6) Salinas Comp N service departments, Maintenance and Human Resources. Salinas 6) Company also toduction departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees. The following information has been gathered for the current year: Human Maintenance Resources Mixing Finishing Direct costs $126,000 $84,000 $105,000 $175,000 Square footage BOO 100 1,300 1,10 Number of employees 20 12 28 32 Assume the step-down method is used to allocate service department costs. Which department should be allocated first? A) Maintenance B) Mixing C) Human Resources D) Finishing 7) McArthur Company makes three types of products. The company has two types of customers. The 7) cost to serve all customers is $12,000 and is allocated to customer types based on the number of manager visits to customer locations. The following data are available Product 1 Product 2 Product 3 Sales $5,000 $6,000 $30,000 Cost of goods sold 4,000 4,800 15,000 Gross margin $1,000 $1,200 $15,000 Customer Type 1 Customer Type 2 Product 1 Sales $500 $4,500 Product 2 Sales $1,000 $5,000 Product 3 Sales $16,000 $14,000 Manager visits 12 What is the cost to serve for Customer Type 1? A) $3,000 B) $12,000 C) $2,400 D) $9,600 8) If a company allocates costs of central services to products based on sales, should be used 8) as the allocation base. A) actual sales B) budgeted sales C) estimated usage D) actual usage 9) When allocating fixed costs from service departments to production departments, managers should 9) use instead of _ A) capacity used; capacity available B) capacity used; budgeted capacity C) capacity available; capacity used D) capacity available; budgeted capacity 10) By-products differ from joint products because by-products have 10) A) joint costs before the split-off point B) insignificant sales value when compared to other products at the split-off point C) significant sales value when compared to other products at the split-off point D) no joint costs before the split-off point 2TRUHFALSE. rite 'T' if the statement is true and 'F' if the statement is false. 11} E\" has of service departments in a hospltal include the housekeeping and laundry departments. 11] 12] If a company allocated fixed costs from service departments to user departments based on 12} long-range plans, there is a tendency on the part of managers to underestimate their planned usage. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 13) What is the after-tax amount of annual cash operating savings associated with a proposed 13] machine? A] operating savings times {1 minus the tax rate} 13} operating savings C1550 D} operating savings times the tax. rate 14] A machine that costs $180,000 is expected to generate $40,000 in cost savings annually for five 14) years. The terminal value at the end of ve years is $10,000. Aswme straight-line depreciation is used. Ignore income taxes. What is the payback period? A} 4.00 years B) 4.50 years C) 3.00 years D] 4.20 years 'I'RUEJ'FALSE. Write '1" if the statement is true and 'P' if the statement is false. 15) US. corporations are required to use the same method of mleulating depreciation on both their 15] income tax retum and their annual nancial statements. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 16} The internal rate of return method and the method usually result in the same investment 16) decisions. A) accounting rate of return B) payback period C} return on investment D} net present value TRUHFALSE. Write '1'" if the statement is hue and \"I" if the statement is false. I?) A recognized loss on the sale of a long-term asset muses a company's tax liability to decrease. 17') MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. '13) is a capital budgeting model that ignores the time value of money and focuses on the 18) protability of an investment project. A) Payback model B) Real options model C] Accounting rate of return model D} Internal rate of return model 19} Ruth Company has a tax rate tit-10% and a required rate of return of 12%. The company has new 19) equipment that saves $200,000 per year in labor costs. What is the annual after-tax cash ow from the labor cost savings? A) $30,000 cash outow B} $120,000 cash outow C} $120,000 cash inflow D) $00,EI]0 cash inflow Exam an All 10 - 12 7 Name TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 1) Return on sales equals revenue divided by income. 1) 2) The nominal rate of interest equals the real rate of interest minus the inflation rate. 2) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 3) When allocating service department costs to producing departments, which of the following 3) guidelines is NOT followed? A) Allocate variable- and fixed-cost pools separately. B) Establish the cost-allocation procedure after rendering the service. C) Establish the cost-allocation procedure before rendering the service. D) Evaluate performance using flexible budgets for each service department. 4) Some service department activities support customers rather than the production process. These 4) costs are traced directly to instead of. A) service departments; producing departments B) customers; producing departments C) producing departments; service departments D) products; producing departments 5) Summer Company makes three types of products. The company has two types of customers. The 5 ) cost to serve all customers is $12,000 and is allocated to customer types based on the number of manager visits to customer locations. The following data are available: Product 1 Product 2 Product 3 Sales $5,000 $6,000 $30,000 Cost of goods sold 4,000 4,800 15,000 Gross margin $1,000 $1,200 $15,000 Customer Type 1 Customer Type 2 Product 1 Sales $500 $4,500 Product 2 Sales $1,000 $5,000 Product 3 Sales $16,000 $14,000 Manager visits 16 What is the operating profit (loss) for all three products for Customer Type 2? A) $8,450 B) $9,600 C) $(700) D) $(2,600)