MGMT640 final exam both parts done on 26 april 2015 (with graded solutions)

Final exam part 1

Question 1 1 / 1 point

A typical use of managerial accounting is to:

help investors and creditors assess the financial position of the company.

help management get a clean audit report

help the marketing manager decide which product promotion tao implement

help the SEC decide whether management is in compliance of its policies.

Question 2 1 / 1 point

Three costs incurred by Pitt Company are summarized below:

1,000 units 2,000 units

Cost A $10,000 $15,000

Cost B $21,000 $21,000

Cost C $16,000 $32,000

Which of these costs are variable?

A, B, and C

A and B

A only

C only

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Question 3 1 / 1 point

Bubba's Steakhouse has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: Materials, $4,080; hourly labor (variable), $5,200; rent (fixed), $1,690; depreciation, $690; and other fixed costs, $560. Each steak dinner sells for $12.90 each. How much would Shula’s profit increase if 10 more dinners were sold?

Question 4 1 / 1 point

Bellfont Company produces door stoppers. August production costs are below:

Door Stoppers produced 73,000

Direct material (variable) $20,000

Direct labor (variable) 40,000

Supplies (variable) 20,000

Supervision (fixed) 27,500

Depreciation (fixed) 22,600

Other (fixed) 3,100

In September, Bellfont expects to produce 100,000 door stoppers. Assuming no structural changes, what is Bellfont’s production cost per door stopper for September?

Answer:

1.63

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Question 5 1 / 1 point

Aaron's chairs is in the process of preparing a production cost budget for August. Actual costs in July for 120 chairs were:

Materials cost $4,650

Labor cost 2,900

Rent 1,500

Depreciation 2,500

Other fixed costs 3,200

Materials and labor are the only variable costs. If production and sales are budgeted to change to 140 chairs in August, how much is the expected total variable cost on the August budget?

Question 6 0 / 1 point

Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,000 and profits of $22,000. Variable costs are projected to be $20 per unit. Michael Co. offers to pay $23,100 to buy 520 units from Carry-ALL. Total fixed costs are $7,000 per year. This offer does not affect Carry-ALL's other planned operations. The incremental revenues for this situation are

Question 7 1 / 1 point

Stellar Company has the following sales, variable cost, and fixed cost. If sales increase by $10,000 then their profit increases/decreases by how much?

Sales $50,000

Variable Costs $7,000

Fixed Costs $27,000

Question 8 1 / 1 point

Susan is trying to decide whether or not to attend college during the next 12-week session. She has the following options:

1. Attend college full-time at a cost of $1,200.

2. Attend college part-time at a cost of $700 and work part-time earning $1,600.

3. Work full-time earning $4,500.

What is Susan's incremental profit if she chooses option 3 over option 2?

Question 9 0 / 1 point

Total costs were $71,200 when 30,000 units were produced and $99,100 when 40,000 units were produced. Use the high-low method to find the estimated total costs for a production level of 32,000 units.

Question 10 1 / 1 point

Professional University teaches a large range of undergraduate courses. It is interested in determining the cost equation for the facilities cost as a function of student credit hours so that it an more accurately budget its facilities costs as enrollment grows. Information for the high and low cost semesters and volumes for last 5 years appears below

Semester Student Credit Hours Facilities Cost

Spring 2007 250,000 $500,000

Fall 2004 300,000 $530,000

Using the high low method, with student credit hours as the activity driver, what is the equation for facilities cost (FC) as a function of student credit hours?

FC = $350,000 + $0.60 / student credit hour

FC = -$585,100 + $1.67 / student credit hour

FC = $1.77 / student credit hour

FC = $2 / student credit hour

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Question 11 1 / 1 point

Randy's tireland makes a product that sells for $67 per unit and has $42 per unit in variable costs. Annual fixed costs are $24,000. If Rambles sells 10 units less than breakeven, how much loss would the company recognize on its income statement?

Question 12 1 / 1 point

Ritz Furniture has a contribution margin ratio of 0.12. If fixed costs are $162,200, how many dollars of revenue must the company generate in order to reach the break-even point?

Question 13 1 / 1 point

U.S. Telephone Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10% (based on the unit sales price per phone). Fixed manufacturing costs total $1,110 per month, while fixed selling and administrative costs total $2,320. How many phones must be sold to achieve the breakeven point?

Question 14 1 / 1 point

Swimkids is a swimsuit manufacturer. They sell swim suits at a selling price is $30 per unit. Swimkids variable costs are $18 per unit. Fixed costs are $84,600. Swimkids expects sales of $285,900 next year. What is Swimkids's margin of safety (in dollars)?

Question 15 1 / 1 point

Lambardi Company sells 3 types of bags. Bag A sells for $15 and has variable cost of $9.00 per unit. Bag B sells for $17 and has variable cost of $12.00 per unit. Bag C sells for $7 and has variable costs of $6.00 per unit. Lambardi sells in a mix of 2 units of A, 3 units of B and 5 units of C. What is the weighted average contribution margin per unit for Lambardi?

Question 16 1 / 1 point

Product A has a contribution margin per unit of $500 and required 2 hours of machine time. Product B has a contribution margin per unit of $1,000 and requires 5 hours of machine time. How much of each product should be produced given there are 100 hours of available machine time?

50 units of A and 25 units of B.

25 units of B.

50 units of A.

None of the above

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Question 17 1 / 1 point

Delfi Company produces two models of seats, Toro and Prep. Information regarding these products for May follows:

Toro Prep

Number of units 3,000 7,000

Sales revenue $120,000 $140,000

Variable costs 60,000 42,000

Fixed costs 24,000 50,000

Net Income $36,000 $48,000

Pounds of plastic to produce one bucket 4.0 1.6

Contribution margin per unit $20 $14

Due to increased demand of plastic in the market, Delfi Company can obtain only 9,000 pounds of plastic per month. Delfi can sell as many seats as it can produce of either model. How many of each model should Delfi produce to maximize profit in May considering the constraint?

Toro: 0; Prep: 4,375

Toro: 2,250; Prep: 0

Toro: 1,125; Prep: 2,812

Toro: 0; Prep: 5,625

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Question 18 1 / 1 point

Abagail Corp. uses activity-based costing system with three activity cost pools. The following information is provided:

Costs: Wages and salaries $ 211,000

Depreciation 111,000

Utilities 119,000

Total $440,000

Activity Cost Pools

Assembly Setting Up Other

Wages and salaries 0.59 30% 10%

Depreciation 0.39 45% 20%

Utilities 0.22 40% 30%

How much total cost would be allocated to the Assembly activity cost pool?

Question 19 1 / 1 point

Which of the following is not a goal of Managerial Accounting?

Provide information managers need for planning.

Provide information managers need for market wide interest rates.

Provide information managers need for control.

Provide information managers need for decision making.

Question 20 1 / 1 point

Which one of the following is least likely to be a fixed cost?

Rent for buildings

Rent for land

Cost of commodity inputs

Cost of property, plant and equipment

Final Exam Part 2

Question 1 1 / 1 point

Maxx Inc. has provided the following data from its activity-based costing system:

Activity Cost Pools Total Cost Total Activity

Designing products $375,800 6,390 product design hours

Setting up batches $52,678 7366 batch set-ups

Assembling products $25,122 4,018 assembly hours

The activity rate for the “designing products” activity cost pool is:

Question 2 0 / 1 point

Sasha Company allocates the estimated $195,900 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows:

Department Employees

Accounting 4

Production 29

Sales 17

How much of the accounting department costs will be allocated to the production?

Question 3 0 / 1 point

Medusa Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory. Information about the departments is presented below:

Number of Number of Square

Department Costs Employees Feet Occupied

Payroll (S1) $137,000 2 2,000

Maintenance (S2) $220,000 8 64,000

Molding (P1) 65 100,000

Finishing (P2) 44 60,000

Packaging (P3) 17 40,000

Medusa uses the direct method to allocate costs. Round all answers to the nearest dollar.

What amount of the payroll department costs will be allocated to the molding department?

Question 4 1 / 1 point

The Manassas Company has 55 obsolete keyboards that are carried in inventory at a cost of $9,600. If these keyboards are upgraded at a cost of $7,600, they could be sold for $19,100. Alternatively, the keyboards could be sold “as is” for $7,900. What is the net advantage or disadvantage of re-working the keyboards?

Answer:

3,600 Correct Response

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Question 5 1 / 1 point

Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:

Cost Pool Total Costs Cost Driver Annual Activity

Packaging and shipping $160,400 Number of boxes shipped 20,700 boxes

Final inspection $196,000 Number of individual items shipped 96,800 items

General operations and supervision $82,300 Number of orders 8,500 orders

During the period, the Far East sales office generated 695 orders for a total of 6,080 items. These orders were shipped in 1,466 boxes. What amount of shipping department costs should be allocated to these sales?

Question 6 0 / 1 point

Baller Financial is a banking services company that offers many different types of checking accounts. The bank has recently adopted an activity-based costing system to assign costs to their various types of checking accounts. The following data relate to the money market checking accounts, one of the popular checking accounts, and the ABC cost pools:

Annual number of accounts = 50,000 accounts Checking account cost pools:

Cost Pool Cost Cost Drivers

Returned check costs $2,800,000 Number of returned checks

Checking account reconciliation costs 53,000 Number of account reconciliation requests

New account setup 648,000 Number of new accounts

Copies of cancelled checks 390,000 Number of cancelled check copy requests

Online banking web site maintenance 182,000 Per product group (type of account)

Annual activity information related to cost drivers:

Cost Pool All Products Money Market Checking

Returned check 195,000 returned checks 18,000

Check reconciliation costs 390,000 checking account 420

New accounts 55,000 new accounts 15,000

Cancelled check copy requests 93,000 cancelled check 60,000

Web site costs 5 types of accounts 1

Calculate the overhead cost per account for the Money Market Checking.

Question 7 1 / 1 point

Sosa Company has $39 per unit in variable costs and $1,900,000 per year in fixed costs. Demand is estimated to be 138,000 units annually. What is the price if a markup of 35% on total cost is used to determine the price?

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Question 8 1 / 1 point

Bob's Company sells one product with a variable cost of $5 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various prices, what price should be charged in order to maximize profits?

Units Sold Price

30,000 $10

40,000 $9

50,000 $8

60,000 $7

$10

$9

$8

$7

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Question 9 1 / 1 point

A retailer purchased some trendy clothes that have gone out of style and must be marked down to 30% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation?

the original selling price

the anticipated profit

the original purchase price

the current selling price

Question 10 1 / 1 point

Carlton Products Company has analyzed the indirect costs associated with servicing its various customers in order to assess customer profitability. Results appear below:

Cost Pool Annual Cost Cost Driver Annual Driver Quantity

Processing electronic orders $1,000,000 Number of orders 500,000

Processing non-electronic orders $2,000,000 Number of orders 400,000

Picking orders $3,000,000 Number of different products ordered 800,000

Packaging orders $1,500,000 Number of items ordered 50,000,000

Returns $2,000,000 Number of returns 50,000

If all costs were assigned to customers based on the number of items ordered, what would be the cost per item ordered?

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Question 11 1 / 1 point

Costa Company has a capacity of 40,000 units per year and is currently selling 35,000 for $400 each. Barton Company has approached Costa about buying 2,000 units for only $300 each. The units would be packaged in bulk, saving Costa $20 per unit when compared to the normal packaging cost. Normally, Costa has a variable cost of $280 per unit. The annual fixed cost of $2,000,000 would be unaffected by the special order. What would be the impact on profits if Costa were to accept this special order?

Profits would increase $40,000.

Profits would increase $60,000.

Profits would decrease $200,000.

Profits would increase $80,000

Question 12 1 / 1 point

A company has $6.50 per unit in variable costs and $3.20 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.43, what price should be charged if 56,000 units are expected to be sold?

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Question 13 1 / 1 point

Customer profitability analysis might result in:

dropping some customers that are unprofitable.

lowering price or offering incentives to profitable customers.

giving incentives to all customers to place orders online.

All of the above.

Question 14 0 / 1 point

The Estrada Company uses cost-plus pricing with a 0.38 mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $5.10. In addition, the company incurs $199,200 in fixed costs annually. If demand falls to 88,700 units and the company wants to continue to earn a 0.38 return, what price should the company charge?

Question 15 1 / 1 point

A new product is being designed by an engineering team at Golem Security. Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a target costing methodology. An analysis of similar products on the market suggests a price of $132.00 per unit. The company requires a profit of 0.16 of selling price. How much is the target cost per unit?

Question 16 1 / 1 point

A company using activity based pricing marks up the direct cost of goods by 0.20 plus charges customers for indirect costs based on the activities utilized by the customer. Indirect costs are charged as follows: $6.80 per order placed; $3.50 per separate item ordered; $25.40 per return. A customer places 5 orders with a total direct cost of $2,700, orders 275 separate items, and makes 7 returns. What will the customer be charged?

Question 17 1 / 1 point

A law firm uses activity-based pricing. The company’s activity pools are as follows:

Cost Pool Annual Estimated Cost Cost Driver Annual Driver Quantity

Consultation 200,000 Number of consultations 100 consultations

Administrative Costs 140,000 Admin labor hours 9,500 labor hours

Client Service 98,000 Number of clients 100 clients

The firm had two consultations with this client and required 130 administrative labor hours. What additional costs will be charged to this customer?

Question 18 1 / 1 point

The Break-Even point is the

number of units sold that allow the company to neither a profit nor a loss

number of units sold that allow the company to pay labor their wages

dollar revenues that allows the firm to pay the required rate of return to its investors

dollar profits that allows the firm to pay the required rate of return to its investors

Question 19 1 / 1 point

Which of the following is not part of the Process of Cost Allocation

Select an allocation base to relate the cost pools to the cost objectives

Form cost pools

Identify the cost objectives

Allocate revenues to different products of the firm

Question 20 0 / 1 point

Opportunity costs are:

Never incremental costs

Always incremental costs

Sometimes sunk costs

Incorrect Response