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COMM 305 ALL SECTIONS & ACCO 240 Final Exam




Question;+;CONCORDIA UNIVERSITY;Course: Managerial;Accounting;No.: COMM 305 ALL;SECTIONS & ACCO 240;Examination: Final;Date: April 10, 2011;QUESTION I. 15 POINTS;Use the following information to calculate and answer;the next 6 questions. (SHOW YOUR WORK);Labrador Company produces a;single product. It sold 75,000 units last year with the following results;Sales $1,875,000;Variable costs $750,000;Fixed costs 300,000 1,050,000;Net income before taxes 825,000;Income taxes (45%) 371,250;Net income $ 453,750;In an attempt to improve its product, Labrador;is considering replacing a component part in its product that has a cost of $5;per unit with a new and better part costing $10 per unit during the coming;year. A new machine would also be needed to increase plant capacity. The;machine would cost $90,000, with a useful life of six years and no salvage;value. The company uses straight-line amortization on all plant assets.;1. Labrador?s break-even point;in units last year was =20,000 units;2.;Product?s units that Labrador would have to sell in the past year to;earn $247,500 in net income after taxes are 50,000;3. If it holds the sales price;constant and makes the suggested changes, Labrador?s break-even point in units;in the coming year will be;4. If it holds the sales price;constant and makes the suggested changes, Labrador have to sell to make the;same net income before taxes as last year will be 114,000 units;5.;If Labrador wishes;to maintain the same contribution margin ratio, selling price per unit of product;must it charge next year to cover the increased materials costs will be $37.5;6.;The effect on the company?s;net income before tax if the sales increased by 10% last year will be;Do not prepare income statement. $112,500;increase =DOL X increase of sales;X net income;QUESTION;II-A. 7.5 POINTS;Use the following information to calculate and;answer the next 3 questions. (SHOW;YOUR WORK);Taylor;Enterprises sells its product for $40 per unit. It currently produces 100,000;units per year, operating at normal capacity, which is about 80% of full;capacity. Taylor;recently received a special order from a customer for 20,000 units. Production;costs per unit for regular sales are direct materials $ 6, direct labour $14;and manufacturing overhead $12. The;$12for manufacturing overhead is based on $400,000 of annual fixed;manufacturing overhead that is allocated using the normal capacity.;7. Suppose the special order price is $520,000;for all 20,000 units, and assume that Taylor;has sufficient capacity to fill the special order. Should it be accepted or not;and how much the effect on the net income?;8. Suppose that Taylor would like to;earn $40,000 on this order and assume that there is sufficient capacity to fill;the special order. What price per unit should Taylor charge for the special order?;9. Suppose that the special order price;is $650,000 for all 20,000 units, but there is not sufficient capacity to fill;the order, 10,000 units of regular business will be replaced by the special;order if it is accepted. Should Taylor;accept the special order or not how much the effect on the net income?;QUESTION II-B. 7.5 POINTS;Use the following information to calculate and;answer the next 3 questions. (SHOW;YOUR WORK);X&Y;Inc. makes 3 products, A, B, and C. X&Y, Inc only has 150 machine hours;available each week. Contribution margin, machine hour requirements, and weekly;customer demand information is as follows;A B C;Contribution;margin per unit $8 $4 $7;Machine;hours required per unit 0.8 0.2 0.2;Weekly;customer demand 400 600 500;10. In what order should the products be;produced?;11. How many units of each product;should be produced?;12. What is the maximum amount that;Clark would be willing to pay, above the normal cost, for one more machine hour;per week?;ANY EXTRA UNIT COME FROM B MARKET BECAUSE Weekly customer;demand is 600 we filled 250 units. CM $20;QUESTION III-A. 5 POINTS;Use the following information to calculate and;answer the next 2 questions. (SHOW;YOUR WORK);The;Machining Division has a capacity of 2,000 units. Its sales and cost data are;Selling price per unit $80;Variable manufacturing costs per;unit $25;Variable selling costs per unit $5;Total fixed manufacturing overhead $200,000;13. The Machining Division is currently;selling 1,800 units to outside customers, and the Assembly Division wants to;purchase 400 units from Machining. If;the transaction takes place, the variable selling costs per unit on the units;transferred to Assembly will be $0/unit, not $5/unit. What should be the transfer price in order;not to affect its? current profit?;14. If the Assembly Division is;currently buying from an outside supplier at $75 per unit, what will be the;effect on overall company profits if internal sales for 400 units take place at;the optimum transfer price?;QUESTION;III-B. 5 POINTS;Use the following information to calculate and;answer the next 2 questions. (SHOW;YOUR WORK);The;National Division of Roboto Company is;buying 10,000 widgets from an outside supplier at $50 per unit. Roboto?s;Overseas Division, which is producing and selling at full capacity (15,000;units), has the following sales and cost structure;Sales price per unit $65.00;Variable cost per unit 45.00;Fixed cost (at capacity) per unit 10.00;15. If the National Division buys its 4,000;widgets from the Overseas Division, the transfer price should be;16. If the Overseas Division meets the;outside supplier?s price and sells the 4,000 widgets to National, the effect on;overall company profits will be;QUESTION;III-C. 5 POINTS;Use the following information to calculate and;answer the next 2 questions. (SHOW;YOUR WORK);High Sound Corporation;manufactures car stereos. It is a division of Quality Motors, which;manufactures vehicles. High Sound sells car stereos to Quality Motors, as well;as to other vehicle manufacturers and retail stores. The following information;is available for High Sound?s standard unit car stereos costs: variable cost;per unit $35, fixed cost per unit $25, and selling price to outside customers $90.;Quality Motors currently purchases a standard unit car stereos from an outside;supplier for $80. Because of quality concerns and to ensure a reliable supply;the top management of Quality Motors has ordered High Sound to provide 20,000;units per year at a transfer price of $40 per unit. High Sound is already;operating at full capacity. High Sound can avoid $5 per unit of variable costs;17. What is the minimum transfer price that High Sound;should accept?;18.;What is the;potential loss to the corporation as a whole because of this forced transfer;price at;QUESTION;IV. 17.5 POINTS;Use the following information to calculate and;answer the next 7 questions. (SHOW;YOUR WORK);January February March April;Sales $30,000 $40,000 $50,000 $25,000;Production in units 1,000 1,500 2,000 2,500;Sales are 40%;cash and 60% on account, and 60% of credit sales are collected in the month of;the sale. In the month after the sale, 40%;of credit sales are collected. It takes;4 KG of direct material to produce a finished unit, and direct materials cost;$5 per KG. All direct materials;purchases are on account, and are paid as follows: 40% in the month of the;purchase, 60% the following month. Ending direct materials inventory for each;month is 40% of the next month?s production needs. January?s beginning materials inventory is;1,080 Kg. Suppose that both accounts;receivable and accounts payable are zero at the beginning of January.;19. Total cash sales for the January ?;March quarter are;20. The accounts receivable balance at;the end of March is;OR;LONG ANALYSIS;Total;credit sales ? collections = Ending Balance;J F M A;Sales $30,000 $40,000 $50,000;Credit;sales 60% $18,000 $24,000 $30,000;Collections;January cs $;10,800 $ 7,200;February cs $14,400 $ 9,600;March cs $18,000 $ 12,000;21. The ending direct materials;inventory for March is =4,000 KG;J F M A;22. Material purchases costs for;February are;23. Cash payments on account for;February are;24. The ending balance in accounts;payable for March is;25. The net change in cash for the;period January ? March is;QUESTION;V-A. 7.5 POINTS;Use the following information to calculate and;answer the next 3 questions. (SHOW;YOUR WORK);Bella, Inc.;has operated for 2 years. During that time it produced 3,000 units in year 1;and 2,400 in year 2, while sales were 2,400 units in year 1 and 2,700 in year;2. Variable production costs were $8 per unit during both years. The company;uses last-in, first-out (LIFO) for inventory costing. The absorption costing;income statements for these 2 years were;Year 1 Year 2;Sales $48,000 $54,000;Less cost of goods sold;Beginning inventory $ 0 $;6,600;Product costs 33,000 28,200;Ending inventory (6,600) 26,400 (3,300) 31,500;Gross profit 21,600 22,500;Less operating expenses(S&A);Variable 3,600 4,050;Fixed 5,000 8,600 5,000 9,050;Operating income $ 13,000 $ 13,450;26. Cost of goods sold for year 1 using;variable costing would be;27. Ending inventory for year 2 using;variable costing would be;28. Operating income for year 2 using;variable costing would be;QUESTION;V-B. 10 POINTS;Use the following information to calculate and;answer the next 4 questions. (SHOW;YOUR WORK);Baylor;Inc. just finished its second year of operations. In the first year it produced;3,000 units and sold 1200. The second year resulted in the same production;level, but sales were 3,600 units. The variable costing income statements for;both years are shown below;Year 1 Year 2;Sales $;60,000 $180,000;Variable cost of goods sold $28,800 $86,400;Variable selling and administration;1,800 30,600 5,400 91,800;Contribution margin 29,400 88,200;Fixed manufacturing overhead 15,000 15,000;Fixed selling and administration;10,000 25,000 10,000 25,000;Operating income $4,400 $ 63,200;29. The total product costs during year;1 using absorption would be;30. The operating income for year 1;using absorption costing would be;31. The ending inventory for year 2;using absorption costing would be;32. The operating income for year 2;using absorption costing would be;QUESTION VI.;25 POINTS;Use the following information to calculate and;answer the next 10 questions. (SHOW;YOUR WORK);You have given;the following information for a firm that has only been in business for one year.;The firm is able to buy a new type of biodegradable plastic at a fixed price of;$100 per roll. The plastic is then cut and sealed to make garbage bags. Fixed;factory overhead is estimated to be $125,000 per year. During this past year;8,000 cartons of garbage bags were produced, which represents 80% of the;activity volume. You have the following information;Rolls of plastic used;8,500;Variable overhead incurred;$70,000;Roll of;plastic price variance;$0;Overhead efficiency variance;$7,500 U;Fixed overhead spending (budget) variance;$5,000F;Standard costs per carton of garbage bags;Labour costs;$10 per hour;$20;Rolls of;plastic;1 roll;Total overhead;$20;Instructions;Compute the following;33. Standard direct labour hours allowed for units;produced are;Total costs of fixed overhead;applied are;Variable overhead spending variance;is;34. Actual number of direct labour hours incurred are;35. Labour efficiency variance is;36. Materials quantity variance is;37. Fixed overhead volume variance is;Manufacturing overhead controllable;variance is


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