Devry ACCT434 Midterm Exam ANSWERS

ACCT 434
Midterm Exam ANSWERS
Question :
(TCO1) ABC systems create
Points Received:
5 of 5
2.
Question :
(TCO 1) Merriamn Company provides the following ABC costing
information:
Activities
Total Costs
Activity-cost
drivers
Account inquiry hours
$400,000
10,000 hours
Account billing lines
$280,000
4,000,000 lines
Account verification accounts
$150,000
40,000 accounts
Correspondence letters
$ 50,000
4,000 letters
Total costs
$880,000
The above activities are used by Department A and B as follows:
Department A
Department B
Account inquiry hours
2,000 hours
4,000 hours
Account billing lines
400,000 lines
200,000 lines
Account verification accounts
10,000 accounts
8,000 accounts
Correspondence letters
1,000 letters
1,600 letters
How much of the account billing cost will be assigned to
Department B?
Points Received:
5 of 5
3.
Question :
(TCO 2) A master budget
Points Received:
5 of 5
4.
Question :
(TCO 2) Dalyrymple Company produces a special spray nozzle. The
budgeted indirect total cost of inserting the spray nozzle is $80,000. The
budgeted number of nozzles to be inserted is 40,000. What is the budgeted
indirect cost allocation rate for this activity?
Points Received:
5 of 5
5.
Question :
(TCO 3) Which cost estimation method analyzes accounts in the
subsidiary ledger as variable, fixed, or mixed using qualitative methods?
Points Received:
5 of 5
6.
Question :
(TCO 4) In evaluating different alternatives, it is useful to
concentrate on
Points Received:
5 of 5
7.
Question :
(TCO 5) The theory of constraints is used for cost analysis when
Points Received:
5 of 5
8.
Question :
(TCO 5) Schmidt Corporation produces a part that is used in the
manufacture of one of its products. The costs associated with the production of
10,000 units of this part are as follows:
Direct materials
$45,000
Direct labor
65,000
Variable factory overhead
30,000
Fixed factory overhead
70,000
Total costs
$210,000
Of the fixed factory overhead costs, $30,000 is avoidable.
Phil Company has offered to sell 10,000 units of the same part to
Schmidt Corporation for $18 per unit. Assuming there is no other use for the
facilities, Schmidt should
Points Received:
5 of 5
9.
Question :
(TCO 3) The cost function + 10X
Points Received:
5 of 5
10.
Question :
(TCO 4) Sunk costs
Points Received:
5 of 5
Page:
1 2
1.
Question :
(TCO 1) For each of the following drivers identify an appropriate
activity.
a. # of machines
b. # of setups
c. # of inspections
d. # of orders
e. # of runs
f. # of bins or aisles
g. # of engineers
Points Received:
25 of 25
2.
Question :
(TCO 2) Favata Company has the following information:
Month Budgeted
Sales
June $60,000
July 51,000
August 40,000
September 70,000
October 72,000
In addition, the cost of goods sold rate is 70% and the desired
inventory level is 30% of next month’s cost of sales.
Prepare a purchases budget for July through September.
Points Received:
25 of 25
3.
Question :
(TCO 3) Patrick Ross, the president of Ross’s Wild Game Company,
has asked for information about the cost behavior of manufacturing overhead
costs. Specifically, he wants to know how much overhead cost is fixed and how
much is variable. The following data are the only records available:
Month
Machine-hours Overhead Costs
February 1,700 $20,500
March 2,800 22,250
April 1,000 19,950
May 2,500 21,500
June 3,500 23,950
Using the high-low method, determine the overhead cost equation.
Use machine-hours as your cost driver.
Points Received:
25 of 25
4.
Question :
(TCO 5) Kirkland Company manufactures a part for use in its
production of hats. When 10,000 items are produced, the costs per unit are:
Direct materials $0.60
Direct manufacturing labor 3.00
Variable manufacturing overhead 1.20
Fixed manufacturing overhead 1.60
Total $6.40
Mike Company has offered to sell to Kirkland Company 10,000 units
of the part for $6.00 per unit. The plant facilities could be used to
manufacture another item at a savings of $9,000 if Kirkland accepts the offer.
In addition, $1.00 per unit of fixed manufacturing overhead on the original
item would be eliminated.
a. What is the relevant per unit cost for the original part?
b. Which alternative is best for Kirkland Company? By how much?
Points Received:
25 of 25