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ACT 5733 Fall 2013 Mid Term Exam Solution




Question;Directions: Answer all the questions. Please submit your work in Word or PDF formats only.You can submit an Excel file to support calculations, but please cut and paste yoursolutions into the Word or PDF file. Be sure to show how you did your calculations. Also,please be sure to include your name at the top of the first page of your file. You can use anysources you wish, except for other people. Please cite any sources you use. There is no time limitto complete the exam, other than it is due at 11:59 PM Eastern on Sunday, November 3rd, 2013.The exam will count 30 percent toward your course grade. The point value for each question isnoted. If you have any questions, please e-mail me at Good luck!Question #1 (12 points)List and describe the four standards in the IMAs Statement of Ethical Practice. As part of youranswer, be sure to provide an example of an action that violates the standard.Question #2 (18 points)Consider the following information, prepared based on a capacity of 60,000 units:CategoryVariable manufacturing costsFixed manufacturing costsVariable marketing costsFixed marketing costsCost per Unit$15.00$1.00$6.00$2.00Capacity cannot be added in the short run and the firm currently sells the product for $25per unit.Consider each of these scenarios independent of each other.a) The company is currently producing 60,000 units per month. A potential customer hascontacted the firm and offered to purchase 10,000 units this month only. The customer iswilling to pay $21 per unit. Since the potential customer approached the firm, there will be novariable marketing costs incurred. Should the company accept the special order? Why or whynot? Be specific.b) The company is currently producing 45,000 units per month. A potential customer hascontacted the firm and offered to purchase 10,000 units this month only. What is theminimum amount that the firm should be willing to accept for this order?c) The company is considering selling 1,000 units that are in danger of becoming obsolete. Whatis the minimum price it would be willing to take for the 1,000 units?Question #3 (44 points)Consider the following information:Beginning inventory (units)Budgeted units to be producedActual units producedUnits soldVariable manufacturing costs per unit producedVariable marketing costs per unit soldBudgeted fixed manufacturing costsFixed marketing costsSelling price per unitVariable costing operating incomeAbsorption costing operating incomeVariable costing beginning inventoryAbsorption costing beginning inventoryVariable costing ending inventoryAbsorption costing ending inventoryPVVAllocated fixed manufacturing costsQ1010,0009,000Q2JA$200$50$1,000,000$200,000$400BCDEFGHI10,00010,30010,300$200$50$1,000,000$200,000$400$345,000Q310010,000QR$200$50$1,000,000$200,000$400SK$280,000$20,000TULMNOP$10,000$15,000V$985,000There are no price, efficiency, or spending variances, and any production-volume varianceis directly written off to cost of goods in the quarter in which it occurs.Complete the missing figures from the above Table. You need to show your work in order tobe eligible for partial credit.Q1ABCDEFGHIQ2JKLMNOPQ3QRSTUVQuestion #4 (12 points)a) What is the goal of the EOQ model?b) Why does a firm hold safety stock?c) What costs are a firm trying to balance when it decides on how much safety stock to hold?Question #5 (9 points)What are some accounting changes that a firm should make if it decides to implement a JITinventory management system? Why are those changes necessary? Be specific!Question #6 (5 points)What is the justification for using backflush costing? Be specific!


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