ACCT505 Full course – June 2018

ACCT 505 Week 1 Discussion

 

WEEK 1: COST TERMS, CLASSIFICATIONS, AND BEHAVIOR (GRADED)

 

9696 unread replies.120120 replies.

 

Would a traditional income statement differ depending on
whether the business is a service organization, a merchandiser, or a
manufacturer?

 

Could we use managerial accounting tools to assess the
profitability of an organization other than a manufacturing business, or are
the topics that we are learning only related to manufacturing?

 

If we could use these concepts in service and merchandising
businesses, how would we go about doing so?

 

 

 

 

 

ACCT 505 Week 2 Discussion

 

WEEK 2: JOB ORDER AND PROCESS COSTING SYSTEMS (GRADED)

 

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Welcome to our Week 2 Discussions! Let’s begin by discussing
when job order costing systems would be more effective than a process costing
system. Please give examples of types of businesses in which each would be
appropriate. Do these costing systems apply only to manufacturing?

 

 

 

 

ACCT 505 Week 3 Discussion

 

WEEK 3: COST-VOLUME-PROFIT (CVP) CONCEPTS (GRADED)

 

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Why is CVP analysis useful? Why is it an important concept
in managerial accounting?

 

 

 

 

ACCT 505 Week 4 Discussion

 

WEEK 4: BUDGETING CASE STUDY (GRADED)

 

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Let’s start the week by discussing Case 8-32 on pages 410
and 411. First, let’s discuss how the budgeting process as employed by Ferguson
& Son Manufacturing Company contributes to the failure to achieve the
budgeted costs. What could they do differently that might lead to better budget
outcomes?

 

 

 

 

 

ACCT 505 Week 5 Discussion

 

WEEK 5: STANDARD COSTS, VARIANCES, AND FLEXIBLE BUDGETS
(GRADED)

 

104104 unread replies.127127 replies.

 

What are standard costs? Is a standard different from a
budget? What happens if they are set too high or too low?

 

 

 

 

ACCT 505 Week 6 Discussion

 

WEEK 6: SEGMENT REPORTING AND RELEVANT COSTS (GRADED)

 

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Welcome to Week 6 Discussions! Let’s begin with some
definitions: What are sunk costs? Opportunity costs? Incremental costs? What is
meant by relevant costs?

 

 

 

 

 

ACCT 505 Week 7 Discussion

 

WEEK 7: CAPITAL BUDGETING (GRADED)

 

6666 unread replies.8686 replies.

 

Welcome to Week 7 Discussions! Let’s start with defining
capital budgeting and decision making. What is capital budgeting? What are the
differences between screening decisions and preference decisions? Do you ever
have occasion to make capital budgeting decisions in your personal life?

 

 

 

 

 

 

 

 

 

 

ACCT 505 Week 2 Team Case Study 1

 

ACCT 505 – Managerial Accounting

 

Case Study 1

 

Chapter 3 – Job Order Costing

 

Team Assignment (2-3 Team members recommended)

 

CASE 3–18 Ethics and the Manager [Course Objective B] Terri
Ronsin had recently been transferred to the Home Security Systems Division of
National Home Products. Shortly after taking over her new position as divisional
controller, she was asked to develop the division’s predetermined overhead rate
for the upcoming year. The accuracy of the rate is important because it is used
throughout the year and any overapplied or underapplied over- head is closed
out to Cost of Goods Sold at the end of the year. National Home Products uses
direct labor-hours in all of its divisions as the allocation base for
manufacturing overhead.

 

To compute the predetermined overhead rate, Terri divided
her estimate of the total manufacturing overhead for the coming year by the
production manager’s estimate of the total direct labor-hours for the coming
year. She took her computations to the division’s general manager for approval
but was quite surprised when he suggested a modification in the base. Her
conversation with the general manager of the Home Security Systems Division,
Harry Irving, went like this:

 

Ronsin: Here are my calculations for next year’s
predetermined overhead rate. If you approve, we can enter the rate into the
computer on January 1 and be up and running in the job-order costing system
right away this year.

 

Irving: Thanks for coming up with the calculations so
quickly, and they look just fine. There is, how- ever, one slight modification
I would like to see. Your estimate of the total direct labor-hours for the year
is 440,000 hours. How about cutting that to about 420,000 hours?

 

Ronsin: I don’t know if I can do that. The production
manager says she will need about 440,000 direct labor-hours to meet the sales
projections for the year. Besides, there are going to be over 430,000 direct
labor-hours during the current year and sales are projected to be higher next
year.

 

Irving: Teri, I know all of that. I would still like to
reduce the direct labor-hours in the base to some- thing like 420,000 hours.
You probably don’t know that I had an agreement with your predecessor as
divisional controller to shave 5% or so off the estimated direct labor-hours
every year. That way, we kept a reserve that usually resulted in a big boost to
net operating income at the end of the fiscal year in December. We called it
our Christmas bonus. Corporate headquarters always seemed as pleased as punch
that we could pull off such a miracle at the end of the year. This system has
worked well for many years, and I don’t want to change it now.

 

Required:

 

Assume the following information:

 

Direct Materials

 

$40

 

per unit

 

Direct Labor

 

$20

 

per unit

 

Total Estimated Manufacturing Overhead

 

$8,400,000

 

Manufacturing overhead is allocated based on estimated
direct-labor hours.

 

Each unit of product requires 1 direct labor hour.

 

1. Calculate the cost of one unit of product, assuming that
the overhead per unit is based on Terri Ronson’s estimate of 440,000 hours.
(Round all dollar figures to two decimal places.)

 

a. If 442,000 units were produced, how much overhead was
applied to work in process.

 

2. Calculate the cost of one unit of product, assuming that
the overhead per unit is based on her supervisors preferred estimate of 420,000
hours. (Round all dollar figures to two decimal places.)

 

a. If 442,000 units were produced, how much overhead was
applied to work in process.

 

3. During the year, the company produced and sold 442,000
units, and incurred actual overhead of $8,450,000, what is the
under/overapplied overhead if:

 

a. The estimated Direct Labor Hours is 440,000.

 

b. The estimated Direct Labor Hours is 420,000.

 

c. All over-applied and under-applied overhead applied
directly to cost of goods sold. Assume that the company had $900,000 in net
operating income before the over/under applied overhead adjustment is made.
What is the revised net income after the over/underapplied overhead adjustment?

 

4. Should Terri Ronson go along with the general manager’s
request to reduce the direct labor hours in the predetermined overhead rate
computation to 420,000 hours? Be sure to discuss the operational and ethical
issues related to this decision.

 

Deliverables:

 

1. Submit an Excel spreadsheet that documents the
calculations made for steps 1-3 above. All items should be clearly labeled, and
appropriate formulas should be used to perform your calculations.

 

2. For step 4, submit a 4-6 minute narrated PowerPoint
(preferably using VoiceThread) that highlights your discussion of the
operational and ethical issues that Teri is facing as a result of the request
to reduce the direct labor hours. Be sure to make a recommendation in regard to
making this decision. The presentation should be 3-4 slides.

 

3. Post your PowerPoint and workbook on behalf of your team
to the Week 2 Assignments Page for the case study.

 

4. NOTE: as a team project, a team collaboration tool (such
as Big Blue Button) should be used for the students to collaborate on the
project!

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCT 505 Week 3 Team Case Study 2

 

ACCT 505 – Managerial Accounting

 

Case Study 2

 

Chapter 4 – Process Costing

 

Team Assignment (2-3 Team members recommended)

 

CASE 4–20 Ethics and the Manager, Understanding the Impact
of Percentage Completion on Profit—Weighted-Average Method [Course Objective B]
Gary Stevens and Mary James are production managers in the Consumer Electronics
Division of General Electronics Company, which has several dozen plants
scattered in locations throughout the world. Mary manages the plant located in
Des Moines, Iowa, while Gary manages the plant in El Segundo, California.
Production managers are paid a salary and get an additional bonus equal to 5%
of their base salary if the entire division meets or exceeds its target profits
for the year. The bonus is determined in March after the company’s annual
report has been prepared and issued to stockholders.

 

Shortly after the beginning of the New Year, Mary received a
phone call from Gary that went like this:

 

Gary: How’s it going, Mary?

 

Mary: Fine, Gary. How’s it going with you?

 

Gary: Great! I just got the preliminary profit figures for
the division for last year and we are within $200,000 of making the year’s
target profits. All we have to do is pull a few strings, and we’ll be over the
top!

 

Mary: What do you mean? Gary: Well, one thing that would be
easy to change is your estimate of the percentage completion of your ending
work in process inventories. Mary: I don’t know if I can do that, Gary. Those
percentage completion figures are supplied by TomWinthrop, my lead supervisor,
who I have always trusted to provide us with good estimates.

 

Besides, I have already sent the percentage completion
figures to corporate headquarters. Gary: You can always tell them there was a
mistake. Think about it, Mary. All of us managers are doing as much as we can
to pull this bonus out of the hat. You may not want the bonus check, but the
rest of us sure could use it.

 

The final processing department in Mary’s production
facility began the year with no work in process inventories. During the year,
210,000 units were transferred in from the prior processing department and
200,000 units were completed and sold. Costs transferred in from the prior
department totaled $39,375,000. No materials are added in the final processing
department. A total of $20,807,500 of conversion cost was incurred in the final
processing department during the year.

 

Required:

 

1. Tom Winthrop estimated that the units in ending inventory
in the final processing department were 30% complete with respect to the
conversion costs of the final processing department. If this estimate of the
percentage completion is used, what would be the Cost of Goods Sold for the
year? (Note: Since all units completed were sold, the cost of goods transferred
out = Cost of Goods Sold.)

 

2. Gary is recommending that the completion percentage by
adjusted by 10 percentage points in order to assist the team in making their
bonus.

 

a. Calculate the cost of goods sold if the ending inventory
is 20% complete in regard to conversion costs. Would net income increase or
decrease if this option was chosen over the 30% completion percentage? How much
is the increase?

 

b. Calculate the cost of goods sold if the ending inventory
is 40% complete in regard to conversion costs. Would net income increase or
decrease if this option was chosen over the 30% completion percentage? How much
is the increase?

 

c. Based on your calculations, which percentage is Gary
suggesting that Mary use for her ending inventory calculations. Recall that
Gary wants to see a higher net income figure.

 

3. Do you think Mary James should go along with the request
to alter estimates of the percentage completion? Why or why not? Support your
response by consulting the IMA Standards of Ethical Practice.

 

Deliverables:

 

1. Submit an Excel spreadsheet that documents the
calculations made for steps 1 and 2 above. All items should be clearly labeled,
and appropriate formulas should be used to perform your calculations.

 

2. For step 3, submit a narrated PowerPoint
(orVoiceThread)that highlights your discussion of the operational and ethical
issues that Mary is facing as a result of the request to change the percent
complete on ending inventory. Be sure to make a recommendation in regard to
making this decision. A suggested length guideline is two slides per group
member.

 

3. Only one group member needs toupload the PowerPoint and
Excel filefor the case study on behalf of the group to the Week 3 assignment
link in your course shell. If there were issues with non-participating group
member, all group members should submit a peer evaluation directly to the
instructor via e-mail.

 

4. NOTE: as a team project, a team collaboration tool (such
as Cisco Spark) should be used for the students to collaborate on the project!

 

 

 

 

 

 

 

 

 

 

 

ACCT 505 Week 5 Individual Course Project

 

COURSE PROJECT 1 INSTRUCTIONS

 

You have just been contracted as a new management trainee by
Earrings Unlimited, a distributor of earrings to various retail outlets across
the country. In the past, the company has done very little in the way of
budgeting and at certain times of the year has experienced a shortage of cash.

 

Since you are well trained in budgeting, you have decided to
prepare a master budget for the upcoming second quarter. To this end, you have
worked with accounting and other areas to gather the information assembled
below.

 

The company sells many styles of earrings, but all are sold
for the same price – $10per pair. Actual sales of earrings for the last three
months and budgeted sales for the next six months follow:

 

January (actual)

 

20,000

 

February (actual)

 

26,000

 

March (actual)

 

40,000

 

April (budget)

 

65,000

 

May (budget)

 

100,000

 

June (budget)

 

50,000

 

July (budget)

 

30,000

 

August (budget)

 

28,000

 

September (budget)

 

25,000

 

The concentration of sales before and during May is due to
Mother’s Day. Sufficient inventory should be on hand at the end of each month
to supply 40% of the earrings sold in the following month.

 

Suppliers are paid $4 for each earring. One-half of a month’s
purchases is paid for in the month of purchase; the other half is paid for in
the following month. All sales are on credit with no discounts. The company has
found, however, that only 20% of a month’s sales are collected in the month of
sale. An additional 70% is collected in the following month, and the remaining
10% is collected in the second month following sale. Bad debts have been
negligible.

 

Monthly operating expenses for the company are given below:

 

Variable expenses:

 

Sales commissions 4% of sales

 

Fixed expenses:

 

Advertising $200,000

 

Rent $18,000

 

Salaries $106,000

 

Utilities $ 7,000

 

Insurance $3,000

 

Depreciation $14,000

 

Insurance is paid on an annual basis, in November of each
year.

 

The company plans to purchase $16,000 in new equipment
during May and $40,000 in new equipment during June; both purchases will be for
cash. The company declares dividends of $15,000 each quarter, payable in the
first month of the following quarter.

 

Other relevant data is given below:

 

Cash balance as of March 31st $74,000

 

Inventory balance as of March 31st $112,000

 

Merchandise purchases for March $200,000

 

The company maintains a minimum cash balance of at least
$50,000 at the end of each month. All borrowing is done at the beginning of a
month; any repayments are made at the end of a month.

 

The company has an agreement with a bank that allows the
company to borrow the exact amount needed at the beginning of each month. The
interest rate on these loans is 1% per month and for simplicity we will assume
that interest is not compounded. At the end of the quarter, the company will
pay the bank all of the accrued interest on the loan and as much of the loan as
possible while still retaining at least $50,000 in cash.

 

Required:

 

Prepare a cash budget for the three-month period ending June
30. Include the following detailed budgets:

 

1.

 

a. A sales budget, by month and in total.

 

b. A schedule of expected cash collections from sales, by
month and in total.

 

c. A merchandise purchases budget in units and in dollars.
Show the budget by month and in total.

 

d. A schedule of expected cash disbursements for merchandise
purchases, by month and in total.

 

2. A cash budget. Show the budget by month and in total.
Determine any borrowing that would be needed to maintain the minimum cash
balance of $50,000.

 

PROJECT 1 – Excel Template

 

Student Name:

 

SALES BUDGET:

 

April

 

May

 

June

 

Quarter

 

Budgeted unit sales

 

Selling price per unit

 

Total sales

 

SCHEDULE OF EXPECTED CASH COLLECTIONS:

 

April

 

May

 

June

 

Quarter

 

February Sales

 

March Sales

 

April Sales

 

May Sales

 

June Sales

 

Total cash collections

 

MERCHANDISE PURCHASES BUDGET:

 

April

 

May

 

June

 

Quarter

 

Budgeted unit sales

 

Add desired ending inventory

 

Total needs

 

Less beginning inventory

 

Required purchases

 

Cost of purchases @ $4 per unit

 

BUDGETED CASH DISBURSEMENTS FOR MERCHANDISE PURCHASES:

 

April

 

May

 

June

 

Quarter

 

March Purchases

 

April Purchases

 

May Purchases

 

June Purchases

 

Total cash payments

 

EARRINGS UNLIMITED

 

CASH BUDGET

 

FOR THE 3 MONTHS ENDING JUNE 30

 

April

 

May

 

June

 

Quarter

 

Cash balance

 

Add collections from customers

 

Total cash available

 

Less disbursements

 

Merchandise purchases

 

Advertising

 

Rent

 

Salaries

 

Commissions

 

Utilities

 

Equipment purchases

 

Dividends paid

 

Total disbursements

 

Excess (deficiency) of receipts

 

over disbursements

 

Financing:

 

Borrowings

 

Repayments

 

Interest

 

Total financing

 

Cash balance, ending

 

 

 

 

 

 

 

 

 

 

 

 

ACCT 505 Week 6 Signature Assignment Team Case Study 3

 

ACCT 505 – Managerial Accounting Team Case Study 3 – Week 6
Balanced Scorecard Case–Team Case(2-3 team members) (Course Objective G)

 

Many companies are using the Balanced Scorecard System to
assist in their performance management. According to Garrison, Noreen, and
Brewer, your textbook authors, a balanced scorecard “consists of integrated set
of performance measures that are derived from and support a company’s strategy”
(p. 519). In a Balanced Scorecard System the company’s strategy is translated
into a system of performance measures that are used to monitor the company’s
performance in meeting its strategic objectives.

 

As part of a two or three member team, your task is to
identify and discuss the key performance measures of a balanced scorecard.
Then, find two or three companies (one company per group member) that are
currently using a Balanced Scorecard Systemby doing an internet andlibrary
database search. Internet searches as well searches of financial databases,
such as Yahoo Finance, should help you in your efforts. Then discuss in as much
detail as possible the specifics of the balanced scorecard that is being used
by these companies.

 

Deliverables

 

Your team should prepare a 6-9 slide PowerPoint
presentation, explaining the specifics of the balanced scorecard system of the
two or three companies (one company per group member) you selected in your
research. This presentation should include your analysis of the advantages and
disadvantages of each company’s Balanced Scorecard System.Be sure toclearly
document the performance measures being used by each of the three companies.

 

Your PowerPoint presentation should be narrated using
VoiceThread or similar technology. All team members must participate in the
narration of the PowerPoint presentation. Please introduce yourself prior to
speaking.

 

APA standards are required to be followed for this
presentation.

 

 

 

 

 

 

 

 

 

 

ACCT 505 Week 7 INDIVIDUAL COURSE PROJECT

 

Capital Budgeting Decision

 

Here is Project 2:

 

HamptonCompany is a producer of house paints. The company’s
production department has been investigating possible ways to trim total
production costs. One possibility currently being examined is to make the paint
cans instead of purchasing them. The equipment needed would cost $1,000,000,
with a disposal value of $200,000, and would be able to produce 27,500,000 cans
over the life of the machinery. The production department estimates that
approximately 5,500,000 cans would be needed for each of the next 5 years.

 

The company would hire six new employees to produce the
paint cans. These six individuals would be full-time employees working 2,000
hours per year and earning $15.00 per hour. They would also receive the same
benefits as other production employees, 15% of wages in addition to $2,000 of
health benefits.

 

It is estimated that the raw materials will cost 30¢ per can
and that other variable costs would be 10¢ per can. Because there is currently
unused space in the factory, no additional fixed costs would be incurred if
this proposal is accepted.

 

It is expected that cans would cost 50¢ each if purchased
from the current supplier. The company’s minimum rate of return (hurdle rate)
has been determined to be 11% for all new projects, and the current tax rate of
35% is anticipated to remain unchanged. The pricing for thecompany’s products
as well as number of units sold will not be affected by this decision. The
unit-of-production depreciation method would be used if the new equipment is
purchased.

 

Required:

 

1. Based on the above information and using Excel, calculate
the following items for this proposed equipment purchase.

 

Annual cash flows over the expected life of the equipment

Payback period

Simple rate of return

Net present value

Internal rate of return

The check figure for the total annual after-tax cash flows
is $271,150.

 

2. Would you recommend the acceptance of this proposal? Why
or why not? Prepare a short, double-spaced paper in MS Wordelaborating on and
supporting your answer.

 

ACCT 505

 

Project 2

 

Template For ACTUALWeek Seven Capital Budgeting Problem

 

This file can be used as the template for the actual
project.

 

Hampton Company

 

Data:

 

Cost of new equipment

 

$10,00,000

 

Expected life of equipment in years

 

5

 

Disposal value in 5 years

 

$2,00,000

 

Life production—number of cans

 

2,75,00,000

 

Annual production or purchase needs

 

55,00,000

 

Number of workers needed

 

6

 

Annual hours to be worked per employee

 

2,000

 

Earnings per hour for employees

 

$15

 

Annual health benefits per employee

 

$2,000

 

Other annual benefits per employee—% of wages

 

15%

 

Cost of raw materials per can

 

$0.30

 

Other variable production costs per can

 

$0.10

 

Costs to purchase cans—per can

 

$0.50

 

Required rate of return

 

11%

 

Tax rate

 

35%

 

Make

 

Purchase

 

Cost to Produce

 

Annual cost of direct material:

 

Need of 5.5 million cans per year

 

Annual cost of direct labor for new employees:

 

Wages

 

Health benefits

 

Other benefits

 

Total wages and benefits

 

Other variable production costs

 

Total annual production costs

 

Annual cost to purchase cans

 

Part 1 Cash Flows Over the Life of the Project

 

Before Tax

 

Tax

 

After Tax

 

Item

 

Amount

 

Effect

 

Amount

 

Annual cash savings

 

Tax savings due to depreciation

 

Total after-tax annual cash flow

 

Part 2 Payback Period

 

years

 

Part 3 Simple Rate of Return

 

Accounting income as result of decreased costs

 

Annual cash savings

 

Less depreciation

 

Before tax income

 

Tax at 35% rate

 

After tax income

 

After tax income / Investment Cost

 

Part 4 Net Present Value

 

Before Tax

 

After Tax

 

11% PV

 

Present

 

Item

 

Year

 

Amount

 

Tax %

 

Amount

 

Factor

 

Value

 

Cost of machine

 

Annual cash savings

 

Tax savings due to depreciation

 

Disposal value

 

Net Present Value

 

Part 5 Internal Rate of Return

 

Excel function method to calculate IRR

 

This function requires that you have only one cash flow per
period (Period 0 through Period 5, for our example).

 

This means that no annuity figures can be used. The chart
for our example can be revised as follows.

 

After Tax

 

Item

 

Year

 

Amount

 

Cost of machine and training

 

0

 

Year 1 inflow

 

1

 

Year 2 inflow

 

2

 

Year 3 inflow

 

3

 

Year 4 inflow

 

4

 

Year 5 inflow

 

5

 

The IRR function will require the range of cash flows,
beginning with the initial cash outflow for the investment

 

and progressing through each year of the project. You also
have to include an initial guess for the

 

possible IRR. The formula is: =IRR(values,guess)

 

IRR Function

 

IRR(f84..f89,.30)

 

 

 

 

 

 

 

 

 

 

ACCT 505 Week 4 Midterm

 

Question 1

 

(TCO A) Direct material cost is a part of

 

Conversion Cost NO…. Prime Cost NO.

 

Conversion Cost YES…. Prime Cost NO.

 

Conversion Cost YES…. Prime Cost YES.

 

Conversion Cost NO…. Prime Cost YES.

 

Question 2

 

(TCO A) Wages paid to an assembly line worker in a factory
are a

 

Prime Cost YES…..Conversion Cost YES.

 

Prime Cost YES…..Conversion Cost NO.

 

Prime Cost NO….Conversion Cost NO.

 

Prime Cost NO…..Conversion Cost YES.

 

Question 3

 

(TCO A) Property taxes on a company’s factory building would
be classified as a(n)

 

variable cost.

 

opportunity cost.

 

period cost.

 

product cost.

 

Question 4

 

(TCO A) Depreciation of office buildings and office
equipment is also known as

 

variable costs.

 

conversion costs.

 

period costs.

 

product costs.

 

Question 5

 

(TCO A) A cost incurred in the past that is not relevant to
any current decision is classified as a(n)

 

period cost.

 

incremental cost.

 

opportunity cost.

 

None of the above

 

Question 6

 

(TCO B) A job-order cost system is employed in those
situations when

 

many different products, jobs, or batches of production are
being produced each period.

 

manufacturing involves a single, homogeneous product that
flows evenly through the production process on a continuous basis.

 

the product moves from department to department before being
completed.

 

the unit cost of production is computed by dividing the
total production costs by the number of units produced.

 

Question 7

 

(TCO B) Which of the following statements about the
process-costing system is/are correct?

 

In a process-costing system, each processing department has
a work-in-process account.

 

In a process-costing system, equivalent units are separately
computed for materials and for conversion costs.

 

In a process-costing system, overhead can be under- or
over-applied just as in job-order costing.

 

All of the statements above are correct.

 

See Chapter 4.

 

Question 8

 

(TCO C) The contribution margin equals

 

sales – expenses.

 

sales – variable costs.

 

sales – cost of goods sold.

 

sales – fixed costs.

 

Question 9

 

(TCO C) To obtain the break-even point in terms of dollar
sales, total fixed expenses are divided by which of the following?

 

Variable expense per unit

 

Variable expense per unit/selling price per unit

 

Fixed expense per unit

 

(Selling price per unit – variable expense per unit) /
selling price per unit

 

Question 10

 

(TCO D) In an income statement prepared using the variable
costing method, fixed manufacturing overhead would

 

not be used.

 

be used in the computation of the contribution margin.

 

be used in the computation of net operating income but not
in the computation of the contribution margin.

 

be treated the same as variable manufacturing overhead.

 

Question 11

 

15 / 15 pts

 

(TCO A) The following data (in thousands of dollars) have
been taken from the accounting records of ABC Corporation for the
just-completed year.

 

Sales

 

$920

 

Purchases of raw materials

 

$215

 

Direct labor

 

$170

 

Manufacturing overhead

 

$275

 

Administrative expenses

 

$180

 

Selling expenses

 

$140

 

Raw materials inventory, beginning

 

$100

 

Raw materials inventory, ending

 

$65

 

Work-in-process inventory, beginning

 

$75

 

Work-in-process inventory, ending

 

$35

 

Finished goods inventory, beginning

 

$130

 

Finished goods inventory, ending

 

$165

 

REQUIRED: Prepare a Schedule of Cost of Goods Manufactured
Statement in the text box below.

 

Question 12

 

20 / 20 pts

 

(TCO B) The following company manufactures a product that
goes through three processing departments. Information relating to activity in the
first department during a given month is provided below.

 

Percentage Completed

 

Units

 

Materials

 

Conversion

 

WIP, Jan 1

 

140,000

 

65%

 

45%

 

WIP, Jan 31

 

120,000

 

75%

 

65%

 

The department started 580,000 units into production during
the month and transferred 600,000 completed units to the next department.

 

REQUIRED: Compute the total equivalent units of production
for materials and conversion costs for the given month, assuming that the
company uses the weighted-average method of accounting for units and costs.

 

Question 13

 

25 / 25 pts

 

(TCO C) Drake Company’s income statement for the most recent
year appears below.

 

Sales (45,000 units) $1,350,000

 

Less: variable expenses 750,000

 

Contribution margin 600,000

 

Less: fixed expenses 375,000

 

Net operating income $225,000

 

REQUIRED:

 

a. Calculate the unit contribution margin in dollars.

 

b. Calculate the break-even point in dollars.

 

c. If the company desires a net operating income of
$290,000, how many units must it sell?

 

Question 14

 

(TCO D) The following Company, which has only one product,
has provided the following data concerning its most recent month of operations:

 

Selling price: $ 175

 

Units Data:

 

Units in beginning inventory 0

 

Units produced 9,500

 

Units sold 8,000

 

Units in ending Inventory 1,500

 

Variable costs per unit:

 

Direct materials $ 55

 

Direct labor $ 38

 

Variable manufacturing overhead $ 2

 

Variable selling and admin $ 10

 

Fixed costs:

 

Fixed manufacturing overhead $ 300,000

 

Fixed selling and admin $ 125,000

 

REQUIRED:

 

a. What is the unit product cost for the month under
variable costing?

 

b. What is the unit product cost for the month under
absorption costing?

 

c. Prepare an income statement for the month using the
variable costing method.

 

d. Prepare an income statement for the month using the
absorption costing method.

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCT 505 Final Exam Latest 2018 June

 

Question 1 30 pts

 

(TCO A) The following data (in thousands of dollars) have
been taken from the accounting records of the following company for the
just-completed year.

 

Sales
………………………………………………………………$1,950

 

Raw materials inventory, beginning
…………………………$50

 

Raw materials inventory, ending
……………………………..$30

 

Purchases of raw materials
…………………………………..$360

 

Direct labor …………………………………………………………$120

 

Manufacturing overhead
……………………………………….$175

 

Administrative expenses
……………………………………….$100

 

Selling expenses ………………………………………………….$140

 

Work-in-process inventory, beginning
……………………….$50

 

Work-in-process inventory, ending
……………………………$70

 

Finished goods inventory, beginning
……………………….$200

 

Finished goods inventory, ending
……………………………$105

 

Required:

 

Use these data to prepare (in thousands of dollars) a
schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold for
the year.

 

Question 2 25 pts

 

TCO B) Willow Creek Corporation bases its predetermined
overhead rate on the estimated labor hours for the upcoming year. At the
beginning of the most recently completed year, the company estimated the labor
hours for the upcoming year at 32,500 labor hours. The estimated variable
manufacturing overhead was $5.55 per labor hour and the estimated total fixed
manufacturing overhead was $710,000. The actual labor hours for the year turned
out to be 40,000 labor hours.

 

Required:

 

Compute the company’s predetermined overhead rate for the
recently completed year.

 

Question 3 30 pts

 

((TCO B) A company uses the weighted-average method in its
process costing system. Data concerning the first processing department for the
most recent month are listed below.

 

Work in process, beginning:

 

Units in beginning work in process inventory

 

400

 

Materials costs

 

$6,900

 

Conversion costs

 

$2,500

 

Percent complete for materials

 

80%

 

Percent complete for conversion

 

15%

 

Units started into production during the month

 

6,000

 

Units transferred to the next department during the month

 

5,400

 

Materials costs added during the month

 

$112,500

 

Conversion costs added during the month

 

$210,300

 

Ending work in process:

 

Units in ending work-in-process inventory

 

1,000

 

Percentage complete for materials

 

80%

 

Percentage complete for conversion

 

30%

 

Required: Calculate the total equivalent units for
conversion for the month in the first processing department.

 

Question 4 25 pts

 

(TCO C) A company produces and sells a single product whose
selling price is $120.00 per unit and whose variable expense is $46.20 per
unit. The company’s fixed expense is $405,900 per month.

 

Required: Determine the monthly breakeven in unit sales.
Show your work!

 

Question 5 30 pts

 

(TCO D) The following absorption costing income statement
and additional data are available from the accounting records of XYZ Co. for
the month ended December 31, 2017. During the accounting period, 17,000 units
were manufactured and sold at a price of $60 per unit. There were no beginning
inventories.

 

XYZ Co.

 

Absorption Costing Income Statement

 

for the Month Ended December 31, 2017

 

Sales (17,000 @ $60)

 

$1,020,000

 

Cost of goods sold

 

612,000

 

Gross profit

 

$ 408,000

 

Selling and administrative expenses

 

66,000

 

Income from operations

 

$ 342,000

 

Additional Information:

 

Cost

 

Total Cost

 

Number of Units

 

Unit Cost

 

Manufacturing costs:

 

Variable

 

$442,000

 

17,000

 

$26

 

Fixed

 

170,000

 

17,000

 

10

 

Total

 

$612,000

 

$36

 

Selling and administrative expenses:

 

Variable ($2 per unit sold)

 

$34,000

 

Fixed

 

32,000

 

Total

 

$66,000

 

Required:

 

1. Prepare a new income statement for the year using
variable costing.

 

2. Did the operating income change under the variable
costing method? Please explain.

 

Question 6 5 pts

 

(TCO E) Complying with regulations is a(n)

 

batch-level activity.

 

product-level activity.

 

unit-level activity.

 

organization sustaining activity.

 

Question 7 30 pts

 

TCO F) The following overhead data are for a department of a
large company.

 

Actual Costs Incurred

 

Static Budget

 

Activity level (in units)

 

360

 

340

 

Variable costs:

 

Indirect materials

 

$4,182

 

$4,148

 

Electricity

 

$2,536

 

$2,414

 

Fixed costs:

 

Administration

 

$6,540

 

$6,500

 

Rent

 

$6,310

 

$6,400

 

Required:

 

Construct a flexible budget performance report that would be
useful in assessing how well costs were controlled in this department. In your
flexible budget, be sure to indicate whether each noted variance is either
favorable or unfavorable.

 

75 words

 

Question 8 25 pts

 

TCO F) A corporation is preparing its cash budget for the
month. The budgeted beginning cash balance is $54,000. Budgeted cash receipts
total $127,000 and budgeted cash disbursements total $99,000. The desired
ending cash balance is $100,000. The company can borrow up to $150,000 at any
time from a local bank, with interest not due until the following month.

 

Required:

 

Prepare the company’s cash budget for the month in good
form. For full credit, indicate what borrowing, if any, would be needed to
attain the desired ending cash balance.

 

42 words

 

Question 9 5 pts

 

(TCO G) Given the following data, what would ROI be?

 

Sales

 

$140,000

 

Net operating income

 

$15,000

 

Contribution margin

 

$40,000

 

Average operating assets

 

$100,000

 

Stockholder’s equity

 

$50,000

 

30.0%

 

15.0%

 

28.6%

 

10.7%

 

Question 10 25 pts

 

(TCO H) A company makes 10,000 units per year of a part for
use in one of its products. Data concerning the unit production costs of the
part follow.

 

Direct materials $250

 

Direct labor 125

 

Variable manufacturing OH 50

 

Fixed manufacturing OH 150

 

Total $575

 

An outside supplier has offered to sell the company all of
the parts it requires. If the company decided to discontinue making the parts,
20% of the above fixed manufacturing overhead costs could be avoided.

 

Required:

 

Assume the company has no alternative use for the facilities
presently devoted to production of the parts. If the outside supplier offers to
sell the parts for $425 each, should the company accept the offer?

 

Fully support your answer with appropriate calculations.

 

40 words

 

Question 11 30 pts

 

(TCO I) (Ignore income taxes in this problem.) Bill Anders
retires in 8 years. He has $650,000 to invest and is considering a franchise
for a fast-food outlet. He would have to purchase equipment costing $500,000 to
equip the outlet and invest an additional $150,000 for inventories and other
working capital needs. Other outlets in the fast-food chain have an annual net
cash inflow of about $160,000. Mr. Anders would close the outlet in 8 years. He
estimates that the equipment could be sold at that time for about 10% of its
original cost. Mr. Anders’ required rate of return is 16%.

 

Required:

 

Part A: What is the investment’s net present value when the
discount rate is 16%?

 

Part B: Refer to your calculations. Is this an acceptable
investment? Why or why not?