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Devry ACCT434 final exam 2014




Question;Final;Question 1.1. (TCO 1) Evaluating customer reaction of the;trade-off of giving up some features of a product for a lower price would best fit;which category of management decisions under activity-based management? (Points;5);Pricing and;product-mix decisions;Cost reduction;decisions;Design decisions;Discretionary;decisions;Question 2.2. (TCO 1) Ireland Company produces a special;spray nozzle. The budgeted indirect;total cost of inserting the spray nozzle is $180,000. The budgeted number of nozzles to be inserted;is 80,000. What is the budgeted indirect;cost allocation rate for this activity? (Points: 5);$0.50;$1.00;$1.50;$2.25;Question 3.3. (TCO 2) Overhead costs have been increasing;due to all of the following except (Points: 5);product;proliferation.;tracing more;costs as direct costs with the help of technology.;more complexity;in distribution processes.;increased;automation.;Question 4.4. (TCO 2) Information pertaining to Brenton;Corporation's sales revenue is presented in the following table;February March April;Cash;Sales $160,000 $150,000 $120,000;Credit Sales;300,000 400,000 280,000;Total Sales;$460,000 $550,000 $400,000;Management estimates that 5% of credit sales are not;collectible. Of the credit sales that;are collectible, 75% are collected in the month of sale and the remainder in;the month following the sale. Cost of;purchases of inventory each month are 80% of the next month's projected total;sales. All purchases of inventory are on;account, 50% are paid in the month of purchase, and the remainder is paid in;the month following the purchase.;Brenton's budgeted total cash receipts in March are;(Points: 5);$506,250.;$457,000.;$492,000.;$428,000.;Question 5.5. (TCO 2) Financing decisions PRIMARILY deal;with (Points: 5);the use of;scarce resources.;how to obtain funds to acquire;resources.;acquiring;equipment and buildings.;preparing;financial statements for stockholders.;Question 6.6. (TCO 3) For January, the cost components of a;picture frame include $0.20 for the glass, $0.85 for the wooden frame, and;$0.60 for assembly. The assembly desk;and tools cost $200. A total of 1,000;frames is expected to be produced in the coming year. What cost function best represents these;costs? (Points: 5);y = 1.80 + 400X;y = 400 + 1.80X;y = 200 + 1.65X;y = 1.00 + 400X;Question 7.7. (TCO 3) Which cost estimation method may use;time-and-motion studies to analyze the relationship between inputs and outputs;in physical terms? (Points: 5);Quantitative;analysis method;Account;analysis method;Conference;method;Industrial engineering method;Question 8.8. (TCO 4) Sunk costs (Points: 5);have future;implications.;are ignored when evaluating;alternatives.;are;differential.;are relevant.;Question 9.9. (TCO 5) Throughput contribution equals;revenues minus (Points: 5);operating;costs.;direct material costs of goods;sold.;direct material;costs and minus operating costs.;direct material;and direct labor costs.;Question 10.10. (TCO 5) Producing more nonbottleneck output;(Points: 5);allows for the;maximization of overall contribution.;creates less;pressure for the bottleneck workstations.;creates more inventory and;increases throughput contribution.;creates more;inventory, but does not increase throughput contribution.;Question 11.11. (TCO 6) What type of cost is the result of;an event that results in more than one product or service simultaneously?;(Points: 5);Byproduct cost;Joint cost;Main costs;Separable cost;Question 12.12. (TCO 6) Which of the following is a;disadvantage of the physical-measure method of allocating joint costs? (Points;5);The measurement;basis for each product may be different.;There is a need;for a common denominator.;The physical;measure may not reflect the product's ability to generate revenues.;All of the above;Question 13.13. (TCO 7) An understanding of life-cycle costs;can lead to (Points: 5);additional;costs during the manufacturing cycle.;less need for;evaluation of the competition.;cost-effective product designs;that are easier to service.;mutually;beneficial relationships between buyers and sellers.;Question 14.14. (TCO 7) Each month, Haddon Company has;$300,000 total manufacturing costs (20% fixed) and $125,000 distribution and;marketing costs (75% fixed). Haddon's;monthly sales are $500,000.;The markup percentage on variable costs to arrive at the;existing (target) selling price is;(Points: 5);84%.;40%.;80%.;66 2/3%.;Question 15.15. (TCO 8) Transfer prices should be judged by;whether they promote (Points: 5);goal;congruence.;the balanced;scorecard method.;a high level of;subunit autonomy in decision making.;Both 1 and 3 are correct;Question 16.16. (TCO 8) The seller of Product A has no idle;capacity and can sell all it can produce at $25 per unit. Outlay cost is $10. What is the opportunity cost, assuming the;seller sells internally? (Points: 5);$10;$16;$15;$24;Question 17.17. (TCO 8) Transferring products or services at;market prices generally leads to optimal decisions when (Points: 5);the market for;the intermediate product is perfectly competitive.;the;interdependencies of the subunits are minimal.;there are no;additional costs or benefits to the company in buying or selling in the;external market.;All of the above;Question 18.18. (TCO 9) To guide cost allocation decisions;the cause-and-effect criterion (Points: 5);may allocate corporate salaries to;divisions based on profits.;is used less;frequently than the other criteria.;is the primary criterion used in;activity-based costing.;is a difficult;criterion on which to obtain agreement.;Question 19.19. (TCO 9) The Hassan Corporation has an;electric mixer division and an electric lamp division. Of a $50,000,000 bond issuance, the electric;mixer division used $24,000,000 and the electric lamp division used $26,000,000;for expansion. Interest costs on the;bond totaled $1,500,000 for the year.;What amount of interest costs should be allocated to the electric mixer;division? (Points: 5);$4,200,000;$14,000,000;$1,050,000;$720,000;Question 20.20. (TCO 10) The net present value method;focuses on (Points: 5);cash inflows.;accrual-accounting net income.;cash outflows.;Both 1;and 3 are correct;Question 21.21. (TCO 10) Upper Darby Park Department is;considering a new capital investment.;The cost of the machine will be $200,000. The annual cost savings if the new machine is;acquired will be $40,000. The machine;will have a five-year life, at which time the terminal disposal value is;expected to be $20,000. Upper Darby Park;Department is assuming no tax consequences.;If Upper Darby Park Department has a required rate of return;of 10%, which of the following is closest to the present value of the project?;(Points: 5);-$35,950;-$150,000;$14,060;-$12,418;Question 22.22. (TCO 11) An advantage of financial cost of;quality measures is that they (Points: 5);are often easy;to quantify and understand.;provide;immediate short-run feedback on whether quality improvement efforts have, in;fact, succeeded in improving quality.;direct;attention to physical processes and therefore focus attentions on the precise;problem areas needing improvement.;provide a single, summary;measure of quality performance.;Question 23.23. (TCO 11) Regal Products has a budget of;$900,000 in 20X6 for prevention costs.;If it decides to automate a portion of its prevention activities, it;will save $60,000 in variable costs. The;new method will require $20,000 in training costs and $150,000 in annual;equipment costs. Management is willing;to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 150,000;units. Appraisal costs for the year are;budgeted at $600,000. The new prevention;procedures will save appraisal costs of $30,000. Internal failure costs average $15 per failed;unit of finished goods. The internal;failure rate is expected to be 3% of all completed items. The proposed changes will cut the internal;failure rate by one-third. Internal;failure units are destroyed. External;failure costs average $54 per failed unit.;The company's average external failures average 3% of units sold. The new proposal will reduce this rate by;50%. Assume all units produced are sold;and there are no ending inventories.;What is the net change in the budget of prevention costs if the;procedures are automated in 20X6? Will;management agree with the changes? (Points: 5);$138,000;increase, no;$78,000 increase, yes;$60,000 increase;no;$110,000;decrease, yes;Question 24.24. (TCO 12) Obsolescence is an example of which;cost category? (Points: 5);Ordering costs;Carrying costs;Labor costs;Quality costs;Question 25.25. (TCO 12) Liberty Celebrations, Inc.;manufactures a line of flags. The annual;demand for its flag display is estimated to be 100,000 units. The annual cost of carrying one unit in;inventory is $1.60, and the cost to initiate a production run is $80. There are no flag displays on hand but;Liberty had scheduled 70 equal production runs of the display sets for the;coming year, the first of which is to be run immediately. Liberty Celebrations has 250 business days;per year. Assume that sales occur;uniformly throughout the year and that production is instantaneous.;If Liberty Celebrations does not maintain a safety stock;the estimated total carrying cost for the flag displays for the coming year is;(Points: 5);$1,800.;$2,000.;$1,600.;$5,600.;Page 2;Question 1. 1. (TCO 2) Gardenia Company has the following;projected account balances for June 30, 20X9;Accounts payable;$;60,000 Sales $ 800,000;Accounts receivable;$ 100,000 Capital;stock $;400,000;Depreciation, factory $;36,000 Retained earnings?;Inventories (5/31 & 6/30) $ 180,000 Cash $ 56,000;Direct materials used;$ 200,000 Equipment;net $ 240,000;Office salaries $ 80,000 Buildings;net $ 400,000;Insurance, factory;$;4,000 Utilities, factory $;16,000;Plant wages $ 140,000 Selling;expenses $;50,000;Bonds payable;$;160,000 Maintenance;factory $ 28,000;Prepare a budgeted income statement AND a budgeted;balance sheet as of June 30, 20X9.Question 2. 2.;(TCO 5) Paul's Medical Equipment Company manufactures;hospital beds. Its most popular model;Deluxe, sells for $5,000. It has;variable costs totaling $2,800 and fixed costs of $1,000 per unit, based on an;average production run of 5,000 units.;It normally has four production runs a year, with $500,000 in setup;costs each time. Plant capacity can;handle up to six runs a year for a total of 30,000 beds.;A competitor is introducing a new hospital bed similar to;Deluxe that will sell for $4,000.;Management believes it must lower the price to compete. Marketing believes that the new price will;increase sales by 25% a year. The plant;manager thinks that production can increase by 25% with the same level of fixed;costs. The company sells all the Deluxe;beds it can produce.;Question 1: What is;the annual operating income from Deluxe at the price of $5,000?;Question 2: What is;the annual operating income from Deluxe if the price is reduced to $4,000 and;sales in units increase by 25%?;3.;(TCO 7) Grace Greeting Cards Incorporated is starting a;new business venture and is in the process of evaluating its product;lines. Information for one new product, traditional parchment grade;cards, is as follows;? For 16 times each year, a;new card design will be put into production. Each new design will;require $200 in setup costs.;? The parchment grade card;product line incurred $75,000 in development costs and is expected to be;produced over the next four years.;? Direct costs of producing the;designs average $0.50 each.;? Indirect manufacturing costs;are estimated at $50,000 per year.;? Customer service expenses;average $0.10 per card.;? Sales are expected to be 2,500;units of each card design. Each card sells for $3.50.;? Sales units equal production;units each year.;What is the total estimated life-cycle operating income?;(Points: 25) Question 4. 4.;(TCO 8) Autocar Company manufactures automobiles. The red car division sells its red cars for;$25,000 each to the general public. The;red cars have manufacturing costs of $12,500 each for variable and $5,000 each;for fixed costs. The division's total;fixed manufacturing costs are $25,000,000 at the normal volume of 5,000 units.;The blue car division has been unable to meet the demand for;its cars this year. It has offered to;buy 1,000 cars from the red car division at the full cost of $18,000. The red car division has excess capacity and;the 1,000 units can be produced without interfering with the outside sales of;5,000. The 6,000 volume is within the;division's relevant operating range.;Explain whether the red car division should accept the;offer. Support your decision showing all;calculations.Question 5. 5. (TCO 11) For supply item HM, Bertha Company;has been ordering 130 units based on the recommendation of the salesperson who;calls on the company monthly. The;company has hired a new purchasing agent, who wants to start using the;economic-order-quantity method and its supporting decision elements. She has gathered the following information;Annual demand in units;500;Days used per year;500;Lead time, in days;30;Ordering costs;$125;Annual unit carrying costs;$20;Determine the EOQ, average inventory, orders per year;average daily demand, reorder point, annual ordering costs, and annual carrying;costs.;(Points: 25)


Paper#47742 | Written in 18-Jul-2015

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