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##### Devry ACCT336 week 6 Quiz

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Question;Question 1.1.(TCO 7) Elliot?s Escargots sells commercial and;home snail extraction tools and serving pieces. Currently, the Serving Pieces;Section takes up approximately 50% of the company?s retail floor space. The;CEO of Elliot?s wants to decide if the company should continue offering;Serving Pieces or focus only on Snail Extraction Tools. If the Serving Pieces;are dropped, salaries and other direct fixed costs can be avoided and Snail;Extraction sales would increase by 13%. Allocated fixed costs are assigned;based on relative sales.;Snail;Extraction;Serving;Tools;Pieces;Total;Sales;\$1,200,000;\$800,000;\$2,000,000;Less;cost of goods sold;500,000;700,000;1,200,000;Contribution;margin;700,000;100,000;800,000;Less;Avoidable direct fixed costs;Salaries;175,000;175,000;350,000;Other;60,000;60,000;120,000;Less;Unavoidable allocated fixed costs;Rent;14,118;9,882;24,000;Insurance;3,529;2,471;6,000;Cleaning;4,117;2,883;7,000;Executive;salary;76,470;53,530;130,000;Other;7,058;4,942;12,000;Total;costs;340,292;308,708;649,000;Net;income;(\$359,708);(\$208,708);\$151,000;Prepare an incremental analysis in good form to determine the incremental;effect on profit of discontinuing the snail extraction tool line. (Points: 6);Question 2.2.(TCO 4) Paschal?s Parasailing Enterprises has;estimated that fixed costs per month are \$115,600 and variable cost per;dollar of sales is \$0.35 (6 points).;What is the break-even point per month in sales?;What level of sales is needed for a monthly profit of \$70,000?;For the month of August, Paschal?s anticipates sales of \$600,000. What is the;expected level of profit?(Points;6);Question 3.3.(TCO 6) Princess Cruise Lines has the following;service departments, concierge, valet, and maintenance. Expenses for these;departments are allocated to Mediterranean and transatlantic cruises.;Expenses for the departments are totaled (both variable and;components are combined) and as follows.;Concierge \$1,500,000;Valet \$2,750,000;Maintenance \$2,250,000;The sea miles logged are 5,000,000 for the Mediterranean and 20,000,000 for;the transatlantic voyages.;Based upon the sea miles logged, allocate the service department costs (6;points). (Points: 6);Question 4.4.(TCO 9) Thurman Munster, the owner of Adams;Family RVs, is considering the addition of a service center his lot. The;building and equipment are estimated to cost \$1,200,000, and both the;building and equipment will be depreciated over 10 years using the;straight-line method. The building and equipment have zero estimated residual;value at the end of 10 years. Munster?s required rate of return for this;project is 12%. Net income related to each year of the investment is as;follows.;Revenue;\$450,000;Less;Material;Cost;\$60,000;Labor;100,000;Depreciation;120,000;Other;10,000;290,000;Income;before taxes;160,000;Taxes;at 40%;64,000;Net;Income;\$96,000;(A) Determine the net present value of the investment in the service center.;Should Munster invest in the service center?;(B) Calculate the internal rate of return of the investment to the nearest;0.5%.;(C) Calculate the payback period of the investment.;(D) Calculate the accounting rate of return. (Points;8);Question 5.5.(TCO 5) The following information relates to Vice;Versa Ventures for calendar year 20XX, the company?s first year of;operations.;Units;produced;20,000;Units;sold;15,000;Selling;price per unit;\$30;Direct;material per unit;\$5;Direct;labor per unit;\$5;Variable;manufacturing overhead per unit;\$2;Variable;selling cost per unit;\$3;Annual;fixed manufacturing overhead;\$160,000;Annual;fixed selling and administrative expense;\$80,000;(a) Prepare an income statement using full costing.;(b) Prepare an income statement using variable costing. (Points: 8);Question 6.6.(TCO 8) Leekee Shipyards has a new;barnacle-removing product for ocean-going vessels. The company invests;\$1,200,000 in operating assets and plans to produce and sell 400,000 units;per year. Leekee wants to make a return on investment of 20% each year. Leekee;needs to know what price to charge for this product.;Use the absorption costing approach to determine the markup necessary to make;the desired return on investment based on the following information.;Per;Unit;Total;Direct;Materials;\$2.00;Direct;Labor;\$1.50;Variable Manufacturing;Overhead;\$1.00;Fixed;Manufacturing Overhead;\$100,000;Variable;Selling and Administrative Expense;\$0.10;Fixed;Selling and Administrative Expense;\$100,000;(Points: 6)

Paper#39880 | Written in 18-Jul-2015

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