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Kaplan University AC 505 Unit 6 Final Exam




Question;Exam;Textbook Problems;Final Exam: Problems from;your textbook;Complete the following problems from your textbook. The;problems must be completed using either Word or Excel.;Question #1 ? Problem 3-25 (pp. 131?132);Question #2 ? Problem 6-22 (p. 270);Question #3 ? Problem 9-19 (pp. 403?404);Question #4 ? Problem 11A-9 (pp. 498?499);Question #5 ? Problem 13-21 (pp. 614?615);Submit your Final Exam to the Dropbox area in the course. For;details on using the Dropbox please click the Academic Tools tab above, then;Dropbox Guide.;AC505: Advanced Managerial/Cost;Accounting;Unit 6 Final Exam;Professor;Final;Exam;Question #1 ? Problem 3-25;(pp. 131?132)Multiple Departments, Overhead Rates, Underapplied or Overapplied;Overhead[LO3, LO5, LO8];Hobart, Evans, and Nix is a small law firm that employs 10;partners and 12 support persons. The firm uses a job-order costing system to;accumulate costs changeable to each client, and it is organized into two;departments-the Research and Documents Department and the Litigation;Department. The firm uses predetermined overhead rates to change the costs of;these departments to its clients. At the beginning of the year, the firm's;management made the following estimates for the year;Department;Research and;Development;Litigation;Research-hour;24,000;Direct attorney-hour;9,000;18,000;Legal forms and supplies;$16,000;$5,000;Direct attorney cost;$450,000;$900,000;Departmental overhead cost;$840,000;$360,000;The;predetermined overhead rate in the Research and Documents Department is based;on research-hours, and the rate in the Litigation Department is based on direct;attorney cost.;The costs;charged to each client are made up of three elements: legal forms and supplies;used, direct attorney cost incurred, and an applied amount of overhead from;each department in which work is performed on the case.;Case 418-3;was initiated on February 23 and completed on May 16. during this period, the;following costs and time were recorded on the case;Department;Research and;Development;Litigation;Research-hour;26;Direct attorney-hour;7;114;Legal forms and supplies;$80;$40;Direct attorney cost;$350;$5,700;Required;Compute the predetermined overhead rate used;during the year in the Research and Documents Department. Compute the rate used;in the Litigation Department.Using the rates you computed in (1) above;compute the total overhead cost applied to Case 418-3.what would be the total cost changed in Case;418-3? Show computations by department and in total for the case.At the end of the year, the firm's records;revealed the following actual cost and operating data for all cases handled;during the year;Department;Research and Development;Litigation;Research-hour;24,000;Direct;attorney-hour;9,000;18,000;Legal forms;and supplies;$16,000;$5,000;Direct;attorney cost;$450,000;$900,000;Departmental;overhead cost;$840,000;$360,000;Determine the amount of underapplied or overapplied overhead;cost in each department for the year.;Question #2 ? Problem 6-22;(p. 270) Basics of CVP Analysis, Cost Structure[LO1, LO3, LO4, LO5, LO6];Due to erratic sales of its sole product-a high-capacity;battery for laptop computers-PEM, Inc., has been experiencing difficulty for;some time. The company's contribution format income statement for the most;recent month is given below;Sales (19,500 units x $30 per unit);$585,000;Variable expenses;409,500;Contribution margin;175,500;Fixed expenses;180,000;Net operating loss;$(4,500);Required;Compute the company's CM ratio and its;break-even point in both units and dollars.The president believes that a $ 16,000 increase;in the monthly advertising budget, combined with an intensified effort by the;sales staff, will result in an $ 80,000 increase in monthly sales. If the;president is right, what will be the effect on the company's monthly net;operating income or loss? (Use the incremental approach in preparing your;answer.)Refer to the original data. The sales manager is;convinced that a 10% reduction in the selling price, combined with an increase;of $ 60,000 in the monthly advertising budget, will cause unit sales to double.;What will the new contribution format income statement look like if these;changes are adopted?Refer to the original data. The Marketing;Department thinks that a fancy new package for the laptop computer battery;would help sales. The new package would increase packaging costs by 75 cents;per unit. Assuming no other changes, how many units would have to be sold each;month to earn a profit of $9,750?Refer to the original data. By automating;certain operations, the company could reduce variable costs by $ 3 per unit.;However, fixed costs would increase by $ 72,000 each month.Compute the new CM ratio and the new break-even;point in both units and dollars.Assume that the company expects to sell 26,000;units next month. Prepare two contribution format income statements, one;assuming that operations are not automated and one assuming that they are.;(Show data on a per unit and percentage basis, as well as in total, for;alternative.)Would you recommend that the company automate;its operations? Explain.Question #3 ? Problem 9-19;(pp. 403-404) Cash Budget, Income Statement, Balance Sheet[LO2, LO4, LO8, LO9, LO10]Minden Company is a wholesale distributor of premium European;chocolates. The company's balance sheet as of April 30 is given below;Minden Company;Balance Sheet;April 30;Assets;Cash;$9,000;Accounts receivable;54,000;Inventory;30,000;Buildings and equipment, net of depreciation;207,000;Total assets;$300,000;Liabilities;and Stockholders' Equity;Account payable;$63,000;Note payable;14,500;Capital stock,no par;180,000;Retained earnings;42,500;Total liabilities and stockholders' equity;$300,000;The company is in the process of preparing budget data for;May. A number of budget items have already been prepared, as stated below;Sales are budgeted at $ 200,000 for May. Of;these sales, 4 60,000 will be for cash, the remainder will be credit sales.;One-half of a month's credit sales are collected in the month the sales are;made, and the reminder is collected in the following month. All of the april 30;accounts receivable will be collected in May.Purchases of inventory are expected to total $;120,000 during May. These purchases will all be on account. Forty percent of;all purchases are paid for in the month of purchase, the remainder are paid in;the following month. All of April 30 accounts payable to suppliers will be paid;during May.The May 31 inventory balance is budgeted at $;40,000.selling and administrative expenses for May are;budgeted at $72,000, exclusive of depreciation. These expenses will be paid in;cash. Depreciation is budgeted at $2,000 for the month.The note payable on the April 30 balance sheet;will be paid during May, with $100 in interest. (All of the interest relates to;May.)New refrigerating equipment costing $6,500 will;be purchased for cash during May.During May, the company will borrow $20,000 from;its bank by giving a new note payable to the bank for that amount. The new note;will be due in one year.Required:Prepare a cash budget for May. Support your;budget with a schedule of expected cash collections from sales and a schedule;of expected cash disbursements for merchandise purchases.Prepare a budget income statement for May. Use;the absorption costing income statement format as shown in schedule 9.Prepare a budget balance sheet as of May 31.Question #4 ? Problem 11A-9;(pp. 498?499) Comprehensive Standard Cost Variances[LO2, LO3, LO4, LO6]?Wonderful! Not only did our salespeople do a good job in;meeting the sales budget this year, but our production people did a good job in;controlling costs as well,? said Kim Clark, president of Martell Company. ?Our;$18,300 overall manufacturing cost variance is only 1.2% of the $1,536,000;standard cost of products made during the year. That's well within the 3%;parameter set by management for acceptable variances. It looks like everyone;will be in line for a bonus this year.? The company;produces and sells a single product. The standard cost card for the product;follows;Standard;cost card-per unit of product;Direct materials, 2 feet at $8.45 per foot;$16.90;Direct labor, 1.4 direct labor hours at $16 per direct;labor-hour;22.4;Variable overhead, 1.4 direct-labor hours at $2.50 per;direct labor-hour;3.5;Fixed overhead, 1.4 direct labor-hours at $6 per;direct labor hour;8.4;Standard cost per unit;$51.20;The fallowing additional information is available for the;year just completed;The company manufactured 30,000 units of product;during the year.A total of 64,000 feet of material was purchased;during the year at a cost of $8.55 per foot. All of this material was used to;manufacture the 30,000 units. There were no beginning or ending inventories for;the year.The company worked 43,500 direct labor-hours;during the year at a direct labor cost of $15.80 per hour.Overhead is applied to products on the basis of;standard direct labor-hours. Data relating to manufacturing overhead costs;follow;Denominator activity level (direct labor-hours);35,000;Budgeted fixed overhead costs (from the overhead;flexible budget);$210,000;Actual variable overhead costs incurred;$108,000;Actual fixed overhead costs incurred;$211,800;Required;Compute the direct materials price and quality;variances for the year.Compute the direct labor rate and efficiency;variances for the year.For manufacturing overhead compute:The variable overhead rate and efficiency;variance for the year.The fixed overhead budget and volume variance;for the year.Total the variances you have computed, and;compare the net amount with the $ 18,300 mentioned by the president. Do you;agree that bonuses should be given to everyone for good cost control during the;year? Explain.Question;#5? Problem 13-21 (pp. 614?615) Make or Buy Decision[LO3]Silven;Industries, which manufactures and sells a highly successful line of summer;lotions and insect repellents, has decided to diversify in order to stabilize;sales throughout the year. A natural area for the company to consider is the;production of winter lotions and creams to prevent dry and chapped skin. After;considerable research, a winter products line has been developed. However;Silven's president has decided to introduce only one of the new products for;this coming winter. If the product is a;success, further expansion in future years will be initiated. The;product selected (called Chap-Off) is a lip balm that will be sold in a;lipstick-type tube. The product will be sold to wholesalers in boxes of 24;tubes for $8 per box. Because of excess capacity, no additional fixed;manufacturing overhead costs will be incurred to produce the product.However,a $ 90,000;charge for fixed manufacturing overhead will be absorbed by the product under;the company's absorption costing system. Using;the estimated sales and production of 100,000 boxed of Chap-Off, the Accounting;Department has developed the following cost per box;Direct materials;$3.60;Direct Labor;2.00;Manufacturing overhear;1.40;Total cost;$7.00;The cost above includes costs for producing both the lip balm;and the tube that contains it. Ans an alternative to making the tubes, Silven;has approached a supplier to discuss the possibility of purchasing the tubs for;Chap-Off. The purchase price of the empty tubes from the suppliers would be;$1.35 per box of 24 tubes. If Silven Industries accepts the purchase proposal;direct labor and variable manufacturing overhead costs per box of Chap-Off;would be reduced by 10% and direct materials costs would be reduced by 25%.;Required;Should Silven Industries make or buy the tubs?;Show calculations to support your answer.What would be the maximum purchase price;acceptable to Silven Industries? Explain.Instead of sales of 100,00 boxes, revised estimates show a sales;volume of 120,000 boxes. At this new volume, additional equipment must be;acquired to manufacture the tubes at an annual rental of $ 40,000. Assuming;that the outside supplier will not accept an order for less than 100,000 boxes;should Silven Industries make or buy the tubs. Show calculation to support your;answer.Refer to the data in (3) above. Assume that the;outside suppliers will accept the order of any size for the tubes at $ 1.35 per;box. How, if at all, would this change your answer? Show computations.What qualitative factors show Silven Indus tires;consider in determining whether they should make or but the tubs?


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