Devry ACCT434 final essay questions

1.(TCO 2) Rossi Company has the following projected account
balances for June 30, 20X9:

Accounts
payable

$
60,000

Sales

$
800,000

Accounts
receivable

$
120,000

Capital
stock

$
420,000

Depreciation,
factory

$
24,000

Retained
earnings

?

Inventories
(5/31 & 6/30)

$
180,000

Cash

$
56,000

Direct
materials used

$
210,000

Equipment,
net

$
260,000

Office
salaries

$
92,000

Buildings,
net

$
400,000

Insurance,
factory

$
4,000

Utilities,
factory

$
16,000

Plant wages

$
140,000

Selling
expenses

$
50,000

Bonds
payable

$
160,000

Maintenance,
factory

$
28,000

Prepare a
budgeted income statement AND a budgeted balance sheet as of June 30, 20X9.
(Points : 25)

2.
(TCO 5)
Paul’s Medical Equipment Company manufactures hospital beds. Its most
popular model, Deluxe, sells for $5,000. It has variable costs totaling
$2,800 and fixed costs of $1,000 per unit, based on an average production run
of 5,000 units. It normally has four production runs a year, with
$500,000 in setup costs each time. Plant capacity can handle up to six
runs a year for a total of 30,000 beds.
A
competitor is introducing a new hospital bed similar to Deluxe that will sell
for $4,000. Management believes it must lower the price to
compete. Marketing believes that the new price will increase sales by
25% a year. The plant manager thinks that production can increase by
25% with the same level of fixed costs. The company sells all the
Deluxe beds it can produce.
Question
1: What is the annual operating income from Deluxe at the price of
$5,000?
Question
2: What is the annual operating income from Deluxe if the price is
reduced to $4,000 and sales in units increase by 25%?
(Points : 25)

3.
(TCO 7) Grace
Greeting Cards Incorporated is starting a new business venture and is in the
process of evaluating its product lines. Information for one new
product, traditional parchment grade cards, is as follows:
? For
16 times each year, a new card design will be put into production. Each
new design will require $200 in setup costs.
?
The parchment grade card product line incurred $75,000 in development costs
and is expected to be produced over the next four years.
?
Direct costs of producing the designs average $0.50 each.
?
Indirect manufacturing costs are estimated at $50,000 per year.
?
Customer service expenses average $0.10 per card.
?
Sales are expected to be 2,500 units of each card design. Each card
sells for $3.50.
?
Sales units equal production units each year.
What is the
total estimated life-cycle operating income?
(Points : 25)

4.
(TCO 8)
Autocar Company manufactures automobiles. The red car division sells
its red cars for $25,000 each to the general public. The red cars have
manufacturing costs of $12,500 each for variable and $5,000 each for fixed
costs. The division’s total fixed manufacturing costs are $25,000,000
at the normal volume of 5,000 units.
The blue car
division has been unable to meet the demand for its cars this year. It
has offered to buy 1,000 cars from the red car division at the full cost
of $18,000. The red car division has excess capacity and the 1,000
units can be produced without interfering with the outside sales of
5,000. The 6,000 volume is within the division’s relevant operating
range.
Explain
whether the red car division should accept the offer. Support your decision
showing all calculations.
(Points : 25)

5.
(TCO 11) For
supply item MT, Bluesky Company has been ordering 150 units based on the
recommendation of the salesperson who calls on the company monthly. The
company has hired a new purchasing agent, who wants to start using the
economic-order-quantity method and its supporting decision elements.
She has gathered the following information:

Annual
demand in units

300

Days
used per year

300

Lead
time, in days

20

Ordering
costs

$125

Annual
unit carrying costs

$25

Determine the
EOQ, average inventory, orders per year, average daily demand, reorder point,
annual ordering costs, and annual carrying costs.