Managerial accounting

2071 end of semester test

1. The job order cost sheet for Job 550 contains the following information: 100 units; direct labor, $4,000; direct materials, $9,000; manufacturing overhead, $3,000. Thirty-three of the units will be shipped to the customer at a sales price of $150 each. Which of the following is one effect of recording the shipment to the customer? A. Finished goods increases by $5,280. B. Cost of goods sold increases by $4,950 C. Work in process decreases by $4,950. D. Cost of goods sold increases by $5,280. E. Some other answer
2. Beginning raw materials inventory for Johnson Inc. was $15,000. Ending raw materials was $7,000. Goods completed during the year were $30,000. Purchases of raw materials totaled $25,000. How much were the raw materials used in current manufacturing costs? A. $30,000 B. $37,000 C. $42,000 D. $25,000 E. Some other answer
3. Harris Companys sales revenue for 2005 was $300,000. Harris has one product that sells for $25 and has variable costs of $18. Fixed costs total $155,000. How many units must Harris sell to break even? Round your answer up to the nearest whole unit. ___________________________Units
4. Manufacturing overhead during the year was overapplied. If the amount is immaterial, which one of the following is a part of the transaction that should occur to dispose of the overapplied amount? A. Increase Cost of Goods Sold B. Decrease Cost of Goods Sold C. Increase Finished Goods Inventory, Work in process, and Cost of goods sold D. Decrease Finished Goods Inventory, Work in process, and Cost of goods sold
5. ThefollowingbudgetdataareavailableforSurlyCorporation:Whichofthefollowingisavalidpredeterminedoverheadrate?A.$1.96perdirectmaterialdollarB.$1.26perdirectlabordollarC.$11.20perdirectlaborhourD.$1.21perdirectlabordollarE.Someotheranswer

Estimated direct labor hours	9,000
Estimated direct labor dollars	$85,500
Estimated material dollars	$55,000
Actual manufacturing overhead costs	$100,800
Estimated manufacturing overhead costs	$103,500

1. Which is not a way that managerial accounting supports the management cycle?
   1. evaluating performance
   2. reporting the results of activities
   3. providing GAAP statements
   4. developing plans and analyzing alternatives
2. The focus of managerial accounting is?
   1. Planning, control, and decision making
   2. Incremental analysis
   3. You get what you measure
   4. To make money
3. As volume decreases, A. variable cost per unit decreases. B. fixed cost in total decreases. C. variable cost in total remains the same. D. fixed cost per unit increases.

9. The following information was taken from the cost records of the Solom Corporation:

Solom applies manufacturing overhead based on direct labor hours. How much is overapplied or underapplied manufacturing overhead closest to?? A. $5,000 overapplied. B. $8,708 overapplied.

C. $1,500 overapplied. D. $1,500 underapplied. E. $3,500 underapplied

10. The delivery trucks of Slavin Transport Company incurred $3,600 of maintenance costs during the busiest month of 2004, in which 12,000 miles were driven collectively. During the slowest month, $2,800 in maintenance costs were incurred, and 8,000 miles were driven. Using the high-low method, what maintenance cost would the company expect to incur if 15,000 miles were driven?

Estimated manufacturing overhead	$89.000
Actual manufacturing overhead	$84,000
Estimated direct labor hours	12,000
Actual direct labor hours	12,500

A. $3,000 B. $4,400 C. $4,000 D. $4,200

11. Consider the following information for Executive Electronics.

Total assets Noninterest-bearing current liabilities Net income Interest expense Tax rate Cost of capital Required rate of return

How much is residual income for 2012?

1. $53,000)
2. ($38,400)
3. $73,400
4. $156,660
5. Some other answer

12/31/2011

$11,800,000 500,000 700,000 2,100,000 35% 7% 9%

12/31/2012

$11,000,000 520,000 800,000 300,000 35% 8% 10%

12. On a balanced scorecard, the measure of the number of new patents developed through research and development would be an example of a measure in the:

1. learning and growth dimension
2. internal process dimension
3. the customer dimension
4. the financial dimension

Use the following information for questions 13-16.

Neilson Manufacturing produces baseball equipment. The standard cost of producing one unit of model XHR is:

Material (3.50 ounces at $1.30 per ounce) Labor (0.30 hour at $12.00 per hour) Total

$4.55 3.60 $8.15

At the start of 2008, Neilsons planned to produce 80,000 units during the year. The following information summarizes the results for 2011: Actual production was 75,000 units. Purchased 275,000 ounces of material at a total cost of $343,750.

Used 266,250 ounces of material in production. Employees worked 22,000 hours and were paid $275,000.

2071 end of semester test

1. What is A. B. C. D. E.
2. What is A. B. C. D. E.
3. What is A. B. C. D. E.
4. What is A. B. C. D. E.

the material price purchases variance? $4,875 unfavorable $13,750 favorable $2,663 favorable

$13,313 favorable Some other answers

the material quantity variance? $4,875 unfavorable $8,875 favorable $$14,750 favorable

$13,750 favorable Some other answers

the labor rate variance? $6,000 favorable $5,000 unfavorable $24,000 favorable $11,000 unfavorable Some other answers

the labor efficiency variance? $11,000 unfavorable $5,000 unfavorable $6,000 favorable

$24,000 favorable Some other answers

17. The difference between standard costs and budgeted costs is that standard costs

1. refer to a single unit while budgeted costs refer to the cost, at standard, for the total number of budgeted units.
2. are calculated under ideal conditions, while budgeted costs are calculated for attainable conditions.
3. are calculated for material while budgeted costs are calculated for labor.
4. are part of the management accounting system, while budgets are part of the financial accounting system.
5. Budgeted sales (in units) for the Randstar Company are as follows:

September October November December

45,000 units 60,000 units 40,000 units 75,000 units

The company wishes to have 10% of the next months sales on hand at the end of each month. Budgeted production for November is:

1. 43,500 units
2. 40,000 units
3. 47,500 units
4. 36,000 units
5. Some other answers

19. Billings Rail Companys sales for the next five months are as follows: February $175,000 March $160,000 April $145,000 May $135,000 June $130,000

Collection history for the company indicates that 50% of sales are collected in the month of the sale, 30% is collected in the following month, 10% is collected two months later and 10% is uncollectible. How much are total budgeted cash receipts for the second quarter?

 $___________________

1. Stanton Company had sales of 15,000 units of its only product in the first quarter of 2007. In the first quarter of 2008, Stanton anticipates selling 20% more units than it sold in the first quarter of 2007, with a selling price of $68 per unit. What is the amount of sales revenue that will appear in the budgeted income statement for the first quarter of 2008?
   1. $1,224,000
   2. $1,020,000
   3. $1,468,800
   4. $816,000
   5. Some other answers
2. A company is considering investing in a piece of machinery which will cost $550,000. It will provide an additional $160,000 in sales each year and its annual operating expenses are expected to be $52,000. The machine will be depreciated on a straight-line basis over a 10-year life with no estimated salvage value. The company has a 40% tax rate. What is the annual operating cash flow?
   1. $64,800
   2. $96,000
   3. $86,800
   4. $118,000
   5. Some other answers

Spring 2015 Final Assignment Page 5 of 11

22. Dokley is deciding whether to accept a project requiring a $110,000 investment. Projected operating cash flows are:

two years. A. B. C. D. E.

The companys required rate of return is 8.2%. What is the internal rate of return on the investment? 3.13%

11.74% 78.33% 12.32% some other answer

Year 1 Year 2 Year 3 Total

$ 30,000 40,000 60,000 $120,000

If HTs required rate of return is 5.7%, how much is the NPV? A. ($3,476) B. $106,254 C. ($3,289)

D. $10,000 E. $4,992

23. Projects should not be undertaken if

1. the NPV is less than zero.
2. the payback period is more than five years.
3. the cost of capital is high.
4. the IRR is equal to or greater than the required rate of return.

24. Staten Company has net income of $100,000, interest expense of $20,000, total assets of $800,000, and non-interest bearing current liabilities totaling $100,000. The cost of capital is 10%. The income tax rate is 40%. How much is NOPAT?

1. $108,000
2. $112,000
3. $50,000
4. $120,000
5. $88,000
6. Some other answers

25. An investment costing $950,000 will yield cash inflows of $400,000 per year for 2 years, then $200,000 for the next

26. Walter Jewelry Company produces a bracelet which normally sells for $79.95. The company produces 1,500 units annually but has the capacity to produce 2,000 units. A special order for manufacturing and selling 200 bracelets at $49.95 has been received which would not disrupt current operations. Current costs for the bracelet are as follows:

Direct materials Direct labor Variable overhead Fixed overhead Total

$17.00 14.50 4.00 5.00 $40.50

In addition, the customer would like to add a monogram to each bracelet which would require an additional $2 per unit in additional labor costs and Walter Company would also have to purchase a piece of equipment to create the monogram which would cost $1,600. This equipment would not have any other uses.

With regard to this special order, only

1. incremental revenues will exceed incremental costs by $2,490.
2. incremental revenues will exceed incremental costs by $890.
3. incremental revenues will exceed incremental costs by $2,890
4. incremental revenues will exceed incremental costs by $1,290

Spring 2015 Final Assignment Page 6 of 11

27. BigByte Company has 12 obsolete computers that are carried in inventory at a cost of $13,200. If these computers are upgraded at a cost of $7,500, they could be sold for $15,300. Alternatively, the calculators could be sold as is for $9,000. What is the net advantage or disadvantage of re-working the computers?

1. $6,300 advantage
2. $1,200 disadvantage
3. $5,400 disadvantage
4. $3,000 advantage
5. Some other amount
6. The following are production and cost data for two products, buckets and pails. Buckets Pails Contribution margin per unit $450 $280 Machine set-ups needed per unit 20 14 The company can only perform 14,000 set-ups each period yet there is unlimited demand for each product. What is the total maximum contribution margin for the year if 14,000 setups are made? (Hint, when there is a constraint choose the product with the higher CM per constraint).
   1. $315,000
   2. $35,000
   3. $280,000
   4. $595,000
   5. Some other amount
7. Central Apparel Company owns two stores and management is considering eliminating the East store due to declining sales. Contribution income statements are as follows and common fixed costs are allocated on the basis of sales.

West

Sales $420,000

East

$90,000 45,000 25,000 35,000

($15,000)

Total

$510,000 255,000 75,000 145,000 $35,000

Variable costs Direct fixed costs Allocated fixed costs Net Income

210,000 50,000 110,000 $ 50,000

Centrals management feels that if they eliminate the East store, that sales in the West store will increase by 20%. If the East store is closed, what effect will occur to the overall company net income?

1. Increase by $25,000
2. Increase by $22,000
3. Increase by $12,000
4. Increase by $15,000
5. some other answer

30. Wallen Company has gathered the following data on a proposed investment project.

Investment required in equipment Annual net cash inflows expected Salvage value Life of the equipment

$400,000 80,000

40,000 10 years 30%

Income tax rate How much is the internal rate of return on the proposed investment? A. 11.43% B. 16.7% C. 20% D. 30.4% E. 15.7%

Spring 2015 31. Washington Supply Company experienced the following costs in 2010:

Final Assignment

Page 7 of 11

34.

Watkins Inc

A. B. C. D. E.

$15,000 $42,000 $27,000 $9,000 Some other amount

Direct materials Direct labor Manufacturing Overhead Costs

Variable

Fixed Selling & Administrative Costs

Variable selling Fixed selling Fixed administrative

$3.50/unit $2.55/unit

$1.50/unit $20,000

$2.15/unit $8,000 $7,000

During the year the company manufactured 95,000 units and sold 80,000 units. If the average selling price per unit was $20, how much was the companys contribution margin?

1. $996,000
2. $776,000
3. $824,000
4. $1,116,000
5. some other amount
6. The purpose of managerial accounting is planning, controlling, and decision making. True/False
7. Rambles Toyland makes a product that sells for $70 per unit and has $45 per unit in variable costs. Annual fixed costs are $24,000. How much will profits increase if 600 more units are sold?

Sales (@ $50) COGS Gross Margin Less selling & admin

250,000 120,000 130,000

100,000 $30,000

Income Statement For the Year ended December 31, 2010

Variable selling Fixed selling Fixed admin exp

Net Income

75,000 10,000 15,000

Watkins manufactures and distributes watches. In 2010, the company produced 6,000 watches. Annual fixed manufacturing overhead was $18,000. What is the value of ending inventory

using variable costing? $___________________

35. How much is variable costing net income? $______________

Spring 2015 Final Assignment Page 8 of 11 36. Summer Reflections Beverage company reported the following for their bottled water division:

Sales Operating expense Depreciation Interest expense

$600,000 325,000 15,000 90,000

The tax rate is 30%. How much is the companys NOPAT? $_________________ 37. Summer Reflections reported the following on its balance sheet:

Raw materials WIP Finished goods

May 1, 2010 $15,000

8,000 45,000

April 1, 2010 $25,000

10,000 38,000

If Summer Reflections had purchases of $40,000, how much was COGS at the end of April?

$_______________ 38. How much were the COGMfd? $________________

39. Washington Industries had budgeted MOH of $90,000 and anticipated using 25,000 machine hours during the period. Actual MOH was $95,000 and OH added to jobs was $97,000. How much OH was overapplied or underapplied?

$______________ Overapplied/Underapplied (circle one)

40. Smyth and Wessin is considering investing in a bullet-proof vest machine. The machine has an estimated cost of $150,000 and a $9,000 salvage value. The five year project has estimated net income of $10,800 each year. The required rate of return is 12% and the cost of capital is 10%. Hint, calculate depreciation expense and convert NI to CF. Make sure you remember how the salvage value affects cash flows.

What is the projects NPV? $______________ (round to the nearest dollar)

41. What is the projects IRR? _______________ (round to the nearest percent)

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42. Aviance produces two products: hammers and screw drivers. Demand for both products is almost equal; however, the company has only 50 hours of machine time remaining in the month before the machine must be shut down for maintenance. Hammer sell for $10 and have variable costs of $6 per unit. Screw drivers sell for $8 and have variable cost per unit of $3. Allocated fixed costs are $2 per unit. It takes 2 hours to produce a hammer and 3 hours to produce a screw driver. Which product should Aviance produce?

_____Hammers _____Screwdrivers _______Either

43. Smith Company manufactures widgets. Richardson Company has approached Smith with a proposal to sell the company one of the components used to make widgets at a price of $100,000 for 50,000 units. Smith is currently making these components in its own factory. The following costs are associated with this part of the process when 50,000 units are produced:

Direct material Direct labor Manufacturing overhead Total

$ 54,000 20,000 70,000 $144,000

The manufacturing overhead consists of $38,000 of costs that will be incurred regardless of whether the order is accepted or not. What is the total cost that Smith will incur if it buys the components from Richardson Company? Note, I am not asking how much Smith will pay Richardson. I am asking how much will it COST Smith if Smith buys.

 $_______________

43. Checks Experts sells checks and deposits slips to businesses. The companys history shows 40% of the sales are collected in the month of the sale, 30% the following month, 28% two months later and 2% is never collected. The company expects sales to be $500,000 (Jan), $450,000 (Feb), $425,000 (Mar), and $400,000 (Apr). How much are the budgeted cash receipts for March?

$______________________ 44. How much are the budgeted cash receipts for the first quarter? $_________________

Spring 2015 Final Assignment Page 10 of 11

45. Edy's, Inc. wants to purchase of a new ice cream truck with a cost of $51,000. Edy's has a cost of capital of 7.4% and a required rate of return of 10.4%. Its income tax rate is 32%. The acquisition is proposed for January 1, 2011. Edy's expects it can sell the truck for $7,000 at end of its useful life of 4 years. Edy's estimates the following incremental amounts to be generated by the truck:

Year 1 Net income $4,200 Operating cash flows 15,200

How much is accounting rate of return?

A. 14.48% B. 56.64% C. 10.64% D. 18.71% E. Some other answer

Year 2 $5,600 16,600

Year 3 $6,100 17,100

Year 4 $5,800 16,800

46. Smithy Company produces hockey helmets. The standard cost for each helmet is as follows:

Direct material Direct labor Overhead

5.0 lbs at $4.00/lb. 2.0 hrs @ $16.00/hr.

$20.00 $32.00 $10.00

During November, 2,000 helmets were produced. 10,600 lbs. of material were purchased and used during November, at a total cost of $44,520. Labor worked 3,870 hours at a total cost of $61,146. Actual overhead was $21,900. The overhead cost of $10.00 per helmet was determined using an estimated monthly fixed overhead of $13,200 and a variable overhead of $4.00 per helmet.

What is the labor rate variance? $_______________ 47. What is the labor efficiency variance? $_______________ 48. What is the materials price variance? $_______________ 49. What is the materials quantity variance? $_______________

Spring 2015 Final Assignment Page 11 of 11

50. Brett Favor has written a self improvement book that has the following cost characteristics when 10,000 books were sold:

Sales Variable Production Selling & administrative Fixed costs:

Production Selling & administrative

$160,000

$40,000 $20,000

$88,000 per year 18,000 per year

How many units must be sold to break-even? ___________________ 51. How much in sales dollars must Brett generate in order to earn a $50k profit? $______________