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1. ACCT 505 Final Exam (New) All 3 Set
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Score 248/250
Multiple Choice 2
Short 2
Essay 7
Question 1 : (TCO E) Designing a new product is a(n)
2. Question : (TCO G) Given the following data, what would ROI be?
Sales $70,000
Net operating income $10,000
Contribution margin $20,000
Average operating assets $50,000
Stockholder's equity $25,000
1. Question : (TCO C) Longiotti Corporation produces and sells a single product. Data
concerning that product appear below.
Selling price per unit $375.00

2. Variable expense per unit $144.00
Fixed expense per month $1,686,300
Required:
Determine the monthly breakeven in units or dollar sales. Show your work!
2. Question : (TCO B) Maverick Corporation uses the weighted-average method in its
process costing system. Data concerning the first processing department for
the most recent month are listed below.
Work in process, beginning:
Units in beginning work in process inventory 400
Materials costs $6,900
Conversion costs $2,500
Percent complete for materials 80%
Percent complete for conversion 15%
Units started into production during the month 6,000
Units transferred to the next department during the month 5,600
Materials costs added during the month $112,500
Conversion costs added during the month $210,300
1. Question : (TCO D) Topple Company produces a single product. Operating data for
the
company and its absorption costing income statement for the last year are
presented below.
Units in beginning inventory 2,000
Units produced 9,000
Units sold 10,000

3. Sales $100,000
Less cost of goods sold:
Beginning inventory 12,000
Add cost of goods manufactured 54,000
Goods available for sale 66,000
Less ending inventory 6,000
Cost of goods sold 60,000
Gross margin 40,000
Less selling and admin. expenses 28,000
Net operating income $12,000
2. Question : (TCO I) (Ignore income taxes in this problem.) Bill Anders retires in 8
years.
He has $650,000 to invest and is considering a franchise for a fast-food
outlet. He would have to purchase equipment costing $500,000 to equip the
outlet and invest an additional $150,000 for inventories and other working
capital needs. Other outlets in the fast-food chain have an annual net cash
inflow of about $160,000. Mr. Anders would close the outlet in 8 years. He
estimates that the equipment could be sold at that time for about 10% of its
original cost. Mr. Anders' required rate of return is 16%.
Required:
Part A: What is the investment's net present value when the discount rate is
16%?
Part B: Refer to your calculations. Is this an acceptable investment? Why or

4. why not?
3. Question : (TCO A) The following data (in thousands of dollars) have been taken
from the accounting records of the Maroon Corporation for the just-completed
year.
Sales 1,300
Raw materials inventory, beginning 25
Raw materials inventory, ending 30
Purchases of raw materials 250
Direct labor 350
Manufacturing overhead 500
Administrative expenses 300
Selling expenses 250
Work in process inventory, beginning 150
Work in process inventory, ending 100
Finished goods inventory, beginning 80
Finished goods inventory, ending 110
Use the above data to prepare (in thousands of dollars) a schedule of Cost
of Goods Manufactured and a Schedule of Cost of Goods Sold for the year.
In addition, what is the impact on the financial statements if the ending
finished goods inventory is overstated or understated?

5. 4. Question : (TCO F) Walker Corporation is preparing its cash budget for November.
The
budgeted beginning cash balance is $43,000. Budgeted cash receipts total $117,000
and budgeted cash disbursements total $122,000. The desired
ending cash balance is $55,000. The company can borrow up to $100,000 at
any time from a local bank, with interest not due until the following month.
Required:
Prepare the company's cash budget for November in good form. Make sure
to indicate what borrowing, if any, would be needed to attain the desired
ending cash balance
5. Question : (TCO F) Bella Lugosi Holdings, Inc. (BLH), has collected the following
operating information for its current month's activity. Using this information,
prepare a flexible budget analysis to determine how well BLH performed in
terms of cost control.
Static Budget
Activity level (in units) 5,250 5,178
Variable costs:
Indirect materials $24,182 $23,476
Utilities $22,356 $22,674
Fixed costs:
Administration $63,450 $65,500
Rent $65,317 $63,904
6. Question : (TCO H) Lindon Company uses 7,500 units of Part Y each year as a
component in the assembly of one of its products. The company is presently

6. producing Part Y internally at a total cost of $119,000 as follows.
Direct
materials
$26,000
Direct labor 28,000
Variable
manufacturing
overhead
20,000
Fixed
manufacturing
overhead
45,000
Total costs $119,000
An outside supplier has offered to provide Part Y at a price of $12 per unit. If
Lindon stops producing the part internally, one third of the fixed
manufacturing overhead would be eliminated.
Required: Prepare a make-or-buy analysis showing the annual advantage or
disadvantage of accepting the outside supplier's offer. Please state clearly
whether the part should be made or bought and share your work.
7. Question : (TCO B) Sandler Corporation bases its predetermined overhead rate on
the
estimated machine hours for the upcoming year. Data for the upcoming year
appear below.

7. Estimated machine hours 75,000
Estimated variable manufacturing
overhead $4.50 per machine hour
Estimated total fixed manufacturing
overhead $825,000
The actual machine hours for the year turned out to be 77,000.
Required:
Compute the company's predetermined overhead rate.
Set 2
1. (TCO C) Madlem, Inc., produces and sells a single product whose selling price is
$120.00 per unit and whose variable expense is $46.20 per unit. The company's fixed
expense is $405,900 per month.
Required: Determine the monthly breakeven in either unit or total dollar sales. Show
your work! (Points : 25)
Question 2.2. (TCO B) Industrial Supply Corporation uses the weighted-average
method in its process costing system. Data concerning the first processing department
for the most recent month are listed below.
Work in process, beginning:
Units in beginning work in process inventory 400
Materials costs $6,900

8. Conversion costs $2,500
Percent complete for materials 80%
Percent complete for conversion 15%
Units started into production during the month 6,000
Units transferred to the next department during the month 5,200
Materials costs added during the month $112,500
Conversion costs added during the month $210,300
Ending work in process:
Units in ending work-in-process inventory 1,200
Percentage complete for materials 75%
Percentage complete for conversion 30%
Required: Calculate the equivalent units for conversion for the month in the first
processing department. (Points : 25)
Question 1.1. (TCO D) The following absorption costing income statement and
additional data are available from the accounting records of Bernon Co. for the month
ended May 31, XXXX. During the accounting period, 17,000 units were
manufactured and sold at a price of $60 per unit. There were no beginning inventories.

9. Bernon Co.
Absorption Costing Income Statement
for the Month Ended May 31, XXXX
Sales (17,000 @ $60) $1,020,000
Cost of goods sold 612,000
Gross profit $ 408,000
Selling and administrative expenses 66,000
Income from operations $ 342,000
Additional Information:
Cost Total Cost Number of Units Unit Cost
Manufacturing costs:
Variable $442,000 17,000 $26
Fixed 170,000 17,000 10
Total $612,000 $36
Selling and administrative expenses:
Variable ($2 per unit sold) $34,000
Fixed 32,000
Total $66,000
Required: Prepare a new income statement for the year using variable costing.
Comment on the differences, if any, between the absorption costing and the variable
costing income statements. (Points : 30)

10. Question 2.2. (TCO I) (Ignore income taxes in this problem.) Simpson Beauty
Products Corporation is considering the production of a new conditioning shampoo
that will require the purchase of new mixing machinery. The machinery will cost
$700,000, is expected to have a useful life of 10 years, and is expected to have a
salvage value of $70,000 at the end of 10 years. The machinery will also need a
$45,000 overhaul at the end of Year 5. A $60,000 increase in working capital will be
needed for this investment project. The working capital will be released at the end of
the 10 years. The new shampoo is expected to generate net cash inflows of $150,000
per year for each of the 10 years. Simpson's discount rate is 18%.
Items Year(s) Amount 18% Factor Present Value
Cost of machinery Now ($700,000) 1 ($700,000)
Working capital increase Now ($60,000) 1 ($60,000)
Annual cash inflows 1–10 $150,000 4.494 674,100
Overhaul 5 ($45,000) 0.437 ($19,665)
Salvage value 10 $70,000 0.191 13,370
Working capital release 10 $60,000 0.191 11,460
Net present value ($80,735)
Required:
(a) What is the net present value of this investment opportunity?
(b) Based on your answer to (a) above, should Simpson go ahead with the new
conditioning shampoo? (Points : 30)
Question 3.3. (TCO A) The following data (in thousands of dollars) have been taken
from the accounting records of the Maroon Corporation for the just-completed year.

11. Sales 1,700
Raw materials inventory, beginning 50
Raw materials inventory, ending 25
Purchases of raw materials 210
Direct labor 360
Manufacturing overhead 330
Administrative expenses 400
Selling expenses 200
Work-in-process inventory, beginning 120
Work-in-process inventory, ending 150
Finished goods inventory, beginning 80
Finished goods inventory, ending 120
Use the above data to prepare (in thousands of dollars) a schedule of Cost of Goods
Manufactured and a Schedule of Cost of Goods Sold for the year. In addition, what is
the impact on the financial statements if the ending finished goods inventory is
overstated or understated? (Points : 25)
Question 4.4. (TCO F) Walker Corporation is preparing its cash budget for November.
The budgeted beginning cash balance is $43,000. Budgeted cash receipts total
$117,000 and budgeted cash disbursements total $122,000. The desired ending cash
balance is $55,000. The company can borrow up to $100,000 at any time from a local
bank, with interest not due until the following month.
Required:

12. Prepare the company's cash budget for November in good form. Make sure to indicate
what borrowing, if any, would be needed to attain the desired ending cash
balance(Points : 25)
Question 5.5. (TCO F) The following overhead data are for a department of a large
company.
Actual Costs Incurred Static Budget
Activity level (in units) 360 340
Variable costs:
Indirect materials $4,182 $4,148
Electricity $2,536 $2,414
Fixed costs:
Administration $6,540 $6,500
Rent $6,310 $6,400
Required: Construct a flexible budget performance report that would be useful in
assessing how well costs were controlled in this department. (Points : 25)
Question 6.6. (TCO H) McMullen Co. uses 10,000 units of Part X each year as a
component in the assembly of one of its products. The company is presently
producing Part X internally at a total cost of $125,000 as follows.

13. Direct materials $40,000
Direct labor 30,000
Variable manufacturing overhead 25,000
Fixed manufacturing overhead 30,000
Total costs $125,000
An outside supplier has offered to provide Part X at a price of $10 per unit. If
McMullen stops producing the part internally, one third of the fixed manufacturing
overhead would be eliminated.
Required: Prepare a make-or-buy analysis showing the annual advantage or
disadvantage of accepting the outside supplier's offer. Please state clearly whether the
part should be made or bought and share your work. (Points : 30)
Question 7.7. (TCO B) Buckhorn Corporation bases its predetermined overhead rate
on the estimated machine hours for the upcoming year. Data for the upcoming year
appear below.
Estimated machine hours 37,000
Estimated variable manufacturing overhead $7.77 per machine hour
Estimated total fixed manufacturing overhead $888,000
The actual machine hours for the year turned out to be 35,000.
Required: Compute the company's predetermined overhead rate. (Points : 25)

14. Set 3
(TCO E) Preparing purchase orders is a(n) (Points : 5)
batch-level activity.
product-level activity.
unit-level activity.
organization sustaining activity.
2. (TCO G) Given the following data, what would ROI be?
Sales $70,000
Net operating income $10,000
Contribution margin $20,000
Average operating assets $50,000
Stockholder's equity $25,000
(Points : 5)
28.6%
20.0%
40.0%
50.0%
3. (TCO C) Heckaman Corporation produces and sells a single product. Data
concerning that product appear below.

15. Selling price per unit $115.00
Variable expense per unit $56.35
Fixed expense per month $299,115
4. TCO B) Industrial Supply Corporation uses the weighted-average method in its
process costing system. Data concerning the first processing department for the most
recent month are listed below.
Work in process, beginning:
Units in beginning work in process inventory 400
Materials costs $6,900
Conversion costs $2,500
Percent complete for materials 80%
Percent complete for conversion 15%
5. (TCO D) Topple Company produces a single product. Operating data for the
company and its absorption costing income statement for the last year are presented
below.
Units in beginning inventory 0
Units produced 9,000
Units sold 7,000
Sales $100,000

16. Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totals
$18,000 for the year. The fixed manufacturing overhead was applied at a rate of $2
per unit. Variable selling and administrative expenses were $1 per unit sold.
Required: Prepare a new income statement for the year using variable costing.
Comment on the differences between the absorption costing and the variable costing
income statements. (Points : 30)
6. (TCO I) (Ignore income taxes in this problem.) Simpson Beauty Products
Corporation is considering the production of a new conditioning shampoo that will
require the purchase of new mixing machinery. The machinery will cost $700,000, is
Required:
Part A: What is the net present value of this investment opportunity?
Part B: Based on your answer to (a) above, should Simpson go ahead with the new
conditioning shampoo? (Points : 30)
PART B:
Simpson should not go ahead and purchase the shampoo machine since the NPV is
negative.
7. (TCO A) The following data (in thousands of dollars) have been taken from the
accounting records of Karmana Corporation for the just-completed year.
8. (TCO F) Matuseski Corporation is preparing its cash budget for October. The
budgeted beginning cash balance is $54,000. Budgeted cash receipts total $127,000
and budgeted cash disbursements total $99,000. The desired ending cash balance is
$100,000. The company can borrow up to $150,000 at any time from a local bank,
with interest not due until the following month.

17. Required: Prepare the company's cash budget for October in good form. Make sure to
indicate what borrowing, if any, would be needed to attain the desired ending cash
balance. (Points : 25)
9. (TCO F) Bella Lugosi Holdings, Inc. (BLH), has collected the following operating
information for its current month's activity. Using this information, prepare a flexible
budget analysis to determine how well BLH performed in terms of cost control.
Actual Costs Incurred Static Budget
Activity level (in units) 5,250 5,178
Variable costs:
Indirect materials $24,182 $23,476
Utilities $22,356 $22,674
Fixed costs:
Administration $63,450 $65,500
Rent $65,317 $63,904
(Points : 25)
10. (TCO H) Lindon Company uses 10,000 units of Part Y each year as a component
in the assembly of one of its products. The company is presently producing Part Y
internally at a total cost of $100,000 as follows.
Direct materials............................................... $20,000
Direct labor...................................................... 40,000

18. Variable manufacturing overhead...................... 16,000
Fixed manufacturing overhead.......................
24,000
Total costs.......................................................100,000
An outside supplier has offered to provide Part Y at a price of $10 per unit. If Lindon
stops producing the part internally, one third of the fixed manufacturing overhead
would be eliminated.
11. (TCO B) Wahr Corporation bases its predetermined overhead rate on the
estimated labor hours for the upcoming year. At the beginning of the most recently
completed year, the company estimated the labor hours for the upcoming year at
35,000. The estimated variable manufacturing overhead was $7.25 per labor hour and
the estimated total fixed manufacturing overhead was $585,000. The actual labor
hours for the year turned out to be 33,000.