Accounting Final

Final Examination Review of Attempt 1Started on: Monday, June 6 2011, 10:54 AM Completed on: Monday, June 6 2011, 12:55 PM Time taken: 2 hours 1 min Overdue: 1 min 8 secs Raw score: 160/320 (50 %) Grade: 160 out of a maximum of 320

Multiple Choice: Choose the best answer to each of the following questions. (16 points each)

1Marks: 16 LBC Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 3.5 hours of direct labor at the rate of $14.50 per direct labor-hour. Management would like you to prepare a Direct Labor Budget for June. The company plans to sell 39,000 units of Product WZ in June. The finished goods inventories on June 1 and June 30 are budgeted to be 200 and 100 units, respectively. Budgeted direct labor costs for June would be: Answer: a. $1,974,175

b. $564,050

c. $1,979,250

d. $1,984,325

Incorrect Marks for this submission: 0/16.

2Marks: 16 Muecke Inc. is working on its cash budget for April. The budgeted beginning cash balance is $40,000. Budgeted cash receipts total $150,000 and budgeted cash disbursements total $158,000. The desired ending cash balance is $50,000. To attain its desired ending cash balance for April, the company needs to borrow: Answer: a. $18,000

b. $50,000

c. $0

d. $82,000

Correct Marks for this submission: 16/16.

3Marks: 16 Shackleford Corporation's standard wage rate is $13.70 per direct labor-hour (DLH) and according to the standards, each unit of output requires 7.0 DLHs. In October, 3,000 units were produced, the actual wage rate was $14.10 per DLH, and the actual hours were 21,760 DLHs. In the journal entry to record the incurrence of direct labor costs in October, the Work in Process entry would consist of a: Answer: a. credit of $306,816.

b. debit of $287,700.

c. credit of $287,700.

d. debit of $306,816.


4Marks: 16 Beakins Company produces a single product. The standard cost card for the product follows: : Direct materials (4 yards @ $5 per yard) ................................... $20

Direct labor (1.5 hours @ $10 per hour) .................................... $15

Variable manufacturing overhead (1.5 hrs @ $4 per /hour) ....... $6 During a recent period the company produced 1,200 units of product. Various costs associated with the production of these units are given below: Direct materials purchased (6,000 yards) .............. $28,500

Direct materials used in production ...................... 5,000 yards

Direct labor cost incurred (2,100 hours) ................ $17,850

Variable manufacturing overhead cost incurred ... $10,080

The company records all variances at the earliest possible point in time. Variable manufacturing

overhead

costs

are

applied

to

products

on

the

basis

of

direct

labor

hours.

The labor rate variance for the period is: Answer: a. $3,150 F

b. $3,150 U

c. $2,700 U

d. $2,700 F


5Marks: 16 Solly Company produces a product for national distribution. Standards for the product are: Materials: 12 ounces - Labor: 2 hours per unit at $8 per hour. per unit at 60 per ounce.

During the month of December, the company produced 1,000 units. Information for the month follows: Materials: Labor: 14,000 2,500 ounces hours purchased worked and at used a at a total total cost of $7,700. cost of $20,625.

The material price variance is: Answer:

a. $600 U

b. $700 U

c. $700 F

d. $600 F


6Marks: 16 A manufacturing company has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity ................................ 1,000 DLHs

Overhead costs at the denominator activity level:

Variable overhead cost .......................................

$3,800

Fixed overhead cost ........................................... $14,250

The following data pertain to operations for the most recent period: Actual hours .......................................................... 1,200 DLHs

Standard hours allowed for the actual output ....... 885 DLHs

Actual total variable overhead cost ....................... $4,380

Actual total fixed overhead cost ........................... $12,450

What was the variable overhead efficiency variance for the period to the nearest dollar? Answer: a. $1,150 U

b. $1,197 U

c. $133 U

d. $580 U


7Marks: 16 Crispy Company manufactures smoke detectors and has developed the following flexible budget for its overhead costs. Manufacturing overhead at Crispy is applied to production on the basis of standard direct labor-hours: Direct labor-hours .............. 56,000 70,000 84,000

Detectors produced ........... 40,000 50,000 60,000

Variable overhead cost ...... $252,000 $315,000 $378,000

Fixed overhead cost .......... $672,000 $672,000 $672,000 Crispy was expecting to produce 40,000 detectors last year. The actual results for the year were as follows: Number of detectors produced ...... 43,200

Direct labor-hours incurred ............ 62,640

Variable overhead cost .................. $278,748

Fixed overhead cost ....................... $714,000

What was Crispy's fixed overhead budget variance? Answer: a. $42,000 unfavorable

b. $37,680 favorable

c. $11,760 favorable

d. $53,760 favorable


8Marks: 16 Geschke Corporation, which produces commercial safes, has provided the following data: Budgeted production ..................... 8,500 safes

Standard machine-hours per safe ... 9.1 machine-hours

Standard supplies cost ................... $1.70 per machine-hour

Actual production .......................... 8,700 safes

Actual machine-hours .................... 79,100 machine-hours

Actual supplies cost ....................... $123,642

The variable overhead spending variance for supplies is: Answer: a. $10,947 U

b. $10,947 F

c. $10,828 U

d. $10,828 F


9Marks: 16 Division A makes a part that it sells to customers outside of the company. Data concerning this part

appear below: Selling price to outside customers ............. $40

Variable cost per unit ................................ $30

Total fixed costs ........................................ $10,000

Capacity in units ........................................ 20,000 Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A is already selling all of the units it can produce to outside customers. If Division A sells to Division B rather than to outside customers, the variable cost per unit would be $1 lower. What is the lowest acceptable transfer price from the standpoint of the selling division? Answer: a. $37

b. $39

c. $38

d. $40


10Marks: 16 The Consumer Products Division of Goich Corporation had average operating assets of $800,000 and net operating income of $81,300 in May. The minimum required rate of return for performance evaluation purposes is 10%. What was the Consumer Products Division's residual income in May? Answer: a. $1,300

b. -$8,130

c. $8,130

d. -$1,300


11Marks: 16 Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $53 to buy from farmers and $18 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $25 or processed further for $18 to make the end product industrial fiber that is sold for $39. The beet juice can be sold as is for $32 or processed further for $28 to make the end product refined sugar that is sold for $79. How much profit (loss) does the company make by processing the intermediate product beet juice into refined sugar rather than selling it as is? Answer: a. ($17)

b. ($52)

c. $19

d. $1


12Marks: 16 Dodd Company makes two products from a common input. Joint processing costs up to the split-off point total $35,000 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below:

Product X Product Y Total

Allocated joint processing costs ................ $14,000 $21,000 $35,000

Sales value at split-off point ...................... $20,000 $30,000 $50,000

Costs of further processing ........................ $23,500 $16,900 $40,400

Sales value after further processing ........... $45,500 $47,500 $93,000 What is the minimum amount the company should accept for Product X if it is to be sold at the splitoff point? Answer: a. $37,500

b. $22,000

c. $14,000

d. $45,500


13Marks: 16 (Ignore income taxes in this problem.) Para Corporation is reviewing the following data relating to an energy saving investment proposal: Initial investment ............... $50,000

Life of the project .............. 5 years

Salvage value ..................... $10,000

Annual cash savings ........... ? What annual cash savings would be needed in order to satisfy the company's 12% required rate of return (rounded to the nearest one hundred dollars)?

Answer: a. $12,300

b. $10,600

c. $13,900

d. $11,100


14Marks: 16 (Ignore income taxes in this problem.) Vandezande Inc. is considering the acquisition of a new machine that costs $370,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are:

Incremental net operating income Incremental net cash flows

Year 1 ..... $54,000 $128,000

Year 2 ..... $31,000 $105,000

Year 3 ..... $52,000 $126,000

Year 4 ..... $49,000 $123,000

Year 5 ..... $48,000 $122,000 If the discount rate is 10%, the net present value of the investment is closest to: Answer: a. $370,000

b. $87,479

c. $234,000

d. $457,479


15Marks: 16 The Golden Company is analyzing projects A, B, and C as possible investment opportunities. Each of these projects has a useful life of eight years. The following information has been obtained:

Project A Project B Project C

Initial investment ....................................... $250,000 $475,000 $380,000

Present value of future net cash inflows .... $290,000 $503,000 $422,000

Internal rate of return ................................. 16% 20% 18% Consider the following statements: I. Project A has the highest ranking according to the project profitability index criterion. II. Project B has the highest ranking according to the internal rate of return criterion.

III. Project C has the highest ranking according to the net present value criterion. Which is true? Answer: a. Only I and III

b. I, II and III

c. Only II and III

d. Only II


16Marks: 16 The most recent balance sheet and income statement of Ganim Corporation appear below: Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents ......................... $ 35 $ 34

Accounts receivable ................................... 73 75

Inventory ................................................... 54 63

Plant and eq

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Accounting Final