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Devry ACCT434 midterm exam




Question;Midterm;Question 1.1.(TCO 1) Which of the following is a sign that an ABC system may be;useful? (Points: 5);Operations staff agrees with accountants about;the costs of manufacturing and marketing products and services.There are small amounts of indirect costs.Products make diverse demands on resources;because of differences in volume, process steps, batch size, or complexity.Products a company is less suited to produce;and sell show small profits.;Question 2.2.(TCO 1) Merriamn Company provides the following ABC costing;information;Activities;Total Costs;Activity-cost drivers;Account inquiry hours;$400,000;10,000 hours;Account billing lines;$280,000;4,000,000 lines;Account verification accounts;$150,000;40,000 accounts;Correspondence letters;$ 50,000;4,000 letters;Total costs;$880,000;The;above activities are used by Department A and B as follows;Department A;Department B;Account inquiry hours;2,000 hours;4,000 hours;Account billing lines;400,000 lines;200,000 lines;Account verification accounts;10,000 accounts;8,000 accounts;Correspondence letters;1,000 letters;1,600 letters;How;much of account verification costs will be assigned to Department A? (Points: 5);$14,000$150,000$10,000$37,500;Question 3.3.(TCO 2) Examples of;nonfinancial budgets include all of the following EXCEPT (Points: 5);cash collections from customers.units sold.units manufactured.number of new products introduced.;Question 4.4.(TCO;2) White planned to use $82 of material per unit but actually used $80 of;material per unit, and planned to make 1,200 units but actually made;1,000 units. The flexible-budget variance is (Points: 5);$2,000 favorable.$14,000 unfavorable.$16,400 unfavorable.$2,400 favorable.;Question 5.5.(TCO;3) Which of the following does NOT represent a cause-and-effect;relationship? (Points: 5);It makes sense that if a complex product has a;large number of parts, it will take longer to assemble than a simple;product with fewer parts.Material costs increase as the number of units;produced increases.A company is charged 40 cents for each brochure;printed and mailed.Utility costs increase at the same time that;insurance costs increase.;Question 6.6.(TCO;4) Relevant costs in a make-or-buy decision of a part include (Points: 5);setup overhead for the manufacture of the;product using the outsourced part.currently used manufacturing capacity that has;alternative uses.annual plant insurance that will remain the;same.corporate office costs that will be allocated;differently.;Question 7.7.(TCO;5) The theory of constraints is used for cost analysis when (Points: 5);a manufacturing company produces multiple;products and uses multiple manufacturing facilities and/or machines.using a long-term time horizon.operating costs are assumed fixed.All of the above;Question 8.8.(TCO 5) Schmidt Corporation;produces a part that is used in the manufacture of one of its;products. The costs associated with the production of 10,000 units;of this part are as follows;Direct materials;$45,000;Direct labor;65,000;Variable factory overhead;30,000;Fixed factory overhead;70,000;Total costs;$210,000;Of;the fixed factory overhead costs, $30,000 is avoidable.;Phil;Company has offered to sell 10,000 units of the same part to Schmidt;Corporation for $18 per unit. Assuming there is no other use for;the facilities, Schmidt should;(Points: 5);make the part, as this would save $3 per the part, as this would save $3 per the part, as this would save the company;$30,000.make the part, as this would save $1 per unit.;Question 9.9.(TCO 3) The cost;function y = 100 + 10X (Points;5);has a slope coefficient of 100.;is a nonlinear.has an intercept of 100.;represents a fixed cost.;Question 10.10.(TCO 4) Sunk costs (Points;5);are relevant.are differential.are ignored when evaluating alternatives.have future implications.;Essays;Question 1.1.;(TCO;1) For each of the following drivers identify an appropriate activity.;a. #;of machines;b. #;of setups;c. #;of inspections;d.;# of orders;e.;# of runs;f. #;of bins or aisles;g. #;of engineers;(Points: 25);Question 2.2.;(TCO;2) Lubriderm Corporation has the following;budgeted sales for the next six-month period;Month Unit;Sales;June;90,000;July;120,000;August;210,000;September;150,000;October;180,000;November;120,000;There;were 30,000 units of finished goods in inventory at the beginning of;June. Plans are to have an inventory of finished products that equal;20% of the unit sales for the next month.;Five;pounds of materials are required for each unit produced. Each pound;of material costs $8. Inventory levels for materials are equal to 30%;of the needs for the next month. Materials inventory on June 1 was 15,000;pounds.;Prepare;production budgets in units for July, August, and September.;(Points: 25);Question 3.3.(TCO 3) Patrick Ross, the president of Ross's Wild Game Company, has;asked for information about the cost behavior of manufacturing overhead;costs. Specifically, he wants to know how much overhead cost is fixed;and how much is variable. The following data are the only records;available;Month Machine-hours Overhead;Costs;February;1,700;$20,500;March;2,800;22,250;April;1,000;19,950;May;2,500;21,500;June;3,500;23,950;Using;the high-low method, determine the overhead cost equation. Use;machine-hours as your cost driver.;(Points: 25);Question 4.4.(TCO 5) Collier Bicycles has been manufacturing its own wheels for;its bikes. The company is operating at 100% capacity, and;variable manufacturing overhead is charged to production at the rate of 30%;of direct labor cost. The direct materials and direct labor cost per;unit to make the wheels are $1.50 and $1.80, respectively. Normal;production is 200,000 wheels per year.;A;supplier offers to make the wheels at a price of $4 each. If the;bicycle company accepts this offer, all variable manufacturing costs will;be eliminated, but the $42,000 of fixed manufacturing overhead being;charged to the wheels will have to be absorbed by other products.;a.;Prepare an incremental analysis for the decision to make or buy the wheels.;b.;Should Collier Bicycles buy the wheels from the outside supplier?;Justify your answer.;(Points: 25)


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