Quiz Bee( MAS and Cost)

Easy
1. Cost accounting is necessitated by
a. the high degree of conversion found in certain businesses.
b. regulatory requirements for manufacturing companies.
c. management's need to be aware of all production activities.
d. management's need for information to be used for planning and controlling activities.

2.Sharp Enterprises

Inventories: March 1 March 31

Raw material $18,000 $15,000
Work in process 9,000 6,000
Finished goods 27,000 36,000

Additional information for March:

Raw material purchased $42,000
Direct labor payroll 30,000
Direct labor rate per hour 7.50
Overhead rate per direct labor hour 10.00

Refer to Sharp Enterprises. For March, prime cost incurred was

a. $75,000.
b. $69,000.
c. $45,000.
d. $39,000.

3.The following information regarding fixed production costs from a manufacturing firm is available for the
current year:

Fixed costs in the beginning inventory $ 16,000

Fixed costs incurred this period 100,000

Which of the following statements is not true?

a. The maximum amount of fixed production costs that this firm could deduct using
absorption costs in the current year is $116,000.
b. The maximum difference between this firm's the current year income based on absorption
costing and its income based on variable costing is $16,000.
c. Using variable costing, this firm will deduct no more than $16,000 for fixed production
costs.
d. If this firm produced substantially more units than it sold in the current year, variable
costing will probably yield a lower income than absorption costing.

4.The Card Division of Party Company reported the following results for a recent year

Sales $8,000,000
Expenses 6,250,000
Total assets (1/1) 5,000,000
Total assets (12/31) 5,400,000

What was the asset turnover ratio of the Card Division?

a. 1.538
b. 2.97
c. 0.650
d. 1.20

5. Which of the following areas offers an opportunity to eliminate waste?

a. raw material and labor
b. space and production time
c. recordkeeping and working capital
d. all of the above
 Average:
1.Bennett Corporation

Bennett Corporation produces a single product that sells for $7.00 per unit. Standard capacity is 100,000 units
per year; 100,000 units were produced and 80,000 units were sold during the year. Manufacturing costs and
selling and administrative expenses are presented below.

There were no variances from the standard variable costs. Any under- or overapplied overhead is written off
directly at year-end as an adjustment to cost of goods sold.

Fixed costs Variable costs

Direct material $0 $1.50 per unit produced
Direct labor 0 1.00 per unit produced
Manufacturing overhead $150,000 0.50 per unit produced
Selling & Administration expense 80,000 0.50 per unit sold

Bennett Corporation had no inventory at the beginning of the year.

Refer to Bennett Corporation. In presenting inventory on the balance sheet at December 31, the unit cost
under absorption costing is
a. $2.50.
b. $3.00.
c. $3.50.
d. $4.50.

2.Andersen Corporation has a target return of 15%. If a prospective investment has an estimated return on
investment of 20%, and a residual income of $10,000, what is the estimated cost of the investment?
a. $200,000
b. $66,667
c. $50,000
d. The answer can't be determined from this information.

3. A company annually consumes 10,000 units of Part C. The carrying cost of this part is $2 per year and the
ordering costs are $100. The company uses an order quantity of 500 units. If the company operates 200 days per
year, and the lead time for ordering Part C is 5 days, what is the order point?
a. 250 units
b. 1,000 units
c. 500 units
d. 2,000 units

4.Hopwood Corporation bought a piece of machinery. Selected data is presented below:

Useful life 6 years

Yearly net cash inflow $45,000
Salvage value -0-
Internal rate of return 18%
Cost of capital 14%

The initial cost of the machinery was

a. $157,392.
b. $174,992.
c. $165,812.
d. impossible to determine from the information given.

5.Which of the following indicates the mission being pursued by a subunit that is

using cash? generating cash?

a. save harvest
b. build save
c. harvest build
d. build harvest
 Difficult:
1. Variance Corporation

Variance Corporation is a manufacturer of a versatile statistical calculator. The following information is a

summary of defective and returned units for the previous year.

Total defective units 1,000

Number of units reworked 750
Number of customer units returned 150
Profit for a good unit $40
Profit for a defective unit $25
Cost to rework a defective unit $10
Cost of a returned unit $15
Total prevention cost $10,000
Total appraisal cost $5,000

Refer to Variance Corporation. The profit lost by selling defective units not reworked is
a. $25,000.
b. $15,000.
c. $18,750.
d. $3,750.

2. Seaworthy Corporation

Seaworthy Corporation is considering the purchase of a new ocean-going vessel that could potentially reduce
labor costs of its operation by a considerable margin. The new ship would cost $500,000 and would be fully
depreciated by the straight-line method over 10 years. At the end of 10 years, the ship will have no value and
will be scuttled. Seaworthy Companys cost of capital is 12 percent, and its marginal tax rate is 40 percent.
Refer to Seaworthy Corporation. What is the present value of the depreciation tax benefit of the new ship?
(Round to the nearest dollar.)
a. $113,004
b. $282,510
c. $169,506
d. $200,000

3.Diller Corporation

Diller Corporation has three production departments A, B, and C. Diller Corporation also has two service
departments, Administration and Personnel. Administration costs are allocated based on value of assets
employed, and Personnel costs are allocated based on number of employees. Assume that Administration
provides more service to the other departments than does the Personnel Department.

Dept. Direct Costs Employees Asset Value

Admin. $900,000 25 $450,000
Personnel 350,000 10 600,000
A 700,000 15 300,000
B 200,000 5 150,000
C 250,000 10 800,000

Refer to Diller Corporation. Using the direct method, what amount of Administration costs is allocated to
A (round to the nearest dollar)?
a. $216,000
b. $150,000
c. $288,000
d. $54,000

4.Biggs Industries is considering two alternative ways to depreciate a proposed investment. The investment has
an initial cost of $100,000 and an expected five-year life. The two alternative depreciation schedules follow:

Method 1 Method 2
Year 1 depreciation $20,000 $40,000
Year 2 depreciation $20,000 $30,000
Year 3 depreciation $20,000 $20,000
Year 4 depreciation $20,000 $10,000
Year 5 depreciation $20,000 $0

Assuming that the company faces a marginal tax rate of 40 percent and has a cost of capital of 10 percent, what
is the difference between the two methods in the present value of the depreciation tax benefit? Present value
tables or a financial calculator are required.

a. $7,196
b. $0
c. $2,878
d. $6,342

5.Versatile Company

Versatile Company produces four solvents from the same process: C, D, E, and G. Joint product costs are $9,000.
(Round all answers to the nearest dollar.)

Disposal Final
Sales price cost Further sales
per barrel per barrel processing price
Barrels at split-off at split-off costs per barrel
C 750 $10.00 $6.50 $2.00 $13.50
D 1,000 8.00 4.00 2.50 10.00
E 1,400 11.00 7.00 4.00 15.50
G 2,000 15.00 9.50 4.50 19.50

If Versatile sells the products after further processing, the following disposal costs will be incurred: C, $2.50; D,
$1.00; E, $3.50; G, $6.00.
Refer to Versatile Company. Using sales value at split-off, what amount of joint processing cost is allocated to
Product D?
a. $4,433
b. $2,276
c. $1,108
d. $1,182

Clincher:
1.The following information is for the Rayne Manufacturing Company for November.

Inventories Beginning Ending

Raw Material $17,400 $13,200
Work in Process 31,150 28,975
Finished Goods 19,200 25,500

Direct Labor (21,000 DLH @ $13)

Raw Material Purchases $120,000 Insurance-Office 2,570
Indirect Labor 11,200 Office Supplies Expense 900
Factory Supplies Used 350 Insurance-Factory 1,770
Other Expenses: Depr. Office Equipment 3,500
Depr.-Factory Equipment 17,300 Repair/Maintenance-Factory 7,400
Calculate total manufacturing costs

2.Entertainment Division
The Entertainment Division is one of the operating units of Software Solutions, Inc. The following operating
data of the division is presented below:

Sales $3,000,000
Profit margin 10%
Target return 15%
Residual income $ 60,000
Refer to the Entertainment Division. What was the segment income of the Entertainment Division for the
year?
3.Denison Company's cost of compliance is $58,000. Appraisal cost is $21,000 and failure cost is $32,000. The
company's total quality cost is
a. $53,000.
b. $79,000.
c. $90,000.
d. $111,000.

4.Seating Concepts

Seating Concepts has just finished its first year of business. Seating Concepts makes decorative outdoor
furniture. The firm manufactured 2,500 pieces of furniture during the year: 2,400 were sold at garden centers for
$456,000; 100 pieces were defective and could only be sold as scrap metal (25 pounds each and can be sold for
$2.50 per pound). No defective units could be reworked. During the year the following costs were incurred:

Total appraisal cost $9,000

Total prevention cost 25,700
Total production cost 250,000
Total selling and administrative cost 70,000

Refer to Seating Concepts. Compute the total profits lost by the company from selling scrap units during
its first year of operations.

5.An all-inclusive definition of quality views it as the ability of products/services to

a. only meet internal design specifications.
b. meet the customer's stated or implied needs.
c. be produced using all value-added production activities.
d. be produced with no rework costs.

6.A small manufacturing company recently stated its sales goal for a period was $100,000. At this level of
activity, its budgeted expenses were $80,000. Its actual sales were $100,000, but its actual expenses were
$85,000. This company operated
a. effectively and efficiently.
b. neither effectively nor efficiently.
c. effectively but not efficiently.
d. efficiently but not effectively.

7.The payback method assumes that all cash inflows are reinvested to yield a return equal to
a. the discount rate.
b. the hurdle rate.
c. the internal rate of return.
d. zero.

8.Fleming Company

Fleming Company is considering an investment in a machine that would reduce annual labor costs by $30,000.
The machine has an expected life of 10 years with no salvage value. The machine would be depreciated
according to the straight-line method over its useful life. The company's marginal tax rate is 30 percent.
Refer to Fleming Company. Assume that the company will invest in the machine if it generates an internal
rate of return of 16 percent. What is the maximum amount the company can pay for the machine and still
meet the internal rate of return criterion?
a. $180,000
b. $210,000
c. $187,500
d. $144,996

9.Thomas Company is currently operating at a loss of $15,000. The sales manager has received a special order
for 5,000 units of product, which normally sells for $35 per unit. Costs associated with the product are: direct
material, $6; direct labor, $10; variable overhead, $3; applied fixed overhead, $4; and variable selling expenses,
$2. The special order would allow the use of a slightly lower grade of direct material, thereby lowering the price
per unit by $1.50 and selling expenses would be decreased by $1. If Thomas wants this special order to increase
the total net income for the firm to $10,000, what sales price must be quoted for each of the 5,000 units?
a. $23.50
b. $24.50
c. $27.50
d. $34.00

10.Harris Manufacturing incurs annual fixed costs of $250,000 in producing and selling a single product.
Estimated unit sales are 125,000. An after-tax income of $75,000 is desired by management. The company
projects its income tax rate at 40 percent. What is the maximum amount that Harris can expend for variable costs
per unit and still meet its profit objective if the sales price per unit is estimated at $6?
a. $3.37
b. $3.59
c. $3.00
d. $3.70

Final Round
1. Gem Systems

Gem Systems uses an activity-based costing system. The company has gathered the following information
concerning various cost pools and activity drivers;

Activity cost pool Normal Cost Activity cost driver Activity level
Material Handling $25,000 Number of moves 5,000
Machine setups $35,000 Number of setups 10,000
Inspections $ 5,000 Number of Inspections 2,500
Electricity Costs $15,000 Kilowatt Hours 5,000

The following data was collected and is specific to Job 150.

Direct Material Cost $40,000

Direct Labor Cost 25,000 (@ $10 per hour)
Number of machine setups 3,000
Number of material moves 1,000
Number of inspections 100
Kilowatt hours of electricity used 1,000
Units produced 5,000

Refer to Gem Systems. Calculate the product cost of one unit of Job 150.

2.Copper Hill Inc. manufactures laser printers within a relevant range of production of 50,000 to 70,000 printers
per year. The following partially completed manufacturing cost schedule has been prepared:

Number of Printers Produced

70,000 90,000 100,000
Total costs:
Total variable costs $350,000 (d) (j)
Total fixed costs 630,000 (e) (k)
Total costs $980,000 (f) (l)
Cost per unit:
Variable cost per unit (a) (g) (m)
Fixed cost per unit (b) (h) (n)
Total cost per unit (c) (i) (o)

Complete the preceding cost schedule, identifying each cost by the appropriate letter (a) through (o).
Give the answer to letter O. Hehe! Goodluck

3. Perfect Stampers has collected new data over the last three months to perform an analysis of their budgeting
and cost computations:
Average production labor cost per month $5,500
Average raw materials consumed per month $1,475
Average utilities for the production facility per month $500
Variable indirect manufacturing overhead costs per month $1,950
Fixed costs per month $2,750
Average production volume in units 1,925 hub caps
Selling price per hub cap $9.95 each

Compute the unit variable cost, the contribution margin per unit and the break-even point in units?

4. The following data are available from the accounting records of Suwanee Co. for the month ended May 31,
2003. 17,000 units were manufactured and sold during the accounting period at a price of $60 per unit. There
was no beginning inventories and all units were completed (no work in process).

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

Give the net income using an absorption costing income.

5. Yipann Corporation is reviewing an investment proposal. The initial costs as well as other related data for
each year are presented in the schedule below. The cash flows are all assumed to take place at the end of the
year. All salvage value of the investment at the end of each year is equal to its net book value, and there will be
no salvage value at the end of the investment's life.

Investment Proposal

Year Initial Cost and Annual Net Annual Net Income

Book Value After-Tax Cash Flows
0 $105,000 $0 $0
1 70,000 50,000 15,000
2 42,000 45,000 17,000
3 21,000 40,000 19,000
4 7,000 35,000 21,000
5 0 30,000 23,000

Yipann uses a 24 percent after-tax target rate of return for new investment proposals. The discount figures for a
24 percent rate of return are given below:

Present Value of $1.00 Received at Present Value of $1.00 Received at

the End of Period the End of Each Period
1 .81 .81
2 .65 1.46
3 .52 1.98
4 .42 2.40
5 .34 2.74
6 .28 3.02
7 .22 3.24

What is the net present value of the investment proposal?

6. Feed the Hungry Foundation

Feed the Hungry Foundation is a non-profit organization that has a cost of capital of 10 percent. The foundation
is considering the replacement of a piece of equipment. The old machine has a book value of $3,000 and a
remaining estimated life of 5 years with no salvage value at that time. The salvage value of the old machine is
currently $1,500. The new equipment will cost $10,000. It has an estimated life of 5 years with no salvage value
then. Annual cash operating costs are $4,000 for the old machine and $2,000 for the new machine.
Refer to Feed the Hungry Foundation. Would the organization keep or replace the machine? What is the
net advantage?
7. . Latway Company is considering opening a new sales territory. Management expects the initial
investment to be $150,000 and subsequent investments of $100,000 and $50,000 at the end of the first and
second years. Net cash flow from the sales territory is expected to yield after-tax cash inflow for 5 more years:
$75,000 for the first two years and $60,000 for the remaining years. The company's cost of capital is 12 percent.
Calculate the net present value of this project.

8. Following are the financial statements for Starman Corporation for the year ended December 31, 20xx.
Assume that all balance sheet amounts represent both average and ending figures.

Starman Corporation
Balance Sheet
December 31, 20xx
Assets
Cash $ 20,000
Marketable securities 30,000
Accounts receivable 50,000
Inventory 100,000
Long-term receivables 35,000
Property, plant, and equipment 65,000
Total assets $300,000

Liabilities and Stockholders' Equity

Current liabilities $100,000
Long-term liabilities 60,000
Stockholders' equity 140,000
Total liabilities and stockholders' equity $300,000

Starman Corporation
Income Statement
For the Year Ended December 31, 20xx
Net sales $400,000
Cost of goods sold 240,000
Gross margin $160,000
Operating expenses 40,000
Income before income taxes $120,000
Income taxes expense 30,000
Net income $ 90,000
What is the receivable turnover for this corporation?

9. From the following information, compute the ratios indicated and place the proper numbers in the spaces
provided. Assume the average for the year is the same as the ending balances for the balance sheet accounts.
Round percentages to one decimal place, and show your work.
Westwood Corporation
Balance Sheet
December 31, 20xx
Assets
Cash $ 15,000
Marketable securities 10,000
Accounts receivable (net) 20,000
Inventory 30,000
Prepaid expenses 8,000
Property, plant, and equipment 117,000
Total assets $200,000

Liabilities and Stockholders' Equity

Current liabilities $ 30,000
Long-term liabilities 50,000
Stockholders' equity 120,000
Total liabilities and stockholders' equity $200,000

Westwood Corporation
Income Statement
 For the Year Ended December 31, 20xx
Net sales $160,000
Cost of goods sold 120,000
Gross margin $ 40,000
Operating expenses
Selling and administrative expenses $ 16,000
Interest expense 8,000
Income taxes expense 4,000 28,000
Net income $ 12,000

Westwood had 4,000 shares of common stock issued and outstanding. The market price of common stock at year
end was $15.00 per share. Dividends paid in 20xx were $0.60 per share.

Compute the Dividends yield and Days' inventory on hand?

10. The law firm of Duwe, Cheatem & Howe provides legal services for clients. During the year, corporate
clients required 5,000 hours of legal services, while individuals required 3,000 hours. The firm has traditionally
used direct labor hours to assign overhead.

However, Ms. Duwe believes services to businesses cost more than services to individuals and wishes to adopt
activity-based costing. The firm's revenues and costs for the year are shown below:

Corporate Individual Total

Revenue $150,000 $150,000 $300,000
Expenses:
Lawyers' salaries $100,000 50,000 $150,000
Overhead:
Filing 10,000
Quality control 5,000
Data entry 25,000
Total overhead $40,000

Mr. Cheatem has kept records of the following data for use in the new activity-based costing system:

Activity Level
Overhead Cost Cost Driver Corporate Individual

Filing Number of Clients 5 5

Quality control Number of hours spent 75 25
Data entry Number of pages entered 1,000 1,500

REQUIRED:
A. Compute the profits by segments using the three cost drivers in the ABC model.

11. On August 31, the end of the first year of operations, during which 18,000 units were manufactured
and 13,500 units were sold, Olympic Inc. prepared the following income statement based on the variable
costing concept:

Olympic Inc.
Income Statement
For Year Ended August 31, 20--
Sales $297,000
Variable cost of goods sold:
Variable cost of goods manufactured $288,000
Less ending inventory 72,000
Variable cost of goods sold 216,000
Manufacturing margin $ 81,000
Variable selling and administrative
expenses 40,500
Contribution margin $ 40,500
Fixed costs:
Fixed manufacturing costs $ 12,000
 Fixed selling and administrative
expenses 10,800 22,800
Income from operations $ 17,700
========

Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption
costing concept.

12. Calculate margin of safety in units using the following assumptions:

Sales Price per unit $500

Variable cost per unit $300
Fixed Costs in total $200,000
Actual Sales Volume 1,750 units

13. Arron company sells three products, X, Y, and Z. The company has fixed costs in the amount of $3,900. The
following information is presented to you:

X Y Z
Price per unit $11 $15 $17
Variable costs per unit $6 $12 $16
Number of units sold 1,000 2,000 2,000

REQUIRED:

. What are the break-even units for each product line?

14. The Cuddly Creations Company produces small plastic dolls in its Georgia manufacturing plant. The
company is currently evaluating ways to improve productivity. The accountant of the firm's parent organization
suggested that management implement a new compensation plan based on throughput performance measure as
an incentive to increase productivity. To demonstrate how such a measure might work, the accountant gathered
the following production data for a recent month:

Total units attempted 6,000,000

Good units manufactured 4,800,000
Processing time (total hours) 800
Value-added processing time 600

. Compute manufacturing cycle efficiency.

15. The manager of the Waco Division of National Church Tours is preparing the budget for the upcoming year.
At this point, he has determined that average total assets for the upcoming year will equal $4,000,000. The
manager is evaluated on the amount of residual income generated by the division. Assume variable costs in the
Waco Division are expected to equal 60% of total sales and fixed costs are expected to equal $400,000.

a. Compute the sales level that would generate a 20% return on investment.

16. Scrumptious Spices manufactures a special blend of beef marinade. The company buys one of the spices
used in the marinade in 10-pound bags that cost $5 each. The company uses 50,000 of the bags per year, and
usage occurs evenly throughout the year.

The average cost to carry a 10-pound bag in inventory per year is $1. The cost to place an order is $12.

1. Determine the economic order quantity for the spice in terms of 10 pound bags.
17.
Southern Cola is considering the purchase of a special-purpose bottling machine for P28,000. It is
expected to have a useful life of 7 years with a zero terminal disposal price. The plant manager
estimates the following savings in cash-operating costs.
Years Amount
1 P14,000
2 11,000
3 8,000
4 6,000
5 4,000
6 3,000
7 3,000
Southern Cola uses a required rate of return of 16% in its capital-budgeting decisions.
Increment tax rate is 40%. The company uses straight-line depreciation
1. Compute the PV of net advantage of using SYD instead of straight-line method of computing
depreciation.

18. Albania Company expects to sell 100,000 units annually for the next four years at P9 each, with variable
costs of P5 per unit, and annual cash fixed cost of P250,000. The product requires machinery costing P320,000
with a four-year life and no salvage value. The company will depreciate the machinery using straight-line
depreciation. Additionally, working capital (in form of receivables and inventory) will increase by P150,000.
This additional working capital will be returned in full at the end of the four years. The tax rate is 40% and cost
of capital is 12%.
1. Compute the profitability index for this investment.

19. Mountain View Hospital has purchased new lab equipment for P134,650. The equipment is expected to
last for three years and to provide cash inflows as follows:
Year 1 ... P45,000
Year 2 60,000
Year 3 ?
Assuming that the equipment will yield exactly a 16% rate of return, what is the expected cash inflows
for year 3?

20. A single process in which one product cannot be manufactured without producing others is referred to as a
____________________.
 Answers and Solutions to
Quiz Bee( MAS and Cost)
Easy
1.Answer: A

2.Answer: A
Begin Inv Purch Ending Inv
Raw Materials $18,000.00 $42,000.00 $(15,000.00) $45,000.00
Rate Hours
Direct Labor $ 7.50 4,000 30,000.00
$75,000.00

3.Answer: C

4.Answer: A
$8,000,000/($((5,000,000 + 5,400,000)/2) = 1.538

5. Answer: D

Average:
1.Answer:D
DM + DL + VOH + FOH = Absorption Cost per Unit
$1.50 + $1.00 + $0.50 + $(150,000/100,000) = $4.50 / Unit

2.Answer:0.20 - 0.15 = 0.05 residual income

$10,000 / 0.05 = $200,000

3.Answer: A
Order point = Daily use * Lead time
= (10,000/200) * 5
= 250 units

4.Answer: A
Use PV of Annuity for 6 years and 18%
$45,000 * 3.4976 = $157,392

5.Answer: D

Difficult:
1.Answer: D
250 units not reworked * $15 incremental difference = $3,750

2.Answer: A
Annual depreciation = $50,000
Tax savings = $20,000
Use PV of Annuity table 10 years, 12%; Constant = 5.6502
$20,000 * 5.6502 = $113,004

3.Answer: A
$900,000 * (300,000/1,250,000) = $216,000

4.Answer:C

Year Difference in After-Tax PV of $1 Discounted

Depreciation Difference Table Value Value
1 $ 20,000 $ 8,000 0.9091 $ 7,272
2 $ 10,000 $ 4,000 0.8265 $ 3,306
3 $ -0- $ 0- 0.7513 $ -0-
4 $(10,000) $(4,000) 0.6830 $(2,732)
5 $(20,000) $(8,000) 0.6209 $(4,967)
Total $ 2,878
======

5.Answer: D
Sales Price
Product Barrels at Split-Off Total
C 750 $10.00 $ 7,500
D 1,000 $ 8.00 $ 8,000
E 1,400 $11.00 $ 15,400
G 2,000 $15.00 $30,000
$60,900
$(8,000/60,900) * $9,000 = $1,182

Clincher:
1.Answer:38,020
Manufacturing Costs:
Raw Material (Nov. 1) $ 17,400
Purchases 120,000
Raw Material Available $137,400
Raw Material (Nov. 30) (13,200)
Raw Material Used $124,200
Direct Labor (21,000 $13) 273,000
Overhead:
Depr.-Factory Equipment $17,300
Repairs/Maintenance-Factory 7,400
Indirect Labor 11,200
Insurance-Factory 1,770
Factory Supplies Used 350
Total Overhead 38,020
Total Manufacturing Costs
Cost of Goods Manufactured:
Total Manufacturing Costs $435,220
Work in Process (Nov. 1) 31,150
Work in Process (Nov. 30) (28,975)
Cost of Goods Manufactured $437,395

Cost of Goods Sold:

Finished Goods (Nov. 1) $ 19,200
Cost of Goods Manufactured 437,395
Total Goods Available $456,595
Finished Goods (Nov. 30) (25,500)
Cost of Goods Sold $431,095

2.Answer: Segment income = Profit Margin * Sales = .10 * $3,000,000 = $300,000

3.Answer: C

Cost of compliance $58,000

Failure cost 32,000
Total quality cost $90,000
======

4.Answer: 12750
Price for good units: $456,000 2,400 = $190
Price for defective units: $6,250* 100 = $ 62.50

*25 pounds 100 pieces $2.50/pound.

Profits lost: 100 ($190.00 - $62.50) = $12,750

5.Answer: B

6.Answer: C

7.Answer: D

8.Answer:D
Use PV of Annuity Table; 10 years, 16%; Constant = 4.8330
$30,000 * 4.8330 = $144,496

9.Answer: A
In order to increase income to $10,000, there must be an increase of $25,000 or $5 per unit.

Direct materials $ 4.50

Direct Labor 10.00
Variable Overhead 3.00
Variable Selling Exp 1.00
Production Costs $18.50
Additional profit per unit
5.00
Sales price/unit $23.50
=====

10.Answer: C
Before Tax Income: $75,000 / 0.60 = $125,000
Fixed Costs: 250,000
Contribution Margin: $375,000

Projected Sales $750,000

less: Contribution Margin 375,000
Variable Costs $375,000

$375,000 / 125,000 units $3/unit

Final Round
1.Answer: $16.74 per unit
SUPPORTING CALCULATIONS:
Direct materials $40,000
Direct labor $25,000
Material Moves $ 5,000 (($25,000/5,000) x 1,000)
Machine Set ups $10,500 ((35,000/10,000) x 3,000)
Inspections $ 200 (($5,000/2,500) x 100)
Electricity $ 3,000 (($15,000/5,000) x 1,000
$83,700/5,000 units produced = $16.74 per unit

2.ANS: $11.30
(a) $5.00 ($350,000/70,000 printers)
(b) $9.00 ($630,000/70,000 printers)
(c) $14.00 ($980,000/70,000 printers)
(d) $450,000 ($5.00 90,000 printers)
(e) $630,000
(f) $1,080,000 ($450,000 + $630,000)
(g) $5.00
(h) $7.00 ($630,000/90,000 printers)
(i) $12.00 ($1,080,000/90,000 printers)
(j) $500,000 ($5.00 100,000 printers)
(k) $630,000
(l) $1,130,000 ($500,000 + $630,000)
(m) $5.00
(n) $6.30 ($630,000/100,000 units)
(o) $11.30 ($1,130,000/100,000 units)

3.ANS:

Total variable costs are:

Production labor cost is $5,500 per month
Raw materials consumed per month is 1,475
Utilities expense is 500
Indirect costs 1,950 per month
Total variable costs (average per month) $9,425

Unit variable costs = Total (average) production costs $9,425 / 1,925 hub caps = $4.8961 per hub cap.

Contribution Margin= Selling price per unit- variable unit costs = $9.95-$4.90= $5.05

Break-even point in units is $2,750 per month / ($9.95 - $4.90) = 545 units

4.Answer:
Suwanee Co.
Absorption Costing Income Statement
For the Month Ended May 31, 2003
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

5.ANS:
$10,450 calculated as follows:
$50,000 .81 = $ 40,500
$45,000 .65 = $ 29,250
$40,000 .52 = $ 20,800
$35,000 .42 = $ 14,700
$30,000 .34 = $ 10,200
Total $115,450
Less investment 105,000
$ 10,450

6.ANS:
Net cash outflow associated with keeping:$4,000 3.791 = $15,164

Net cash outflow associated with replacing:

Cash operating costs $ 7,582
Initial cash outlay 10,000
Salvage value - old -1,500
Net cash outflow - replacing $16,082

Since the net cash outflow of keeping is less than replacing, the Foundation should keep the machine.

Keep the Machine .Net Advantage= 16082 15164 = $918

7.ANS: (37,500)

Initial investment $150,000 1.000 $150,000

End of year 1 100,000 .893 89,300
End of year 2 50,000 .797 39,850
Present value of cash outflows $279,150

Cash inflows:
Year 1 & 2 $75,000 1.690 $126,750
 Year 3 60,000 .712 42,720
Year 4 60,000 .636 38,160
Year 5 60,000 .567 34,020
Present value of cash inflows $241,650

Net present value ($241,650 - 279,150) ($37,500)

8.ANS: 8 times PTS: 1 OBJ: LO3

9.Compute the Dividends yield and Days' inventory on hand?

Answer: Dividends yield ($0.60 $15.00)= 4%

Days' inventory on hand (365 4.0)= 91.3 days

10.ANSWER:
Income statement using activity-based costing:

Calculation of activity rates:

Filing: $10,000/10 clients = $1,000 per client

Quality costs: $5,000/100 hours = $50 per hour
Data entry: $25,000/2,500 pages = $10 per page

Corporate Individual Total

Revenue $150,000 $150,000 $300,000
Expenses:
Salaries 100,000 50,000 150,000
Overhead:
Filing ($1,000 x 5) 5,000 5,000 10,000
Quality costs 5,000
$50 x 75 3,750
$50 x 25 1,250
Data entry 25,000
$10 x 1,000 10,000
$10 x 1,500 15,000
Total overhead $ 18,750 $ 21,250 $ 40,000
Total costs $118,750 $ 71,250 $190,000
Profit $ 31,250 $ 78,750 $110,000

11.ANS:
(a) $16.00 ($288,000 total variable cost of goods manufactured/18,000 units manufactured.)

(b) Unit variable cost of goods manufactured (a) $16.00

Unit fixed cost of goods manufactured
($12,000/18,000 units manufactured) .67
Unit cost $16.67
======

12.Answer:
SUPPORTING CALCULATIONS:
Fixed Costs/Contribution Margin = break-even
$200,000/$200 = 1,000 units at break-even
Actual Sales 1,750 - break-even sales 1,000 = margin of safety 750

13.ANS:

X Y Z
Contribution margin 5 3 1
Product mix 1/5 2/5 2/5
Product mix as % 0.2 0.4 0.4
CM x PM% 1.0 1.2 0.4 = 2.6
(weighted average CM)
 3,900/2.6 = 1,500 units

. X: 0.2 1,500 = 300 units

Y: 0.4 1,500 = 600 units
Z: 0.4 1,500 = 600 units

14.ANS: 75%

. MCE = 600 / 800 = 75%

DIF: Moderate OBJ: 19-7

15.ANS:
a. The required net income = 20% x $4,000,000 = $800,000.

sales = net income + fixed costs + variable costs

sales = $800,000 +| $400,000 + (.60 x sales)
sales x 40% = $1,200,000
sales = $3,000,000

16.Answer
1. EOQ =
where EOQ = Economic order quantity
P = Cost of placing and receiving an order
D = Annual demand in units
C = annual cost of carrying one unit in stock for one year
EOQ =
= 1,095 bags

17.Answer: 942

18. Answer: .99

19. Answer: P80,000

20.Answer: Joint Process