Midterm Solutions BB(1)

7/25/2019 Midterm Solutions BB(1)

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Professor Zachary Kaplan

2620 Fall 2014

Mid-Term # 1

Name:

!"den" $% #:

Tes": &



1' For "he year (s" ended) *ole *orpora"ion+s manfac"rin, cos"s ra. ma"erials sed) direc" la/or

and manfac"rin, oerhead' "o"aled 1)00)0003 e,innin, and endin, .or5-in-process

inen"ories .ere 60)000 and 0)000) respec"iely3 *ole+s /alance shee" also reealed

respec"ie /e,innin, and endin, finished-,oods-inen"ories of 20)000 and 170)0003 8n "he

/asis of "his informa"ion) ho. mch .old "he company repor" as cos" of ,oods sold9a3 1)400)000 /3 1)460)000c. $1,540,000

d3 1)600)000

2' Proide "he (ornal en"ry a manfac"rin, firm .old ma5e "o record 1)000)000

deprecia"ion on a fac"ory sed "o manfac"re prodc"s drin, "he year3a3 %r3 Manfac"rin, 8erhead 1)000)000

*r3 %eprecia"ion ;pense 1)000)000

b. Dr. Manufacturing Overhead $1,000,000

Cr. Accumulated Depreciation $1,000,000

c3 %r3 %eprecia"ion ;pense 1)000)000*r3 Manfac"rin, 8erhead 1)000)000

d3 %r3 &ccmla"ed %eprecia"ion 1)000)000*r3 Manfac"rin, 8erhead 1)000)000

<' Proide "he (ornal en"ry a manfac"rin, firm .old ma5e "o apply 1)000)000 of

manfac"rin, oerhead "o inen"ory3a3 %r3 Manfac"rin, 8erhead 1)000)000

*r3 =or5-in-process inen"ory 1)000)000

/3 %r3 Manfac"rin, 8erhead 1)000)000*r3 Finished >oods $nen"ory 1)000)000

c. Dr. or!"#n"roce%% #nventor& $1,000,000

Cr. Manufacturing Overhead $1,000,000

d3 %r3 Finished >oods $nen"ory 1)000)000*r3 Manfac"rin, 8erhead 1)000)000



4' Proide "he (ornal en"ry a manfac"rin, firm .old ma5e "o record direc" la/or cos" of

1)000)0003

a3 %r3 =or5-in-process inen"ory 1)000)000*r3 %irec" ?a/or ;pense 1)000)000

b. Dr. or!"in"proce%% inventor& $1,000,000

Cr. age% a&able $1,000,000

c3 %r3 Finished >oods $nen"ory 1)000)000*r3 %irec" ?a/or ;pense 1)000)000

d3 %r3 Finished >oods $nen"ory 1)000)000*r3 =a,es Paya/le 1)000)000

' & manfac"rin, firm nder-applied oerhead /y 60)000 drin, "he period3 The firm

closes all nder or oer-applied oerhead "o cos" of ,oods sold *8>!' a" "he end of "he period3 Please proide "he correc" (ornal en"ry3

a3 %r3 Manfac"rin, 8erhead 60)000*r3 *8>! 60)000

/3 %r3 =or5-in-process $nen"ory 60)000*r3 *8>! 60)000

c. Dr. CO'( $)0,000

Cr. Manufacturing Overhead $)0,000

d3 %r3 *8>! 60)000*r3 =or5-in-process inen"ory 60)000



6' & manfac"rin, firm spen" 120)000 in cash on ader"isin, drin, "he period3 Please

proide "he correc" (ornal en"ry3

a. Dr. Adverti%ing *+pen%e $10,000

Cr. Ca%h $10,000

/3 %r3 =or5-in-process $nen"ory 120)000*r3 *ash 120)000

c3 %r3 Manfac"rin, oerhead 120)000*r3 *ash 120)000

d3 %r3 *ash 120)000*r3 Manfac"rin, 8erhead 120)000

e3 %r3 *ash 120)000*r3 =or5-in-process inen"ory 120)000



@es"ions A B 7 rely on "he follo.in, informa"ion:

Tre5) .hich "radi"ionally has manfac"red /icycles) is plannin, "o in"rodce a "ricycle in

"he comin, year3 ased on "he desi,n of "he "ricycle) and Tre5+s es"ima"e of prodc"

demand) Tre5 e;pec"s "o manfac"re < million "ricycles3

Tre5 e;pec"s direc" ma"erials cos"s of 1< per "ricycle and direc" la/or cos"s of 64 per"ricycle 4 hors a" 16 per hor'3Tre5 es"ima"es "he amon" of oerhead /y sin, "he re,ression me"hod "o es"ima"e "he

rela"ionship /e".een direc" la/or hors and oerhead in a /icycle fac"ory3 They assme

"he rela"ionship /e".een direc" la/or hors and oerhead .ill /e similar in "he "ricycle

fac"ory3 Tre5 o/"ained "he follo.in, resl"s3

*omp"ed ales: Fi;ed oerhead cos": 700)000

$ncrease in oerhead cos" per direc" la/or hor: <30

A' *omp"e "he total /d,e"ed cos" of <)000)000 "ricycles3

a3 11)<00)000 /3 42)700)000c3 607)<00)000d. )-,/00,000

7' =ill "he oerhead cos" es"ima"es for "ricycles /e more or less precise "han oerhead cos"

es"ima"es for /icycles9

a. e%% preci%e, the bic&cle data the anal&%t u%e% to e%timate the relation%hip

beteen overhead co%t and output ill be le%% applicable to the manufacture

of tric&cle% than bic&cle%.

/3 More precise) "ricycles are a ne. prodc" so mana,emen" .ill spend a lo" more

"ime "ryin, "o forecas" oerhead cos"s3c3 &/o" "he same B mana,emen" .ill spend a lo" more "ime "ryin, "o forecas"

oerhead cos"s) /" "he lac5 of his"orical da"a .ill ma5e forecas"in, more difficl"3

The resl" of "hese ".o opposin, forces shold resl" in eCally accra"e

es"ima"es3



@es"ions - 1< rely on "he follo.in, informa"ion:

& la. firm D"he firmE' employs ".o "ypes of professionals) a""orneys and parale,als3

The firm pays a""orneys 200)000year and parale,als 60)000year3 The firm employs

10 a""orneys and 10 parale,als3 The firm e;pec"s a""orneys and parale,als "o .or5 2)000

hors per year3 The firm+s /d,e"ed oerhead is 2)000)000 per year3 The firm appliesoerhead on "he /asis of professional la/or hors DTradi"ional sys"emE'3 The firm

recen"ly hired a mana,erial accon"an" .ho s,,es"ed applyin, differen" amon"s of

oerhead "o cases for a""orney hors and parale,al hors3 The mana,erial accon"an"

,roped oerhead cos"s in"o "hree cos" pools) and es"ima"ed "he percen"a,e of oerhead

consmed /y a""orneys and parale,als for each cos" pool3

' Gnder "he "radi"ional cos"in, sys"em) .hen an a""orney .or5s an hor) "he "o"al cos"

assi,ned "o a pro(ec" .ill /e:a3 70 /3 100c. $150

d3 160e3 170

10' &f"er "he firm implemen"s an ac"ii"y /ased sys"em) .hen an a""orney .or5s an hor) "he

"o"al cos" assi,ned "o a pro(ec" .ill /e:a3 70 /3 100c3 10d3 160e. $1/0



11' The mos" plasi/le adan"a,e of "he "radi"ional cos"in, sys"em rela"ie "o an ac"ii"y

/ased sys"em is9a3 The "radi"ional sys"em is simpler3 !imple sys"ems encora,e /e""er decision

ma5in,3

b. 2he traditional %&%tem i% %impler. (imple %&%tem% re3uire feer calculation%hich li!el& reduce% co%t%.

c3 The "radi"ional sys"em is simpler3 $" .ill more accra"ely char,e (o/s for "he

economic resorces sacrificed3d3 ecase of "he simplici"y of "he "radi"ional sys"em) "he la. firm .ill /e a/le "o

alloca"e all of "he oerhead "o pro(ec"s3 & do.nside of comple; cos"in, sys"ems is

"ha" some cos"s remain nalloca"ed3

12' The "radi"ional cos"in, sys"em .ill:a3 &ssi,n "oo mch cos" "o (o/s .i"h rela"iely more a""orney hors and "oo li""le

cos" "o (o/s .i"h rela"iely more para-le,al hors3

b. A%%ign too little co%t to ob% ith relativel& more attorne& hour% and toomuch co%t to ob% ith relativel& more para"legal hour%.

c3 &lloca"e "oo mch oerhead "o cases3d3 &lloca"e "oo li""le oerhead "o cases3

1<' 2rue or al%e6 The firm shold no" alloca"e hirin, cos"s "o ei"her a""orney hors or

parale,al hors /ecase "hose cos"s hae /een incrred in "he pas"3

THG

A(*



@es"ions 14 B 16 rely on "he follo.in, informa"ion:

*ohn+s *oches manfac"res loe sea"s and sofas3 They se a "radi"ional cos"in, sys"em

and alloca"e all oerhead /ased on direc" la/or hors3 The *8 of *ohn+s recen"ly fired

his accon"an") and he canno" fi,re o" seeral impor"an" fac"s /ased on "he paper.or5

lef" /ehind3 Ie fond "he follo.in, de"ails:

• *ohn+s pre-de"ermined oerhead ra"e is 100 per hor3

• *ohn+s applied 10)000 of oerhead "o sofas las" year

• *ohn+s "o"al /d,e"ed oerhead .as 20)000

• *ohn+s oer-applied oerhead /y 20)000 sofas and loe sea"s com/ined'

14' Io. mch oerhead .as alloca"ed "o loe sea"s las" year9a3 20)000 /3 70)000c3 100)000d3 120)000

e. 7ot enough information

1' &cross /o"h prodc"s) ho. many la/or hors did *ohn+s /d,e"9a3 2)<00b. ,500

c3 2)A00d3 )000e3 No" eno,h informa"ion

16' Io. many la/or hors did *ohn+s /d,e" specifically for sofas9a3 1)000

/3 1)<00c3 1)00d3 1)A00e. 7ot enough information



1A' & consl"in, firm .old li5e "o learn ho. oerhead cos"s ary .i"h /illa/le hors3 The

consl"in, firm has /illa/le hors and oerhead cos" da"a for for mon"hs3 The

consl"in, firm .old li5e "o selec" ".o mon"hs of da"a and se "he hi,h-lo. me"hod "o

predic" cos"s i" is a no" ery ,ood consl"in, firm and "he office mana,er does no" 5no.

ho. "o do linear re,ression'3 Io.eer) many odd een"s happened in "hese for mon"hsand "he office mana,er does no" 5no. .hich ".o mon"hs "o se3 Please circle "he to

be%t mon"hs for se in cos"-predic"ion 84 point% ver%u% - for all other multiple choice9:December B *hris"mas) many people .ere o" of "he office and /illa/le hors

.ere really lo.7ovember B &n oil em/ar,o cased oil prices "o spi5e .hich impac"ed oerheadOctober B The local /ase/all "eam .en" deep in"o "he playoffs and "he firm spen"

a lo" of money en"er"ainin, clien"s a" /ase/all playoff ,ames(eptember B *onsl"an"s /illed an nsally hi,h nm/er of hors /ecase "hey

helped a h,e clien" .i"h a ma(or res"rc"rin,3

D*C*M:*; and (*2*M:*;



17' *hes"erfield *i,are""es has "hree cos"s: & .hich is aria/le3 .hich is semi-aria/le

and * .hich is fi;ed3 The *8 has proided yo .i"h "he follo.in, cos" informa"ion

81< point%9:

• &" 0)000 pac5s *os" & "o"aled AA)00

• &" 20)000 pac5s "he fi;ed por"ion of cos" .as 03< per pac53• &" 2)000 pac5s cos" * .as 030 per pac5

• &" 2)000 pac5s "he sm of cos" * and cos" .as 2)00

The *8 as5ed yo "o predic" "he follo.in, cos"s:a3 *omp"e cos" & a" 10)000 pac5s

/3 *omp"e cos" * a" 1)000 pac5s

c3*omp"e cos" a" 1)000 pac5s





1' %an+s %ollies D%%E' manfac"res non-mo"oriJed moin, eCipmen"3 They

manfac"re ".o "ypes of dollies: an l"ra-dra/le dolly sed /y professional moers and

a re,lar dolly primarily aaila/le for ren" a" $K&3 $nforma"ion a/o" "he company+s

prodc"s follo.:

%ra/le ---

s"ima"ed prodc"ion olme 60)000 ni"s

%irec" ma"erials cos" 40ni"

%irec" ?a/or 4 < hors'

%irec" la/or hors <30 horsni"

He,lar ---

s"ima"ed prodc"ion olme 40)000 ni"s

%irec" ma"erials cos" 40ni"

%irec" la/or <0ni"

%irec" la/or hors 23 horsni"

%%+s oerhead of 1)600)000 can /e iden"ified .i"h for ma(or ac"ii"ies: assem/ly

700)000') finishin, 200)000') se"-p 200)000' and order processin, 400)000'3 %%

only applies finishin, "o dra/le dollies3 &ll o"her da"a relean" "o "hese ac"ii"ies follo.

81< point%9:



HeCired:

a3 *omp"e "he pool ra"es "ha" .old /e sed for assem/ly) se"-ps) order processin,

and finishin,3

Activity Cost Driver Driver

UnitsCost/Driver

Unit

Assembly $800,000Machinehours 1,200 $667

inishin! $200,000 Units 60,000 $"

#etu% $200,000 #etu%s &0 $',000(r)er*rocessin! $&00,000 (r)ers 1'0 $2,666+67

/3 &ssmin, se of ac"ii"y /ased cos"in,)

• *omp"e "he applied oerhead per ni" of dra/le3

• *omp"e "he "o"al cos" per ni" of dra/le if "he e;pec"ed manfac"rin,

olme is a""ained3



c3 Io. mch oerhead .old /e applied per dra/le dolly if %% applied all

oerhead "o prodc"s sin, a "radi"ional sys"em .i"h direc" la/or hors as "he cos"

drier9 =hich prodc" .old /e oer-cos"ed sin, "he "radi"ional sys"em9

8er-cos"ed circle one': %ra/le ;egular



20' Pe"er+s Pan"s DPPE' manfac"res /le and "an pan"s3 PP manfac"res pan"s in ".o s"eps3

Firs") "he assem/ly depar"men" manfac"res plain colored pan"s3 !econd) "he colorin,

depar"men" colors "he pan"s ei"her /le or "an3 The colorin, process is differen" for /le and

"an pan"s) so PP assi,ns differen" cos"s "o pan"s of differen" colors3

&s of March 1s") "here .ere 6)000 pan"s in "he assem/ly depar"men") 100 comple"e .i"h

respec" "o ma"erials and A0 comple"e .i"h respec" "o conersion cos"s3 PP s"ar"ed 60)000

ni"s in"o prodc"ion drin, March3 y March <1s") PP had finished and "ransferred <)000

ni"s "o "he colorin, diision3 The endin, .or5-in-process inen"ory is 0 comple"e .i"h

respec" "o ma"erials and A0 comple"e .i"h respec" "o conersion cos"s3

PP colored all <)000 pan"s "hey receied from "he assem/ly depar"men"3 PP colored 2<)000

pan"s "an and <0)000 pan"s /le3 The colorin, depar"men" had no ncomple"ed ni"s a" "he

/e,innin, or end of "he period3

The ncomple"ed ni"s in "he assem/ly depar"men" on March 1s" had 160)000 of direc"

ma"erials cos"s and 170)000 of conersion cos"s alloca"ed "o "hem3 %rin, "he mon"h of

March "he assem/ly depar"men" incrred <0)000 of direc" ma"erials cos"s and applied

A00)000 of conersion cos"s3

The colorin, depar"men" incrred 0)000 in cos" colorin, pan"s /le and <0)000 in cos"

colorin, pan"s "an 81/ point%93

a' For "he assem/ly depar"men" only) ,ie "he eCialen" ni"s for "he mon"h of March for

/o"h direc" ma"erials and conersion cos"s3

/' For "he assem/ly depar"men" only) ,ie "he "o"al cos" per ni" for "he mon"h of March)

and "he cos" per ni" for direc" ma"erials and conersion cos"s3



c' $n "he mon"h of March) .ha" .as "he cos" of colorin, a pair of pan"s /le9 =ha" .as "he

cos" of colorin, a pair of pan"s "an9

1 poin" each) ms" /e ri,h"

d' Io. mch "o"al cos" .as alloca"ed "o "he ,oods comple"ed drin, "he mon"h of March

pan"s are comple"ed once "hey are colored'9 Io. mch cos" is alloca"ed "o "he

ncomple"ed ,oods9

< poin"s for comple"ed ,oods3 1 poin" for assem/ly depar"men") ml"iply "o"al cos" per

ni" from / can /e .ron,' /y nm/er of comple"ed ni"s3

2 poin" for colorin, depar"men" cos"s ms" /e ri,h") 70)000'

2 poin"s for remainin, ni"s31 poin" for %M3 Ms" ml"iply 1<)000 /y A0 and %M cos" per ni" from / only

cos" per ni" from / can /e .ron,'31 poin" for **3 Ms" ml"iply 1<)000 /y 0 and ** cos" per ni" from / only

cos" per ni" from / can /e .ron,'3



e' For par" e only) assme "he colorin, depar"men" made a mis"a5e and ins"ead of colorin,

all <)000 pairs of pan"s) "hey only colored 0)000 pairs3 elo.) sho. ho. yo .old

ad(s" yor ans.er "o par" d a/oe "o reflec" "he reali"y "ha" <)000 pan"s hae no" /een

colored3 Io. mch cos" is no. alloca"ed "o ncomple"ed ,oods9 Io. mch cos" isalloca"ed "o "he finished ,oods "he amon" spen" colorin, pan"s is "he same as a/oe'9

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Midterm Solutions BB(1)