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Accounting week4 midterm Exam




Question;1. (TCO1) ABC systems create (Points: 5)one large cost pool.homogenous activity-related cost pools.activity-cost pools with a broad focus.activity-cost pools containing many direct costs.2. (TCO 1) Merriamn Company provides the following ABC costing information:ActivitiesAccount inquiryhoursTotalCosts$400,000Activitycostdrivers10,000hoursAccount billing4,000,000$280,000lineslinesAccount40,000verification$150,000accountsaccountsCorrespondence4,000$ 50,000letterslettersTotal costs$880,000The above activities are used by Department A and B as follows:Department DepartmentABAccount inquiry2,000 hours 4,000 hourshoursAccount billing 400,000200,000lineslineslinesAccount10,0008,000verificationaccountsaccountsaccountsCorrespondence1,000 letters 1,600 letterslettersHow much of the inquiry cost will be assigned to Department A?(Points: 5)$80,000$400,000$160,000Noneoftheabove3. (TCO 2) A master budget (Points: 5)includes only financial aspects of a plan and excludes nonfinancial aspects.includes broad expectations and visionary an aid to coordinating what needs to be done to implement a plan.should not be altered after it has been agreed upon.4. (TCO2)Whiteplannedtouse$82ofmaterialperunitbutactuallyused$80ofmaterialperunit,andplannedtomake1,200unitsbutactuallymade1,000units.Thesalesvolumevarianceis (Points: 5)$2,000favorable.$14,000unfavorable.$16,400unfavorable.$2,400favorable.5. (TCO3)WhichofthefollowingdoesNOTrepresentacauseandeffectrelationship? (Points: 5)Itmakessensethatifacomplexproducthasalargenumberofparts,itwilltakelongertoassemblethanasimpleproductwithfewerparts.Materialcostsincreaseasthenumberofunitsproducedincreases.Acompanyischarged40centsforeachbrochureprintedandmailed.Utilitycostsincreaseatthesametimethatinsurancecostsincrease.6. (TCO 4) Relevant costs of a make-or-buy decision include all of the following EXCEPT (Points: 5)fixed salaries that will not be incurred if the part is outsourced.current direct material costs of the part.special machinery for the part that has no resale value.material-handling costs that can be eliminated.7. (TCO5)Constraintsmayinclude (Points: 5)theavailabilityofdirectmaterialsinmanufacturing.linearsquarefeetofdisplayspaceforaretailer.directlaborintheserviceindustry.Alloftheabove8. (TCO5)JensenCompanyhasrelevantcostsof$80perunittomanufacturePartA. AcurrentsupplierofferstomakePartAfor$70perunit.Ifcapacityisconstrained,theopportunitycostofbuyingPartAfromthesupplieris (Points: 5)0.$10,000.$70,000.indeterminable.9. (TCO 3) The cost components of an air conditioner include $35 for the compressor, $11.50 for thesheet-molded compound frame, and $80 per unit for assembly. The factory machines and tools cost is$55,000. The company expects to produce 1,500 air conditioners in the coming year. What cost functionbest represents these costs? (Points: 5)y = 1500 + 126.5Xy = 1,500 + 55,000Xy = 55,000 + 126.50Xy = 55,000 + 1,500X10. (TCO 4) Sunk costs (Points: 5)are future costs.are past costs.have future implications.are relevant to all decisions.Essays1. (TCO 1)Trustme Vehical Rental Corporation has two departments, Car Rental and Truck Rental. Central costsmay be allocated to the two departments in various ways.Number of vehicles in fleetNumber of employeesSalesCar Rental700150$1,500,000Truck Rental30050$750,0001. If administrative expense of $125,000 is allocated on the basis of number of employees, the amountallocated to the truck rental department would be2. If administrative expense of $125,000 is allocated on the basis of number of employees, the amountallocated to the car rental department would be3. If advertising expense of $150,000 is allocated on the basis of sales, the amount allocated to the carrental department would be4. If advertising expense of $225,000 is allocated on the basis of sales, the amount allocated to the truckrental department would be5. If the facility lease expense of $350,000 is allocated on the basis of vehicles in the fleet, the amountallocated to the truck rental department would be(Points: 25)2. (TCO 2) Favata Company has the following information:MonthBudgeted SalesJune$60,000July51,000August40,000September70,000October72,000In addition, the cost of goods sold rate is 70% and the desired inventory level is 30% of next month's costof sales.Prepare a purchases budget for July through September.(Points: 25)3. (TCO 3) As part of his job as cost analyst, Max Thompson collected the following informationconcerning the operations of the Machining Department:ObservationMachine-hoursTotal Operating CostsJanuary4,000$45,000February4,60049,500March3,80045,750April4,40048,000May4,50049,800Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.(Points: 25)4.(TCO 5) Kirkland Company manufactures a part for use in its production of hats. When 10,000 items areproduced, the costs per unit are:Direct materials$0.60Direct manufacturing labor3.00Variable manufacturing overhead1.20Fixed manufacturing overhead1.60Total$6.40Mike Company has offered to sell to Kirkland Company 10,000 units of the part for $6.00 per unit. Theplant facilities could be used to manufacture another item at a savings of $9,000 if Kirklandaccepts theoffer. In addition, $1.00 per unit of fixed manufacturing overhead on the original item would beeliminated.a. What is the relevant per unit cost for the original part?b. Which alternative is best for Kirkland Company? By how much?(Points: 25)


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