I need help answering these pretest questions? It is for Accounting class

Name: ______________________________________ Take Home Pre-Test (Exam 2 Material) Extra Credit - 15 Points Instructions: TO RECEIVE FULL CREDIT - YOU MUST SHOW YOUR WORK. IF YOU ONLY PROVIDE SOLUTIONS, EVEN IT IS CORRECT, YOU WILL NOT RECEIVE FULL CREDIT! You may work in teams up to 4 members. Each student will need to submit their own work. If you work in teams, make sure you work on each problem. The purpose of this assignment is to practice the material before the exam. Those who are able to work through each of the problems, tend to do better on the exam. Provide team-member's names: (1):____________________________________ (2):___________________________________ (3):____________________________________ Solutions for this assignment will be made available on Blackboard on 6/22/2016 BUAD 2050: Summer 2016 1 Take-home - Due 6/22/2016 at NOON 1. For a cost to be relevant, what two things must exist? 1. ____________________________________________________________________________ 2. ____________________________________________________________________________ What information is relevant in your decision to attend graduate school? (Identify 3 things) 1. _____________________________________________________________ 2. _____________________________________________________________ 3. _____________________________________________________________ 2. Chappy manufactures two lines of slacks: Plain and Upscale. Last year, the Plain line sold 25,000 slacks and the Upscale sold 32,000 slacks. Chappy is considering to eliminate the Plain line based on the financial statement listed below: Sales Plain $400,000 Upscale $900,000 Less: COGS Unit level 220,000 320,000 Deprecation production 80,000 120,000 equipment Gross Margin 100,000 460,000 Less: operating expenses: Unit level SG&A 80,000 130,000 Corporate (facility level fixed cost) 40,000 40,000 Net income (loss) $(20,000) $290,000 Should Chappy eliminate the Plain slacks line? _______________________ Explain your answer: 3. Tommy has been using the same machines to make its name brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by BUAD 2050: Summer 2016 2 Take-home - Due 6/22/2016 at NOON purchasing more technologically advanced machinery. The old machines cost the company $100,000. The old machines presently have a book value of $60,000 and a market value of $6,000. They are expected to have a five-year remaining life and $1,000 salvage value. The new machines would cost the company $50,000 and have operating expenses of $9,000 a year. The new machines are expected to have a five-year useful life and $5,000 salvage value. The operating expenses associated with the old machines are $15,000 a year. Should Tommy keep or replace the machine, and how would that decision impact profitability? Indicate the following: a. Sunk cost: b. Relevant cost: c. Opportunity cost: 4. Montoya Enterprises produces a sword that sells for $200. Although the company's production capacity is 3,000 swords per year, only 2,500 swords are currently being produced and sold. Humperdinck Corporation has offered to purchase 500 swords as a one-time special purchase at a price of $140 per sword. If the special order is accepted, Montoya Enterprises will have to incur additional fixed costs of $1,200. At Montoya's current level of production (2,500 swords), the Montoya Enterprises incurs the following costs: Direct materials $200,000 Direct labor $100,000 Variable factory overhead $ 50,000 Fixed factory overhead $ 70,000 What will be the impact on Montoya's Enterprises' income if the special order is accepted? 5. Highlander Company uses 10,000 units of a part in its production process. The costs to make a part are: DM per unit $12 BUAD 2050: Summer 2016 3 Take-home - Due 6/22/2016 at NOON DL per unit $25 VOH per unit $13 FOH per unit $30 Highlander has received a quote of $55 from a potential supplier for this part. If Highlander buys the part, 70 percent of the fixed overhead would continue. Indicate whether Highlander should make or buy the part and the dollar amount difference between make and buy. 6. The treasurer of Yoda Inc. needs to estimate cash collections from accounts receivable for September, October, and November 2017. Forty percent of the company's customer's pay in cash the rest are credit customers. The collection pattern for the credit customers is 20% in the month of the sale and 80% in the following month. They have zero uncollectible accounts. Estimated total sales are as follows: August $70,000 September $80,000 October $85,000 November $90,000 a. What is Yoda's cash collections for September, October, and November? - September cash collections: - October cash collections: - November cash collections: b. The accounts receivable balance at the end of November will be: 7. The following is a cash budget. Assume need a minimum cash balance of 6,000 at the start of each month. All borrowing are made in even 1,000 increments (not repayments). No borrowing or investments exist at the beginning of July. Interest is 1.5% per month. BUAD 2050: Summer 2016 4 Take-home - Due 6/22/2016 at NOON Beg Cash Balance Cash Receipts Total cash avail. Cash Disbursements Payments - inventory Wages paid S&A payments Interest payment Total Disbursement Financing: Cash surplus (shortage) Borrowing (repayment) Ending cash balance July $7,400 16,400 ? (a) August ? (d) 20,200 ? (e) September (difficult ? (k) ? (l) 41,000 ? (b) 10,000 8,000 0 20,600 7,800 ? (f) 9,200 ?(g) 26,105 11,400 12,000 ? (m) ?(n) ?(o) ? (c) 3,000 ? (h) ? (i) (p) (1,000) 6,200 ? (j) ? (q) Fill in the boxes: Missing A B C D E F G H I Your answer Missing J K L M N O P Q Your answer 8. Muddy Waters Industries has projected sales of its product for the next 6 months: January February March April May June 300 units 700 units 1,000 units 900 units 400 units 300 units Each unit is sold at $40 per unit. The cost of goods sold is typically 40% of the month's budgeted sales revenue. Muddy Waters tries to maintain a Finished Goods ending inventory equal to the 60% of next month's cost of goods sold. January beginning inventories are expected to conform to company policy. Prepare a purchase budget for March, and April BUAD 2050: Summer 2016 5 Take-home - Due 6/22/2016 at NOON 9. The selling and administrative expense budget of Ruffing Corporation is based on budgeted unit sales, which are 4,000 units for February. The variable selling and administrative expense is $8 per unit. The budgeted fixed selling and administrative expense is $78,000 per month, which includes depreciation of $10,000 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the February selling and administrative expense budget should be: 10. Archer's cost accountant prepared the following static budget based on expected activity of 4,000 units for the May 2016 accounting period: Sales Revenue Variable Costs Contribution Margin Fixed Costs Net Income $64,000 34,000 $30,000 18,000 $12,000 a. If Archer's sales manager were to prepare a flexible budget for expected activity of 4,300 units, budgeted net income on this flexible budget would be? BUAD 2050: Summer 2016 6 Take-home - Due 6/22/2016 at NOON b. If Archer actually produced and sold 4,300 units at $20 each, what is the sales revenue activity/volume variance? c. If Archer actually incurred the following costs during May 2016: Sales Revenue $86,000 Variable Costs 37,000 Contribution Margin $49,000 Fixed Costs 22,000 Net Income $27,000 The flexible budget variance for: i. ii. Fixed costs:__________________________ Variable costs:_________________________ Indicate favorable / unfavorable variances for full credit 11. Direct labor variances - Find the missing information: Units Produced Standard hours per unit Standard hours (SQA) Standard rate per hour Actual hours worked Actual total labor cost Labor rate (price) variance Labor efficiency (usage) variance Case A 800 3 ? (a) $7.00 2,330 ? (b) $466 F ? (c) Case B 240 ? (d) 480 $9.50 ? (e) $4,560 $288 U (f) Letter Your answer Lette r F A BUAD 2050: Summer 2016 7 Case C 1,500 ? (g) ? (h) $6.00 4,875 $26,812.50 ? (i) $2,250 U Your answer Take-home - Due 6/22/2016 at NOON B G C H D I E 12. Cartman makes Supersized Cheezy-Poofs. Cartman determined the standards for each unit (bag) of Cheezy-Poof produced requires 1.5 gallons of ingredients (direct materials) and 0.75 direct labor hours. Cartman expects to pay $2 per gallon of ingredients and his employees a rate of $12 per hour. Based on the company's forecasts, Cartman is expecting to sell 15,000 units (bags) during the year. At the end of year, Cartman actually sold 16,000 units (bags) and used 22,500 gallons of ingredients and paid $2.10 per gallon. Further, Human resources informed Cartman that he incurred $126,585 in direct labor costs from 11,252 direct labor hours (assume no overtime is used). a. What is the material price variance? b. What is the material quantity variance? c. What is the labor rate variance? d. What is the labor usage variance? 13. Responsibility Accounting: a. What is a cost center? Give an example of a cost center _____________________________________________________________________________________ _____________________________________________________________________________________ b. What is a Profit center? Give an example of a profit center _____________________________________________________________________________________ _____________________________________________________________________________________ c. What is an investment center? Give an example of an investment center _____________________________________________________________________________________ _____________________________________________________________________________________ d. What is management by exception: _____________________________________________________________________________________ _____________________________________________________________________________________ BUAD 2050: Summer 2016 8 Take-home - Due 6/22/2016 at NOON 14. The Hydride Division of Murdoch Corporation is an investment center. It has $1,000,000 of operating assets. During 2015, the Hydride Division earned operating income of $400,000 on $6,000,000 of sales. Murdoch's companywide return on investment or desired rate of return is approximately 10% SHOW WORK FOR CREDIT! a. What is the ROI?______________________ b. What is the margin? ____________________ c. What is the turnover? _____________________ d. What is the residual income? _______________ 15. What is a payback period? _____________________________________________________________________________________ _____________________________________________________________________________________ Alpha Company invested $30,000 in new equipment. The more efficient new equipment was expected to reduce operating cash outflows over the next four years by the following: Year 1 $9,000 Year 2 $7,000 Year 3 $6,000 Year 4 $5,000 Using the averaging method, the payback period for the investment is: 16. Lt. Dan Corporation invested $80,000 in a manufacturing equipment. The salvage value of the asset is expected to be $0. The company is expected to add $9,000 per year to the net income. Using the original cost of the asset, the unadjusted rate of return on the investment will be? BUAD 2050: Summer 2016 9 Take-home - Due 6/22/2016 at NOON Hint: If the problem does not give you enough information to determine the net values, keep your calculations simple! 17.Triple Crossing Brewing is considering installing a new cooler (equipment) in order to increase the volume and variety of beverages they can offer. The new cooler will cost $24,000. It is expected to last 7 years but only if the cooler is overhauled (REPAIRED) at a cost of $4,000 at the end of year 4. The new cooler is expected to have a $2,000 salvage value at the end of 7 years. The new cooler is expected to generate additional revenues of $15,000 per year with an increase in expenses of $9,000 per year. Triple Crossing's discount rate is 12%. What is the net present value of this investment opportunity? Should they invest in the cooler? Hint: determine the PV of each item. Be careful if the item is an annuity (annual) or one time only event. PV of an annuity of $1 Time 10% period 1 0.909 2 1.736 3 2.487 4 3.170 5 3.791 6 4.355 7 4.868 8 5.335 12% 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 BUAD 2050: Summer 2016 PV of $1 Time period 1 2 3 4 5 6 7 8 14% 0.877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 10 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 Take-home - Due 6/22/2016 at NOON