours, what is the highest direct labor rate per hourthat Walton Toy Company would be willing to pay for additionalcapacity (that is, for added direct labor time)?
| #1 | Which of the following correctly describes fixed and variable cost behavior as total volume increases? | ||
| A. | Unit fixed costs stay the same and unit variable costs increase. | ||
| B. | Total fixed costs stay the same and total variable costs increase. | ||
| C. | Unit fixed costs decrease and total variable costs decrease. | ||
| D. | Unit fixed costs decrease and unit variable costs decrease. | ||
| #2 | The incremental profit generated by the sale of one additional unit is equal to the | ||
| A. | contribution margin per unit. | ||
| B. | selling price. | ||
| C. | margin of safety. | ||
| D. | incremental cost. | ||
| #3 | Clipper Office Furniture uses cost-plus pricing with a 40% mark-up on total cost at capacity. The company is currently selling 40,000 units at $19.60 per unit. Each unit has a variable cost of $9. In addition, the company incurs $200,000 in fixed costs annually. If demand falls to 32,000 units and the company wants to continue to earn a 40% return, what price should the company charge? | ||
| A. | $15.25 | ||
| B. | $21.35 | ||
| C. | $19.60 | ||
| D. | $27.44 | ||
| #4 | ABC company has $6.50 per unit in variable costs and $2.20 per unit in fixed costs at a volume of 40,000 units. If the company uses cost-plus 20% for pricing, which of the following should the company use to determine the price? | ||
| A. | The company should use a unit cost of $8.70 per unit only at a volume of 40,000 units. | ||
| B. | The company should use a unit cost of $8.70 at any volume level. | ||
| C. | The company should use a unit price of $10.44 at any volume level. | ||
| D. | The company should ignore fixed costs for cost-plus pricing. | ||
| #5 | Which of the following is a grouping of overhead costs whose total is allocated using one allocation base? | ||
| A. | Cost objective | ||
| B. | Cost pool | ||
| C. | Direct cost | ||
| D. | Cost driver | ||
| #6 | Which one of the following is the preferred alternative when deciding between two options? | ||
| A. | Incremental profit is greater than under the other alternatives. | ||
| B. | Revenues are greater than under the other alternatives. | ||
| C. | Expenses are less than under the other alternatives. | ||
| D. | No opportunity or sunk costs exist. | ||
| #7 | The required rate of return used to calculate an investmentâs net present value is related to the firmâs | |||
| A. | contribution margin. | |||
| B. | cost of capital. | |||
| C. | total assets. | |||
| D. | Price/Earnings ratio. | |||
| #8 | A company is trying to decide whether to keep or drop the organic foods department in its grocery store. If organic foods are dropped, the manager will be laid off. What is the manager's salary in relation to the decision to keep or drop the department? | |||
| A. | A variable cost and therefore relevant | |||
| B. | Avoidable and therefore incremental | |||
| C. | Sunk and therefore not relevant | |||
| D. | A fixed cost and therefore not relevant | |||
| #9 | The following information relates to Ajax Widgets during the year. There was no beginning inventory. | |||
| Units produced | 11,000 | |||
| Units sold | 10,000 | |||
| Units in ending inventory | 1,000 | |||
| Fixed manufacturing overhead | $220,000 | |||
| How much fixed manufacturing overhead will be expensed during the year (included in Cost of Goods Sold) using full costing? | ||||
| A. | $220,000 | |||
| B. | $200,000 | |||
| C. | $20,000 | |||
| D. | $10,000 | |||
| #10 | If the required rate of return is greater than the internal rate of return of a potential investment, the company should judge the investment as acceptable. | |||
| A. | This is a True statement | |||
| B. | This is a False statement | |||
| C. | Not enough information provided. | |||
| #11 | The basic concept involved in time value of money calculations is that | |||
| A. | it is better to receive a dollar in the future than to receive a dollar today | |||
| B. | incremental revenues must exceed incremental costs. | |||
| C. | it is better to receive a dollar today than to receive a dollar in the future. | |||
| D. | it can only be applied to positive cash flows | |||
| #12 | Hanson Sports has three product lines: footballs, basketballs, and bats. Common costs are allocated based on relative sales. A product line income statement for the year ended December 31, 2016 follows: | ||||
| Footballs | Basketballs | Bats | Total | ||
| Sales | $600,000 | $800,000 | $400,000 | $1,800,000 | |
| Cost of goods sold | 260,000 | 400,000 | 230,000 | 890,000 | |
| Gross margin | 340,000 | 400,000 | 170,000 | 910,000 | |
| Less other variable costs | 85,000 | 120,000 | 80,000 | 285,000 | |
| Contribution margin | 255,000 | 280,000 | 90,000 | 625,000 | |
| Less direct salaries | 50,000 | 60,000 | 45,000 | 155,000 | |
| Less common fixed costs | 85,000 | 100,000 | 55,000 | 240,000 | |
| Net income | $120,000 | $120,000 | -$10,000 | $230,000 | |
| Since the profit for bats is a net loss, the company is considering dropping this product line. What is the incremental $ effect on total net income of dropping the Bats line? | |||||
| #13 | Right Air Supply sells a specialized air filter that has a variable cost of $10 each. | ||||
| Fixed costs are estimated to be $700,000 across all levels of sales shown below. | |||||
| Units Sold | Unit Price | CM per unit x Qty | Fixed Costs | Profit | |
| 90,000 | $33 | 700,000 | |||
| 100,000 | $31 | 700,000 | |||
| 110,000 | $30 | 700,000 | |||
| 120,000 | $28 | 700,000 | |||
| Which price should Right Air Supply charge to maximize profits? | |||||
| #14 | Randolph Corporation sells a single product at a price of $275 per unit. Variable cost per unit is $135 and fixed costs total $356,860. If sales are expected to be $825,000, what is the companyâs margin of safety? | ||||
| #15 | Roger Excavating Company experienced the following costs in 2016: | ||||
| Direct materials | $1.75 per unit | ||||
| Direct labor | $2.00 per unit | ||||
| Variable manufacturing overhead | $2.50 per unit | ||||
| Variable selling | $0.75 per unit | ||||
| Fixed manufacturing overhead | $50,000 | ||||
| Fixed selling | $15,000 | ||||
| Fixed administrative | $5,000 | ||||
| During 2016, the company manufactured 100,000 units and sold 80,000 units. If the average selling price per unit was $22.65, what is the amount of the companyâs contribution margin per unit? | |||||
