MGMT640 final exam part 1

1.	A typical use of managerial accounting is to:
	A)	Help investors and creditors to assess the financial position of the company.
	B)	Help management get a clean audit report.
	C)	Help the SEC decide whether management is in compliance with its policies.
	D)	Help the marketing manager decide which product promotion to implement.

Q2

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?

3. Bubba’s steakhouse has budgeted the following costs for a month in which 1,600 steak dinners will be sold: Materials, $4,080; hourly labor (variable), $5,200; rent (fixed), $1,720; depreciation, $600; and other fixed costs, $550. Each dinner sells for $12.60. How much would Bubba’s profit increase if 10 more dinners were sold?
A) $68.
B) $72.
C) $52.
D) $126.

Q4 Bellfont Company produces door stoppers. August production costs are below:

Door Stoppers produced 74,000

Direct material (variable) $20,000

Direct labor (variable) 40,000

Supplies (variable) 20,000

Supervision (fixed) 27,400

Depreciation (fixed) 21,000

Other (fixed) 4,800

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?

Q5

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

$4,820

Labor cost

2,560

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 increase to 130 chairs in August, how much is the expected total variable cost on the August budget?

Q-6

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 $24,300 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

Q7

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 $7,300

Fixed Costs $25,000

Q8

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 $600 and work part-time earning $1,600.

3. Work full-time earning $4,900.

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

Q9

Total cost were $74,300 when 27,000 units were produced and $99,000 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.

Q10

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?

Q11

Randy's tireland makes a product that sells for $61 per unit and has $50 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?

Q12

Ritz Furniture has a contribution margin ratio of 0.17. If fixed costs are $165,000, how many dollars of revenue must the company generate in order to reach the break-even point?

Q13

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 $1,010 per month, while fixed selling and administrative costs total $2,200. How many phones must be sold to achieve the breakeven point?

Q14

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 $71,200. Swimkids expects sales of $262,800 next year. What is Swimkids's margin of safety?

Q15

Lambardi Company sells 3 types of bags. Bag A sells for $17 and has variable cost of $9.00 per unit. Bag B sells for $14 and has variable cost of $12.00 per unit. Bag C sells for $8 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?

Q16

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?

Q17

Delfi Company produces two models of buckets, Tonto and Pronto. Information regarding these products for May follows:
Tonto Pronto
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 buckets as it can produce of either model. How many of each model should Delfi produce to maximize profit in May considering the constraint?

Tonto: 2,250; Pronto: 0

Tonto: 0; Pronto: 5,625

Tonto: 0; Pronto: 4,375

Tonto: 1,125; Pronto: 2,812

Solution

Q18

Aberdeen Corp. uses activity-based costing system with three activity cost pools. The following information is provided:
Costs: Wages and salaries $ 220,000
Depreciation 120,000
Utilities 100,000
Total $440,000

Activity Cost Pools
Assembly Setting Up Other Total
Wages and salaries 60% 30% 10% 100%
Depreciation 35% 45% 20% 100%
Utilities 30% 40% 30% 100%

How much total cost would be allocated to the Assembly activity cost pool?
A. $204,000
B. $174,000
C. $440,000
D. $162,000