1. (TCO 4) Assumptions underlying cost-volume-profit analysis include all of the following, except: (Points : 5)
all costs can be divided into fixed and variable elements.
total variable costs are directly proportional to volume over the relevant range.
selling prices are to be unchanged.
sales price is the only relevant factor affecting cost.
Question 2.2. (TCO 6) A basic assumption of activity-based costing (ABC) is that: (Points : 5)
all manufacturing costs vary directly with units of production.
inventory levels do not fluctuate.
only costs that respond to unit-level drivers are product costs.
only variable costs are included in activity-cost pools.
Question 3.3. (TCO 2) In a traditional job order cost system, the use of direct labor on jobs increases: (Points : 5)
work in process.
Question 4.4. (TCO 5) A cost driver is defined as: (Points : 5)
the largest cost in a manufacturing process.
the significant factor in the development of a new product.
an indirect cost that cannot be traced to a particular cost objective but is essential to the business.
a causal factor that increases the total cost of a cost objective.
Question 5.5. (TCO 8) Wood Co. has considerable excess manufacturing capacity. A special job order’s cost sheet includes the following applied manufacturing overhead costs:
Fixed costs: 25,000
Variable costs: 36,000
The fixed costs include a normal $4,500 allocation for in-house design costs, although no in-house design will be done. Instead, the job will require the use of external designers costing $9,250. What is the total amount to be included in the calculation to determine the minimum acceptable price for the job? (Points : 5)
(TCO 1) Who are the users of managerial accounting information? How does their use of accounting information differ from the users of financial accounting information?(Points : 25)
(TCO 2) Wolf Co. estimates
that its employees will work 400,000 direct labor hours during the coming year. Total overhead costs are estimated to be $9,600,000 and direct labor costs are estimated to be $12,500,000. Direct Labor hoursare actually 450,000.If Wolf Co. allocates overhead based on direct labor HOURS, what is the predetermined overhead rate? (Points : 25)
(TCO 6) At Long Co. electricity cost starts with a minimum fixed cost, and after that, there is a perfectly variable expense. Using estimated machine hours:Machine hours Cost
(TCO 9) (TCO 9) Harry Corp buys equipment for $224,888 that will last for 9 years. The equipment will generate cash flows of $36,000 per year and will have no salvage value at the end of its life. Ignore taxes. Use 10% required rate of return.(a) What is the Present Value (PV) of this investment (at 10%)?.(b) What is the NET Present Value (NPV) of this investment? If you need 10%, should you buy the equipment?(c) What is the Internal Rate of Return (IRR) of this investment?
(d) What is the payback period? . (Points : 25)
(TCO 10) Tanya Corp sells its products on both credit and cash basis. Monthly sales are sold 20% for cash, 80% for credit. Credit sales are collected 65% in the month of sale and35% the following month. Sales for the first quarter are BUDGETED as follows: January $200,000; February $300,000; March $300,000.Compute cash collections Budgeted for February. How much cash was collected in the month? (Points : 25)
(TCO 3) The Mixing Department is the third department in the MZS Inc. factory. During January, there were 4,000 units of beginning inventory in the Mixing Department, and 60,000 units were transferred in from the prior process. There were 8,000 units in ending inventory. The transferred-in cost in the beginning inventory was $170,000, and there was $600,000 in transferred-in cost during the month.
(TCO 4) Assume that we are manufacturing a product, and assume that the sales price per unit is $70, the variable cost is $20 per unit, and the fixed cost is $85,000; a) how many units would we need to sell to break even? b) How many units would we need to sell to earn a profit of $120,000? c) How many units do we need to sell to double that profit to $240,000? D) Why didn’t the number of units double from Part B to Part C?(Points: 25)
(TCO 5) Sivan Co. manufactures and sells one product. For the year, they started with no opening inventory; produced 100,000 units but only sold 70,000 units. The selling price per each unit is $80.The variable costs per unit were:
Direct Labor ………………………..6
variable manufacturing overhead….5
variable selling and administrative….6
Fixed costs per year:
Fixed manufacturing Overhead …………….$700,000
Fixed Selling and Administrative expenses….$300,000
(a) Prepare the Income Statement using Absorption Costing.
(b) Prepare the Income Statement using Variable Costing.(Points : 25)
(TCO 7) North Company produces a small part that it uses in the production of its Product “H”. The company’s unit product cost for the part, based on a production of 100,000 parts per year, is as follows:
………………………………………….Per part ………………..Total
Direct Materials………………………. $7.00………..$700,000
Direct Labor …………………………….6.00…………$600,000
Variable Manufacturing Overhead 2.00………..$200,000
Fixed manufacturing Overhead, (Traceable or avoidable) $325,000 TOTAL, equal to $3.25 per unit
Fixed manufacturing Overhead,( Common—not traceable to any product. Will stay even if no product is manufactured) allocated on basis of labor-hours 5.75) $575,000 TotalUnit Product Cost……………………… $24.00 (7+ 6+ 2, variable of $15. Plus Fixed 3.25+ 5.75=9, total)An outside supplier has offered to supply parts to the North Company for only $21.25 per part.(it appears to the President of the company that he could save $2.75 per unit.
100 percent of the traceable or avoidable fixed manufacturing cost is supervisor salaries and other costs that can be ELIMINATED if the parts are purchased. The decision to buy the parts from the outside supplier would have no effect on the common fixed costs of the company, and the space being used to produce the parts would otherwise be idle. Ignore the impact of income taxes in your calculation.
How much would profits increase or decrease as a result of purchasing the parts from the
outside supplier rather than making them inside the company? (Points : 25)
(TCO F) A company has the opportunity to do any, none, or all of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work.
Year A B C
0 -300 -150 -350
1 100 -50 100
2 100 100 100
3 100 100 100
4 100 100 100
5 100 100 100
6 50 100 100
7 -100 -200 0
(Points : 40)