final review

Division A has variable manufacturing costs of $69 per unit and fixed costs of $19 per unit. Assuming that Division A is operating significantly below capacity, what is the optimal transfer price of an internal transfer when the market price is $92? Multiple Choice

$69

Division B has variable manufacturing costs of $59 per unit and fixed costs of $15 per unit. Assuming that Division B is operating significantly below capacity, what is the opportunity cost of an internal transfer when the market price is $84?

$0

Rerun Manufacturing Company is in the process of preparing its 2020 budget and is anticipating the following changes:30% increase in the number of units sold.20% increase in the direct material unit cost.15% increase in the direct labor cost per unit.10% increase in the manufacturing overhead cost per unit.14% increase in the sales price.7% increase in the administrative expenses.Rerun does not keep any units in inventory.The composition of the cost of finished products during 2019 for direct materials, direct labor, and factory overhead, respectively, was in the ratio of 3:2:1. The condensed income statement for 2019 is as follows: Sales (30,000 units)$450,000 Less sales returns 13,500 Net sales 436,500 Cost of goods sold 306,000 Gross profit $130,500 Selling expenses$60,000 Admin.expenses 30,000 90,000 Net income $40,500 What are estimated net sales for 2020, assuming the sales return/gross sales relationship remains constant?

$571,500.

Dockside Enterprises Incorporated operates two divisions: (1) a management division that owns and manages bulk carriers on the Great Lakes and (2) a repair division that operates a dry dock in Tampa, Florida. The repair division works on company ships and outside large-hull ships. The repair division has an estimated variable cost of $36 per labor-hour, has a backlog of work for outside ships, and charges $75 per hour for labor, which is standard for this type of work. The management division complained that it could hire its own repair workers for $45 per hour, including leasing an adequate work area.What is the minimum transfer price per hour that the repair division should obtain for its services, assuming it is operating at capacity?

$75

The following information was presented by User-Friendly Industries Company for an asset purchased at the beginning of the previous year. Original cost of the asset$20,000 Useful life of the asset 10years Annual operating profit, including depreciation$4,000 Salvage value$-0- What is the return on investment (ROI) assuming User-Friendly uses (a) the straight-line method for depreciation and (b) beginning-of-year net book values to compute ROI?

22.2%

Midland Company buys tiles and prints different designs on them for souvenir and gift stores. It buys the tiles from a small company in Europe, so at all times it keeps on hand a stock equal to the tiles needed for three months' sales. The tiles cost $3 each and must be paid for in cash. The company has 28,000 tiles in stock. Sales estimates, based on contracts received, are as follows for the next six months: January 12,400 February 17,800 March 13,200 April 14,200 May 9,600 June 7,200 Required: a. & b. Estimate purchases (in units) and cash required to make purchases in January, February, and March.

29,600 9,600 7,200 88,800 $28,800 $21,60

A transfer made at cost does not motivate the selling division to transfer its goods or services internally.

True

Net realizable value at the split-off point is used to allocate: Costs After Split-off Point Incurred Joint Costs A.No No B.No Yes C.Yes No D.Yes Yes

B

Which of the following is not a cost of decentralization?

Delegating decision making to the lowest level possible enables an organization to respond in a timely way to opportunities and problems.

Allocated joint costs are useful for:

Determining inventory cost for accounting purposes.

Which of the following methods provides no data for service departments to monitor each other's costs?

Direct method.

Which of the following statements regarding accounting for by-products is true?

If all products are sold in the same period as they are produced, the reported gross margin will be the same regardless of how by-product revenue is accounted for.

Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow: Maching $99,000 Assembly 64,400 Maintenance 40,000 - 0.2 0.5 0.3 Cafeteria 32,000 0.8 - 0.1 0.1 Compute the allocation of service department costs to producing departments using the direct method. (Do not round intermediate calculations.)

Maintenance$25,000 $15,000 Cafeteria 16,000 16,000 Total Costs$41,000 $31,000

Which of the following correctly defines a principal-agent relationship?

The relationship between a superior and a subordinate. (The principal-agent relationship is defined as the relationship between a superior and a subordinate.)

If by-product revenue is treated as other revenue instead of deducted from the net-realizable-value of the main products:

There is no difference in the overall gross margin of the company.

The Foxmoor Company produces three products, X, Y, and Z, from a single raw material input. Product Y can be sold at the split-off point for total revenues of $64,000 or it can be processed further at a total cost of $29,000 and then sold for $94,000. Product Y:

Would increase the company's overall net income by $1,000 if processed further and then sold.

Barrington Box Enterprises has two divisions, large and small, that share the common costs of the company's communications network. The annual common costs are $4,800,000. You have been provided with the following information for the upcoming year: Calls Time on Network (hours) Large 112,000 125,000 Small 80,000 275,000 What is the allocation rate for the upcoming, year assuming Barrington Box uses the single-rate method and allocates common costs based on the time on the network?

[$4,800,000/(125,000 + 275,000)] = $12.00.