Devry ACCT434 final exam 2014

Final
Question 1.1. (TCO 1) Evaluating customer reaction of the
trade-off of giving up some features of a product for a lower price would best fit
which category of management decisions under activity-based management? (Points
: 5)
Pricing and
product-mix decisions
Cost reduction
decisions
Design decisions
Discretionary
decisions
Question 2.2. (TCO 1) Ireland Company produces a special
spray nozzle. The budgeted indirect
total cost of inserting the spray nozzle is $180,000. The budgeted number of nozzles to be inserted
is 80,000. What is the budgeted indirect
cost allocation rate for this activity? (Points : 5)
$0.50
$1.00
$1.50
$2.25
Question 3.3. (TCO 2) Overhead costs have been increasing
due to all of the following except (Points : 5)
product
proliferation.
tracing more
costs as direct costs with the help of technology.
more complexity
in distribution processes.
increased
automation.
Question 4.4. (TCO 2) Information pertaining to Brenton
Corporation’s sales revenue is presented in the following table:
February March April
Cash
Sales $160,000 $150,000 $120,000

Credit Sales
300,000 400,000 280,000

Total Sales
$460,000 $550,000 $400,000
Management estimates that 5% of credit sales are not
collectible. Of the credit sales that
are collectible, 75% are collected in the month of sale and the remainder in
the month following the sale. Cost of
purchases of inventory each month are 80% of the next month’s projected total
sales. All purchases of inventory are on
account; 50% are paid in the month of purchase, and the remainder is paid in
the month following the purchase.
Brenton’s budgeted total cash receipts in March are
(Points : 5)
$506,250.
$457,000.
$492,000.
$428,000.
Question 5.5. (TCO 2) Financing decisions PRIMARILY deal
with (Points : 5)
the use of
scarce resources.
how to obtain funds to acquire
resources.
acquiring
equipment and buildings.
preparing
financial statements for stockholders.
Question 6.6. (TCO 3) For January, the cost components of a
picture frame include $0.20 for the glass, $0.85 for the wooden frame, and
$0.60 for assembly. The assembly desk
and tools cost $200. A total of 1,000
frames is expected to be produced in the coming year. What cost function best represents these
costs? (Points : 5)
y = 1.80 + 400X
y = 400 + 1.80X
y = 200 + 1.65X
y = 1.00 + 400X
Question 7.7. (TCO 3) Which cost estimation method may use
time-and-motion studies to analyze the relationship between inputs and outputs
in physical terms? (Points : 5)
Quantitative
analysis method
Account
analysis method
Conference
method
Industrial engineering method
Question 8.8. (TCO 4) Sunk costs (Points : 5)
have future
implications.
are ignored when evaluating
alternatives.
are
differential.
are relevant.
Question 9.9. (TCO 5) Throughput contribution equals
revenues minus (Points : 5)
operating
costs.
direct material costs of goods
sold.
direct material
costs and minus operating costs.
direct material
and direct labor costs.
Question 10.10. (TCO 5) Producing more nonbottleneck output
(Points : 5)
allows for the
maximization of overall contribution.
creates less
pressure for the bottleneck workstations.
creates more inventory and
increases throughput contribution.
creates more
inventory, but does not increase throughput contribution.
Question 11.11. (TCO 6) What type of cost is the result of
an event that results in more than one product or service simultaneously?
(Points : 5)
Byproduct cost
Joint cost
Main costs
Separable cost
Question 12.12. (TCO 6) Which of the following is a
disadvantage of the physical-measure method of allocating joint costs? (Points
: 5)
The measurement
basis for each product may be different.
There is a need
for a common denominator.
The physical
measure may not reflect the product’s ability to generate revenues.
All of the above
Question 13.13. (TCO 7) An understanding of life-cycle costs
can lead to (Points : 5)
additional
costs during the manufacturing cycle.
less need for
evaluation of the competition.
cost-effective product designs
that are easier to service.
mutually
beneficial relationships between buyers and sellers.
Question 14.14. (TCO 7) Each month, Haddon Company has
$300,000 total manufacturing costs (20% fixed) and $125,000 distribution and
marketing costs (75% fixed). Haddon’s
monthly sales are $500,000.
The markup percentage on variable costs to arrive at the
existing (target) selling price is
(Points : 5)
84%.
40%.
80%.
66 2/3%.
Question 15.15. (TCO 8) Transfer prices should be judged by
whether they promote (Points : 5)
goal
congruence.
the balanced
scorecard method.
a high level of
subunit autonomy in decision making.
Both 1 and 3 are correct
Question 16.16. (TCO 8) The seller of Product A has no idle
capacity and can sell all it can produce at $25 per unit. Outlay cost is $10. What is the opportunity cost, assuming the
seller sells internally? (Points : 5)
$10
$16
$15
$24
Question 17.17. (TCO 8) Transferring products or services at
market prices generally leads to optimal decisions when (Points : 5)
the market for
the intermediate product is perfectly competitive.
the
interdependencies of the subunits are minimal.
there are no
additional costs or benefits to the company in buying or selling in the
external market.
All of the above
Question 18.18. (TCO 9) To guide cost allocation decisions,
the cause-and-effect criterion (Points : 5)
may allocate corporate salaries to
divisions based on profits.
is used less
frequently than the other criteria.
is the primary criterion used in
activity-based costing.
is a difficult
criterion on which to obtain agreement.
Question 19.19. (TCO 9) The Hassan Corporation has an
electric mixer division and an electric lamp division. Of a $50,000,000 bond issuance, the electric
mixer division used $24,000,000 and the electric lamp division used $26,000,000
for expansion. Interest costs on the
bond totaled $1,500,000 for the year.
What amount of interest costs should be allocated to the electric mixer
division? (Points : 5)
$4,200,000
$14,000,000
$1,050,000
$720,000
Question 20.20. (TCO 10) The net present value method
focuses on (Points : 5)
cash inflows.

accrual-accounting net income.
cash outflows.
Both 1
and 3 are correct
Question 21.21. (TCO 10) Upper Darby Park Department is
considering a new capital investment.
The cost of the machine will be $200,000. The annual cost savings if the new machine is
acquired will be $40,000. The machine
will have a five-year life, at which time the terminal disposal value is
expected to be $20,000. Upper Darby Park
Department is assuming no tax consequences.
If Upper Darby Park Department has a required rate of return
of 10%, which of the following is closest to the present value of the project?
(Points : 5)
-$35,950
-$150,000
$14,060
-$12,418
Question 22.22. (TCO 11) An advantage of financial cost of
quality measures is that they (Points : 5)
are often easy
to quantify and understand.
provide
immediate short-run feedback on whether quality improvement efforts have, in
fact, succeeded in improving quality.
direct
attention to physical processes and therefore focus attentions on the precise
problem areas needing improvement.
provide a single, summary
measure of quality performance.
Question 23.23. (TCO 11) Regal Products has a budget of
$900,000 in 20X6 for prevention costs.
If it decides to automate a portion of its prevention activities, it
will save $60,000 in variable costs. The
new method will require $20,000 in training costs and $150,000 in annual
equipment costs. Management is willing
to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 150,000
units. Appraisal costs for the year are
budgeted at $600,000. The new prevention
procedures will save appraisal costs of $30,000. Internal failure costs average $15 per failed
unit of finished goods. The internal
failure rate is expected to be 3% of all completed items. The proposed changes will cut the internal
failure rate by one-third. Internal
failure units are destroyed. External
failure costs average $54 per failed unit.
The company’s average external failures average 3% of units sold. The new proposal will reduce this rate by
50%. Assume all units produced are sold
and there are no ending inventories.
What is the net change in the budget of prevention costs if the
procedures are automated in 20X6? Will
management agree with the changes? (Points : 5)
$138,000
increase, no
$78,000 increase, yes
$60,000 increase,
no
$110,000
decrease, yes
Question 24.24. (TCO 12) Obsolescence is an example of which
cost category? (Points : 5)
Ordering costs
Carrying costs
Labor costs
Quality costs
Question 25.25. (TCO 12) Liberty Celebrations, Inc.,
manufactures a line of flags. The annual
demand for its flag display is estimated to be 100,000 units. The annual cost of carrying one unit in
inventory is $1.60, and the cost to initiate a production run is $80. There are no flag displays on hand but
Liberty had scheduled 70 equal production runs of the display sets for the
coming year, the first of which is to be run immediately. Liberty Celebrations has 250 business days
per year. Assume that sales occur
uniformly throughout the year and that production is instantaneous.
If Liberty Celebrations does not maintain a safety stock,
the estimated total carrying cost for the flag displays for the coming year is
(Points : 5)
$1,800.
$2,000.
$1,600.
$5,600.
Page 2
Question 1. 1. (TCO 2) Gardenia Company has the following
projected account balances for June 30, 20X9:
Accounts payable
$
60,000 Sales $ 800,000
Accounts receivable
$ 100,000 Capital
stock $
400,000
Depreciation, factory $
36,000 Retained earnings ?
Inventories (5/31 & 6/30) $ 180,000 Cash $ 56,000
Direct materials used
$ 200,000 Equipment,
net $ 240,000
Office salaries $ 80,000 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.Question 2. 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%?
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)
Question 4. 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.Question 5. 5. (TCO 11) For supply item HM, Bertha Company
has been ordering 130 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

500

Days used per year

500

Lead time, in days

30

Ordering costs

$125

Annual unit carrying costs

$20

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

(Points : 25)