COMPREHENSIVE FINAL EXAMINATION (Chapters 1 13; Chapter 7 Omitted) Approximate Problem Topic Points Minutes I Multiple Choice 50 45 II Matching 16 20 III Variance Analysis 18 25 IV Miscellaneous Managerial Mini-Problems 16 20 100 110 Checking Work 10 120 EXAMINATION INSTRUCTIONS READ COMPLETELY AND CAREFULLY! This examination is a take home examination. This examination must be completed individually, by you! o If it is discovered that your work on this examination was copied or plagiarized, you will receive an F grade (0%), as fully stated in the syllabus. No exceptions! This examination must be completed in typed format and spell checked! o Your name, in the box at the top of this page, must be typed. o Handwritten exams will not be accepted, as fully stated in the syllabus! Note: You must show computations for all problems except the multiple choice questions! This examination, in its entirety, must be turned in with your answers, starting with this page! If you need additional space, please attach any work after its associated problem (not attached to the back) with your name clearly present on every page! o Note: If you have handwritten notes working out problems, attach those after the last page of this examination with your name clearly present on every page. You will have until the next class session to complete the examination (see due date and time below). Emailed examinations will not be accepted, as fully stated in the syllabus! o If your completed and STAPLED examination is not brought to class on Monday, May 3, 2010 by 12:25pm, you will receive an F grade. No exceptions! No makeup of this examination will be given, as fully stated in the syllabus. Problem I Multiple Choice (50 points) On your computer, bold, highlight, underline or box the one best answer. 1. A responsibility center that incurs costs (and expenses) and generates revenues is classified as a(n) a. cost center. b. revenue center. c. profit center. d. investment center. 2. The most useful measure for evaluating a manager's performance in controlling revenues and costs in a profit center is a. contribution margin. b. contribution net income. c. contribution gross profit. d. controllable margin. 3. Ramsey Corporation desires to earn target net income of $90,000. If the selling price per unit is $30, unit variable cost is $24, and total fixed costs are $360,000, the number of units that the company must sell to earn its target net income is a. 30,000. b. 75,000. c. 45,000. d. 60,000. 4. Shane Corporation uses a process cost accounting system. Given the following data, compute the number of units transferred out during the current period. Beginning Work in Process 20,000 units (1/2 complete) Ending Work in Process 25,000 units (1/3 complete) Started into Production 150,000 units a. 125,000 b. 141,667 c. 145,000 d. 150,000 5. Given the following information for Hett Company, compute the company's ROI: Sales $1,000,000 Controllable Margin $120,000 Average Operating Assets $500,000 a. 40% b. 50% c. 12% d. 24% 6. The following data has been collected for use in analyzing the behavior of maintenance costs of Ridell Corporation: Month Maintenance Costs Machine Hours January $121,000 20,000 February 125,000 23,000 March 128,000 24,000 April 159,000 34,000 May 168,000 36,000 June 178,000 38,000 July 181,000 40,000 Using the high-low method to separate the maintenance costs into their variable and fixed cost components, these components are a. $5 per hour plus $20,000. b. $5 per hour plus $30,000. c. $4 per hour plus $41,000. d. $3 per hour plus $61,000. 7. Given the following data for Glennon Company, compute (A) total manufacturing costs and (B) costs of goods manufactured: Direct materials used $120,000 Beginning work in process $20,000 Direct labor 50,000 Ending work in process 10,000 Manufacturing overhead 150,000 Beginning finished goods 25,000 Operating expenses 175,000 Ending finished goods 15,000 (A) (B) a. $310,000 $330,000 b. $320,000 $310,000 c. $320,000 $330,000 d. $330,000 $340,000 8. The production cost report shows both quantities and costs. Costs are reported in three sections: (1) costs accounted for, (2) unit costs, and (3) costs charged to department. The sections are listed in the following order: a. (1), (2), (3). b. (1), (3), (2). c. (2), (1), (3). d. (2), (3), (1). 9. The starting point of a master budget is the preparation of the a. cash budget. b. sales budget. c. production budget. d. budgeted balance sheet. 10. The most useful measure for evaluating the performance of the manager of an investment center is a. contribution margin. b. controllable margin. c. return on investment. d. income from operations. 11. Which of the following capital budgeting techniques explicitly takes the time value of money into consideration? a. Annual rate of return b. Internal rate of return c. Net present value d. Both (b) and (c) above Use the following information for questions 12 and 13. Grant Company estimates its sales at 60,000 units in the first quarter and that sales will increase by 6,000 units each quarter over the year. It has, and desires, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale. 12. Cash collections for the third quarter are budgeted at a. $1,017,000. b. $1,476,000. c. $1,773,000. d. $2,052,000. 13. Production in units for the third quarter should be budgeted at a. 73,500. b. 69,000. c. 91,500. d. 72,000. 14. A flexible budget a. is also called a static budget. b. can be considered a series of related static budgets. c. can be prepared for sales or production budgets, but not for an operating expense budget. d. typically uses an activity index different from that used in developing the predetermined overhead rate. 15. Carey Company's equipment account increased $800,000 during the period; the related accumulated depreciation increased $60,000. New equipment was purchased at a cost of $1,400,000 and used equipment was sold at a loss of $40,000. Depreciation expense was $200,000. Proceeds from the sale of the used equipment were a. $420,000. b. $500,000. c. $560,000. d. $640,000. 16. Which of the following combinations presents correct examples of liquidity, profitability, and solvency ratios, respectively? Liquidity Profitability Solvency a. Inventory turnover Inventory turnover Times interest earned b. Current ratio Inventory turnover Debt to total assets c. Receivables turnover Return on assets Times interest earned d. Quick ratio Payout ratio Return on assets 17. A companys planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs: Variable Fixed Indirect materials $60,000 Depreciation $25,000 Indirect labor 80,000 Taxes 5,000 Factory supplies 10,000 Supervision 20,000 A flexible budget prepared at the 90,000 machine hours level of activity would allow total manufacturing overhead costs of a. $135,000. b. $180,000. c. $185,000. d. $150,000. 18. A company developed the following per unit materials standards for its product: 3 gallons of direct materials at $5 per gallon. If 4,000 units of product were produced last month and 12,500 gallons of direct materials were used, the direct materials quantity variance was a. $1,500 favorable. b. $2,500 unfavorable. c. $1,500 unfavorable. d. $2,500 favorable. 19. The standard direct labor cost for producing one unit of product is 5 direct labor hours at a standard rate of pay of $8. Last month, 5,000 units were produced and 24,500 direct labor hours were actually worked at a total cost of $180,000. The direct labor quantity variance was a. $4,000 unfavorable. b. $6,000 unfavorable. c. $6,000 favorable. d. $4,000 favorable. 20. Under the time-and-material-pricing approach, the charges for any particular job include each of the following except the a. labor charge. b. charge for materials. c. material loading charge. d. overhead charge. 21. The transfer pricing approach that does not reflect the selling divisions true profitability is the a. cost-based approach. b. market-based approach. c. negotiated price approach. d. time-and-material-pricing approach. Use the following information for questions 22 and 23. Robot Toy Company manufactures two products: X-O-Tron and Mechoman. Robots overhead costs consist of setting up machines, $200,000; machining, $450,000; and inspecting, $150,000 Additional information on the two products is: X-O-Tron Mechoman Direct labor hours 15,000 25,000 Machine setups 600 400 Machine hours 24,000 26,000 Inspections 800 700 22. Overhead applied to Mechoman using traditional costing is a. $320,000. b. $384,000. c. $416,000. d. $500,000. 23. Overhead applied to X-O-Tron using activity-based costing is a. $300,000. b. $384,000. c. $416,000. d. $480,000. 24. An appropriate cost driver for an assembling cost pool is the number of a. purchase orders. b. setups. c. parts. d. direct labor hours. 25. Which of the following is included in the cost of goods manufactured under absorption costing but not under variable costing? a. Direct materials b. Variable factory overhead c. Fixed factory overhead d. Direct labor Problem II Matching (16 points) Instructions: Designate the terminology that best represents the definition or statement given below by placing the identifying letter(s) in the space provided. Note: No terminology should be used more than once. A. Activity-based costing N. Job cost sheet B. Annual rate of return O. Noncontrollable costs C. Budgetary control P. Non-value-added activity D. Contribution margin Q. Operating budgets E. Contribution margin ratio R. Overhead controllable variance F. Controllable costs S. Overhead volume variance G. Absorption costing T. Physical units H. Cost accounting U. Process cost systems I. Cost centers V. Product costs J. Cost of capital W. Profit center K. Equivalent units of production X. Value-added activity L. Fixed costs Y. Variable costs M. Free cash flow Z. Variances ____ 1. Costs that a manager has the authority to incur within a given period of time. ____ 2. A form used to record the costs chargeable to a job. ____ 3. A responsibility center that incurs costs and also generates revenues. ____ 4. The amount of revenue remaining after deducting variable costs. ____ 5. Used to apply costs to similar products that are mass produced in a continuous fashion. ____ 6. Costs that vary in total directly and proportionately with changes in the activity level. ____ 7. The differences between actual costs and standard costs. ____ 8. Determines profitability of a capital expenditure by dividing expected net income by the average investment. ____ 9. The rate a company must pay to obtain funds from creditors and stockholders. ____ 10. Costs that are an integral part of producing the finished product. ____ 11. Allocates overhead to multiple cost pools and assigns the cost pools to products by means of cost drivers. ____ 12. A measure of the work done during the period, expressed in fully completed units. ____ 13. A costing approach in which all manufacturing costs are charged to the product. ____ 14. Increase the worth of a product or service to customers. ____ 15. The amount of cash from operations after deducting capital expenditures and cash dividends paid. ____ 16. Individual budgets that culminate in a budgeted income statement. Problem III Variance Analysis (18 points) The Olson Company developed the following standard costs for its product in 2008: Standard Cost Card Unit Standard Cost Direct materials (5 pounds @ $4 per pound) $20 Direct labor (4 hours @ $8 per hour) 32 Manufacturing overhead Variable (4 hours @ $4 per hour) 16 Fixed (4 hours @ $3 per hour) 12 $80 The company planned to work 100,000 direct labor hours and produce 25,000 units of product in 2008. Actual results for 2008 are as follows: 24,000 units of product were produced. Actual direct materials purchased and used during the year amounted to 122,000 pounds at a cost of $475,800. Actual direct labor costs were $779,000 for 95,000 direct labor hours worked. Total actual manufacturing overhead incurred amounted to $685,500. Instructions Calculate the following variances and you must show computations to support your answers! Note: You must also indicate if the variances are favorable (F) or unfavorable (U). (a) Direct materials price and direct materials quantity variances. (b) Direct labor price and direct labor quantity variances. Problem IV Miscellaneous Managerial Mini-Problems (16 points) Carson Corporation manufactures paper shredding equipment. You are requested to audit a sampling of computations made by Carson's internal accountants via your independent recalculation of the information. Instructions: Compute the requested information for each of the following independent situations. Note: You must show all computations to support your answers! (a) Carson uses a process costing system. 2,000 units were in process at the beginning of the period, 60% complete. 20,000 units were started into production during the period; 1,000 were in process at the end of the period, 60% complete. Compute equivalent units for conversion costs. (b) Carson sells each unit for $500. Variable costs per unit equal $300. Total fixed costs equal $800,000. Carson is currently selling 5,000 units per period and would like to earn net income of $400,000. Compute: (1) break-even point in dollars; (2) sales units necessary to attain desired income; and (3) margin of safety ratio for current operations. (1) Break-even point = $________________________________________________. (2) Desired sales = _____________________________________________ units. (3) Margin of safety = _______________________________________________ %