DeVry Chicago ACCT 346 Managerial Accounting Wk6 Quiz

Week 6 Quiz

1.

Question :

(TCO 7) Elliot’s Escargots sells
commercial and home snail extraction tools and serving pieces. Currently,
the Serving Pieces Section takes up approximately 50% of the company’s
retail floor space. The CEO of Elliot’s wants to decide if the company
should continue offering Serving Pieces or focus only on Snail Extraction
Tools. If the Serving Pieces are dropped, salaries and other direct fixed
costs can be avoided and Snail Extraction sales and variable costs would
increase by 13%. Allocated fixed costs would remain unchanged.

Snail Extraction

Serving

Tools

Pieces

Total

Sales

$1,200,000

$800,000

$2,000,000

Less cost of goods sold

500,000

700,000

1,200,000

Contribution margin

700,000

100,000

800,000

Less Avoidable direct fixed costs:

Salaries

175,000

175,000

350,000

Other

60,000

60,000

120,000

Less Unavoidable allocated fixed
costs:

Rent

14,118

9,882

24,000

Insurance

3,529

2,471

6,000

Cleaning

4,117

2,883

7,000

Executive salary

76,470

53,530

130,000

Other

7,058

4,942

12,000

Total costs

340,292

308,708

649,000

Net income

$359,708

($208,708)

$151,000

Prepare an incremental analysis in good form to determine the
incremental effect on profit of discontinuing the serving pieces line.

Question 2.

Question :

(TCO 4) Paschal’s Parasailing
Enterprises has estimated that fixed costs per month are $115,600 and
variable cost per dollar of sales is $0.38 (6 points).

What is the break-even point per month in sales dollars?
What level of sales is needed in dollars for a monthly profit of
$67,000?
For the month of August, Paschal’s anticipates sales of $585,000. What is
the expected level of profit?

Question 3.

Question :

(TCO 6) Princess Cruise Lines has the
following service departments; concierge, valet, and maintenance. Expenses
for these departments are allocated to Mediterranean and transatlantic
cruises. Expenses for the departments are totaled (both variable and fixed
components are combined) and as follows.

Concierge $2,500,000
Valet $1,750,000
Maintenance $4,250,000

The sea miles logged are 6,000,000 for the Mediterranean and 18,000,000 for
the transatlantic voyages.

Using sea miles logged as the allocation base, allocate the service
department costs to the Mediterranean and Transatlantic cruise lines (6
points).

Question 4.

Question :

(TCO 9) Thurman Munster, the owner of
Adams Family RVs, is considering the addition of a service center his lot.
The building and equipment are estimated to cost $1,200,000, and both the
building and equipment will be depreciated over 10 years using the straight-line
method. The building and equipment have zero estimated residual value at
the end of 10 years. Munster’s required rate of return for this project is
12%. Net income related to each year of the investment is as follows.

Revenue

$450,000

Less:

Material Cost

$60,000

Labor

100,000

Depreciation

120,000

Other

10,000

290,000

Income before taxes

160,000

Taxes at 40%

64,000

Net Income

$96,000

(A) Determine the net present value of the investment in the service
center. Should Munster invest in the service center?
(B) Calculate the internal rate of return of the investment to the nearest
0.5%.
(C) Calculate the payback period of the investment.
(D) Calculate the accounting rate of return.

Question 5.

Question :

(TCO 5) The following information
relates to Vice Versa Ventures for calendar year 2013, the company’s first
year of operations.

Units produced

20,000

Units sold

17,000

Selling price per unit

$35

Direct material per unit

$5

Direct labor per unit

$5

Variable manufacturing overhead per
unit

$2

Variable selling cost per unit

$3

Annual fixed manufacturing overhead

$160,000

Annual fixed selling and
administrative expense

$80,000

(a) Prepare an income statement using full costing.
(b) Prepare an income statement using variable costing.

Question 6.

Question :

(TCO 8) Leekee Shipyards has a new
barnacle-removing product for ocean-going vessels. The company invests
$1,200,000 in operating assets and plans to produce and sell 400,000 units
per year. Leekee wants to make a return on investment of 20% each year.
Leekee needs to know what price to charge for this product.

Use the absorption costing approach to determine the (1) unit product cost
and (2) markup necessary to make the desired return on investment based on
the following information.

Per Unit

Total

Direct Materials

$2.00

Direct Labor

$1.50

Variable
Manufacturing Overhead

$1.00

Fixed Manufacturing Overhead

$100,000

Variable Selling and Administrative
Expense

$0.10

Fixed Selling and Administrative
Expense

$100,000