Quiz
PART II: JOB-ORDER COSTING (5 QUESTIONS AT 8 POINTS EACH) PART I: MULTIPLE GUESS – 5 QUESTIONS @ 1 POINTS EACH _______1. In job-order costing, all the activity in the WIP account is generally reported in the A. The Cost of Goods Manufactured statement B. The Materials Requisition form C. The Cost of Goods Sold statement D. The Income Statement E. None of the above _______2. A materials requisition form is typically used to A. Apply indirect materials overhead to a job B. Purchase materials C. Issue materials to a WIP account D. Clean the windows of the production manager’s car E. None of the above _______3. A debit entry to the overhead control account represents A. Applied overhead costs B. Actual overhead costs C. Cash paid for overhead costs D. All of the above E. None of the above _______4. The Cost of Goods Sold statement is essentially an analysis of A. Production costs incurred only in the current period B. Depreciation C. The WIP account D. The FG account E. None of the above _______5. Equivalent units represent A. The amount of direct materials included in units completed and transferred out B. The number of units that would have been completed if they were worked on one at a time C. The average number of units completed each period D. The total number of units available for completion in a given period E. None of the above PART II: PROBLEMS (95 points total) A. CVP Analysis 16. Thumbdrive, Inc. has $16,000 per month in fixed costs. Each unit requires $2.00 in materials and $2.00 in labor and the sales price per unit is $5.00. If the flat tax rate is 40%, how many units do they need to produce and sell to achieve an after-tax profit of $14,000? ANSWER: ______________________(5 Points) B. Budgeting 17. Ignatz expects DM purchases for June, July, and August to be $30,000, $40,000, and $50,000, respectively. The purchase contracts require 25%, 50%, and 25% payments beginning in the month of purchase. There are no A/P beginning balances. What is the total forecast cash disbursement for August? ANSWER: ______________________(5 Points) C. Standard Costing and Variance Analysis **USE THE FOLLOWING INFORMATION FOR THE NEXT FOUR (4) QUESTIONS** Blue Scout Company produces Webelos. The following Standard Cost Sheet was developed from historical data and contains projected standards for the upcoming period. Blue Scout expected to produce 5,500 Webelos, but actual production was only 5,000 units. STANDARD COST SHEET DM 2 liters @ $3.00 / liter = $6.00 DL 3 DLH @ $15.00 / DLH = $45.00 VMOH 1 Mhr @ $5.00 / Mhr = $5.00 Total VC $56.00 Blue Scout purchased 12,000 liters of materials for $35,000, and used 9,500 liters. 15,500 direct labor hours were used in production, costing $230,000. 5,020 machine hours were used, and actual variable manufacturing overhead costs were $26,000 in total. Required: Calculate the following: 18. DMPV:_ ANSWER: ______________________(5 Points) 19. DMUV:_ ANSWER: ______________________(5 Points) 20. DLEV:_ ANSWER: ______________________(5 Points) 21. DLRV:_ ANSWER: ______________________(5 Points) 22. VOEV:_ ANSWER: ______________________(5 Points) 23. VORV:_ ANSWER: ______________________(5 Points) D. Capital Budgeting ***Use the following data to answer the next four (4) problems*** Port Renovations, Incorporated (PRI) is considering purchasing a dredging machine. The purchase would require an initial full payment of $1,500,000. The machine is expected to generate $100,000 per month for 18 months, at which time it is expected to be sold as scrap for $400,000. Straight-line depreciation will be used over the machine’s entire useful life. PRI’s cost of capital is 1% per month. The applicable tax rate is 30%. 24. What is the NPV of the proposed purchase? ANSWER (5 POINTS):________________ 25. What is the IRR? ANSWER (5 POINTS):________________ 26. What is the payback period? ANSWER (5 POINTS):________________ 27. What is the Accounting Rate of Return? ANSWER (5 POINTS):________________ E. Make-or-Buy (5 POINTS) 28. PhatCar Renovations buys each vehicle for $500, rebuilds the chassis for $300, installs a new $1,000 engine, and repaints it for $200. PhatCar is considering just buying vehicles for $1,500 each that have already been rebuilt with a new engine, and just doing the paint. Making the change would mean laying off 9 of the 20 workers in the shop, saving $50 per vehicle. What is the difference in cost if they make the proposed change? F. Segment Elimination (Differential Analysis) (5 POINTS) 29. The following is a consolidated Income Statement for TreeTop Pruning. PER MONTH GEOGRAPHIC SEGMENT Sharpstown Cypress Pasadena TOTAL Sales $20,000 $18,000 $12,000 $48,000 TVC (5,000) (2,000) (6,000) (13,000) TCM 15,000 16,000 6,000 35,000 FC: Salaries 2,000 2,000 2,000 6,000 Advertising 1,000 1,000 1,000 3,000 Administrative 1,000 1,000 2,000 4,000 Depreciation 500 800 1,000 2,300 Rent 1,000 1,500 5,000 7,500 Other 2,000 1,000 1,000 4,000 Total FC (7,500) (7,300) (12,000) (26,800) Net Income 7,500 8,700 (6,000) 8,200 If the Pasadena segment is eliminated, advertising, administrative, and rent will be eliminated entirely, and the rest of the Pasadena fixed costs will be decreased by 50%. Required: Calculate the net change in monthly Net Income for the consolidated entity if the Pasadena Office is eliminated. G. Joint Costing >>>>> SHOW YOUR WORK TO RECEIVE CREDIT! The following is the data collected for the production of the joint products, A, B, C, and D. Joint costs total $4,000,000. Units of Production (lbs.) Weighting Market Value at Split-Off Separable Costs Gross Revenues A: 20,000 1.00 3,000,000 400,000 3,000,000 B: 10,000 1.40 2,000,000 800,000 4,500,000 C: 15,000 2.20 3,000,000 500,000 6,000,000 D: 12,000 2.75 700,000 250,000 1,500,000 8,700,000 1,950,000 15,000,000 REQUIRED: Calculate the joint cost allocation only for product A using the following cost allocation methods: 30. Physical Units (5 PTS.)ANSWER: ___________________ 31. Weighted units(5 PTS.)ANSWER: ___________________ 32. Market Value at Split-off (5 PTS.)ANSWER: ___________________ 33. Net Realizable Value (5 PTS.)ANSWER: ___________________ 34. Constant Gross Profit (5 PTS.)ANSWER: ___________________ PART I: Multiple Choice (15 questions - 2 point each, 30 points total) 1. ______ A manger should be held responsible only for those items over which he or she exercises significant control. This is a. Restrained (or limited) management theory b. Agency theory c. Responsibility accountingp. 388 d. The active management principle e. None of the above 2. ______ An accountant must “Provide all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, analyses, or recommendations.” According to the IMA, this is part of a. Competence b. Confidentiality c. Integrity d. Credibility e. None of the above 3. ______ When a single company is involved in more than one activity in the value chain, it is said to be a. Vertically integrated b. Horizontally integrated c. Competing internally d. Monopolistic e. None of the above 4. ______ Another word for constraint used in the text is a. Straitjacket b. Hindrance c. Bottleneck d. All of the above e. None of the above 5. ______ A joint cost is the term used to describe a. Costs incurred up to the split-off point b. The cost of one plumbing joint c. All the product costs required to produce one unit of a product d. The standard costs expected to be incurred at the actual level of production e. None of the above 6. ______ Which of the following allocation methods is based on the overall profitability of the firm? a. Physical units b. Weighted units c. Constant gross profit percentage d. All of the above e. None of the above 7. ______ As volume decreases, fixed costs will a. Decrease in total b. Decrease per unit c. Increase per unit d. Increase in total e. None of the above 8. ______ Which of the following methods creates a hypothetical cost at the split-off point? a. Physical units b. Weighted units c. Net realizable value d. Constant gross profit percentage e. None of the above 9. ______ The potential benefit that is sacrificed when one alternative is selected over another is called the a. Opportunity cost b. Constraint c. Separable cost d. Sunk cost e. None of the above 10. ______ An example of a relevant benefit is a(n) a. Revenue generated that are unrelated to the analysis b. Differential cost c. Differential revenue d. Avoidable cost e. None of the above 11. ______ A business segment whose manager only has control over cost and revenue is called a a. Cost center b. Revenue center c. Profit center d. Investment center e. None of the above 12. ______ Income before interest and income taxes is called a. Net Income b. Operating revenues c. Net operating income d. Variable costing net income e. None of the above 13. ______ As volume