Acct Final Exam Notes
The expected average rate of return for a proposed investment of $5,690,000 in a fixed asset, using straight-line depreciation, a useful life of 20 years, no residual value, and an expected total income of $17,070,000 over the 20 years, is (round to two decimal places)
30.00%
The expected average rate of return for a proposed investment of $777,000 in a fixed asset, with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total net income of $233,000 for the 4 years, is (round to two decimal points).
14.99%
The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: YearOperatingIncomeNet CashFlow1$100,000 $180,000 240,000 120,000 340,000 100,000 410,000 90,000 510,000 120,000 The average rate of return for this investment is
16%
Mason Corporation had $1,036,000 in invested assets, sales of $1,226,000, operating income amounting to $225,000, and a desired minimum return on investment of 14%. The profit margin for Mason Corporation is
18.4%
Hayden Company is considering the acquisition of a machine that costs $363,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual net cash inflow of $83,000, and annual operating income of $70,550. The estimated cash payback period for the machine is (round to one decimal place)
4.4 years
An anticipated purchase of equipment for $490,000 with a useful life of 8 years and no residual value is expected to yield the following annual incomes and net cash flows: YearIncomeNet Cash Flow1$60,000$110,000250,000100,000350,000100,000440,00090,000540,00090,000640,00090,000740,00090,000840,00090,000 The cash payback period for the equipment is
5 years
Swan Company produces its product at a total cost of $43 per unit. Of this amount, $8 per unit is selling and administrative costs. The total variable cost is $30 per unit, and the desired profit is $20 per unit. The markup percentage on product cost is
80%
Differential revenue is the amount of profit that would result from the best available alternative proposed use of cash.
False
With sensitivity analysis, at least one input must be a known (not estimated) value.
False
_____ manufacturing principles emphasize quality and zero defects.
Lean
Which of the following statements regarding the cash payback period is true?
The shorter the payback, the possibility of obsolescence will be less likely.
James, an accountant at Forta Company, is preparing a report showing the production shift data for the previous day's production. This report will be shared with the production manager, Julia. This is an example of the role of managerial accounting at work.
True
Lean manufacturing focuses on reducing time, cost, and poor quality in processes.
True
The desired selling price for a product will be the same under both the variable and total cost methods.
True
When performing activity analysis on administrative processes, the "product" is often information.
True
How are the objectives of lean manufacturing achieved?
all of these choices
Which of the following is a characteristic of a lean accounting system?
all of these choices
Which of the following underlying problems may be hidden by high raw materials, work in process, and finished goods inventory levels?
all of these choices
The _____ method of analyzing capital investment proposals divides the estimated average annual income by the average investment.
average rate of return
Which of the following is a method of analyzing capital investment proposals that ignores present value?
average rate of return
Which of the following is an example of a strategic performance measurement system?
balanced scorecard
The process by which management plans, evaluates, and controls investments in fixed assets is called _____ analysis.
capital investment
Accounting for lean operations requires fewer transactions because
combined materials and conversion costs are transferred to finished goods
Lean manufacturing philosophy reduces all of the following except
conversion costs
Kilbuck Company operates in a lean manufacturing environment. Kilbuck applies conversion costs at a rate of $25 per unit. Kilbuck produced 12,000 units during May. Kilbuck's actual conversion costs for the month of May were: Direct and indirect labor$150,000Machine depreciation85,000Maintenance and supplies60,000Total conversion costs$295,000 The journal entry to record applied conversion costs for May will include a
debit to Raw and In Process Inventory for $300,000
The lean philosophy attempts to reduce setup times, which will
decrease within-batch wait time
The amount of increase or decrease in revenue that is expected from a particular course of action as compared with an alternative is
differential revenue
The revenue that is forgone from an alternative use of an asset, such as cash, is called
opportunity cost
ABC Corporation has three support departments with the following costs and cost drivers: Support DepartmentCostCost DriverGraphics Production$200,000number of copies madeAccounting500,000number of invoices processedPersonnel400,000number of employees ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows: MicroMacroSuperRevenues$700,000$850,000$650,000Direct operating expenses50,00070,000100,000Number of copies made20,00030,00050,000Number of invoices processed700800500Number of employees130145125 The support department allocation rate for the Personnel Department is
$1,000
Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, operating income amounting to $302,500, and a desired minimum return on investment of 15%. The profit margin for Chicks Corporation is
25%
The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine which one has the best average rate of return. Machine AMachine BMachine CEstimated average income$40,000 $50,000 $75,000 Average investment300,000 250,000 500,000
Machine B
When several alternative investment proposals of the same amount are being considered, the one with the largest net present value is the most desirable. If the alternative proposals involve different amounts of investment, it is useful to prepare a relative ranking of the proposals by using a(n) _____ index.
present value
In a lean environment, process problems are more visible than they are in a traditional environment because
process problems cause production to shut down immediately
Which of the following is an example of value-added time?
processing time
A cost that has been incurred in the past, cannot be recouped, and is not relevant to future decisions is termed a
sunk cost
Flyer Company sells a product in a competitive marketplace. Market analysis indicates that its product would probably sell at $48 per unit. Flyer management desires a 12.5% profit margin on sales. Flyer's current full cost for the product is $44 per unit. In order to meet the new target cost, how much will the company have to cut costs per unit, if any?
$2
Rylan Corporation received an offer from an exporter for 25,000 units of product at $16 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price$22Unit manufacturing costs: Variable11 Fixed6 The differential cost from the acceptance of the offer is
$275,000
Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates to only one customer's lean cell for the coming year. For the year, projected labor and overhead was $7,370,000 and materials costs were $28 per unit. Planned production included 4,000 hours to produce 27,500 motor drives. Actual production for August was 1,600 units, and motor drives shipped amounted to 1,380 units. Conversion costs are applied based on units of production From the foregoing information, determine the manufacturing cost per unit.
$296.00
Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales 7 hours; and Wales 1 hour. Assuming that Widgeon Co. can sell all of the products it can make, the maximum contribution margin it can earn per month is
$34,000
Blaser Corporation had $1,035,000 in invested assets, sales of $1,266,000, operating income amounting to $203,000 , and a desired minimum return on investment of 14%. The return on investment for Blaser Corporation is Round the percentage to one decimal place.
19.6%
Clydesdale Company has sales of $4,500,000, invested assets of $2,000,000, and operating expenses of $3,600,000. The company has established a minimum return on investment of 7%. Clydesdale Company's investment turnover is
2.25
The management of Indiana Corporation is considering the purchase of a new machine costing $400,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment: YearOperatingIncomeNet CashFlow1$100,000 $180,000 260,000 120,000 330,000 100,000 410,000 90,000 510,000 90,000 The average rate of return for this investment is
21%
The expected average rate of return for a proposed investment of $4,800,000 in a fixed asset, using straight-line depreciation, with a useful life of 20 years, no residual value, and an expected total net income of $10,560,000 over the 20 years, is
22%
The expected average rate of return for a proposed investment of $800,000 in a fixed asset with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total income of $360,000 for the 4 years is
22.5%
Heidi Company is considering the acquisition of a machine that costs $420,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual net cash inflow of $120,000, and annual operating income of $83,721. The estimated cash payback period for the machine is
3.5 years
The management of River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: YearOperatingIncomeNet CashFlow1$20,000 $95,000 220,000 95,000 320,000 95,000 420,000 95,000 520,000 95,000 The cash payback period for this investment is
4 years
The process by which management plans, evaluates, and controls investments in fixed assets is called capital investment analysis.
True
Discontinuing a product or segment is a huge decision that must be carefully analyzed. Which of the following would be a valid reason not to discontinue an operation?
Variable costs are less than revenues.
Waterfield Company is looking for a way to help its executive managers assess how its three divisions are meeting the company's goals and objectives for the performance of its purchasing department. Which of the following metrics might be used for this purpose?
the amount of time employees spend in training
Which of the following is a measure of a manager's performance working in a profit center?
the divisional income statements
The target cost is determined by taking
the expected selling price and subtracting the desired profit
Waterfield Company has three decentralized segments. Executive managers are looking for a way to measure the performance of each segment. Which of the following metrics might be used for this purpose?
the residual income of each segment
The target costing method assumes that
the selling price is set by the marketplace
Which of the following is an advantage of the cash payback method?
easy to use
Which of the following is not a method commonly used in applying the cost-plus approach to product pricing?
fixed cost method
Falcon Co. produces a single product. Its normal selling price is $28 per unit. The variable costs are $17 per unit. Fixed costs are $20,300 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,450 units with a special price of $20 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $2 per unit would be eliminated. If the order is accepted, the differential effect on profit would be a(n)
increase of $7,250
Which of the following methods of evaluating capital investment proposals uses the concept of present value to compute a rate of return?
internal rate of return
Inventory reduction is a(n) _____ principle.
lean
Which of the following is considered non-value-added lead time?
moving from process to process
Which of the following is best suited to providing timely and focused performance information?
nonfinancial information
All of the following should be considered in a make-or-buy decision except
whether the supplier will make a profit that would no longer belong to the business
Lara Technologies is considering a total cash outlay of $240,000 for the purchase of land, which it could lease for $46,300 per year. If alternative investments are available that yield a 18% return, the opportunity cost of the purchase of the land is
$43,200
Mighty Safe Fire Alarm is currently buying 58,000 motherboards from MotherBoard, Inc., at a price of $66 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $32 per unit; direct labor, $9 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $77,000. Which option should be selected and why?
make, $560,860 increase in profits
Waterfield Company is looking for a way to help its executive managers assess how the three divisions within the company are meeting the company's overall goals and objectives. The company is looking for a(n)
performance measurement system
Using the following partial table of present value of $1 at compound interest, the present value of $15,000 to be received 3 years hence with earnings at the rate of 6% a year is Year6%10%12%10.943 0.909 0.893 20.890 0.826 0.797 30.840 0.751 0.712 40.792 0.683 0.636
$12,600
Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $14.00 per unit. The unit cost for the business to make the part is $21.00, including fixed costs, and $10.00, not including fixed costs. If 33,075 units of the part are normally purchased during the year but could be manufactured using unused capacity, the amount of differential cost increase or decrease from making the part rather than purchasing it would be a
$132,300 cost decrease
Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, operating income amounting to $302,500, and a desired minimum return on investment of 15%. The residual income for Chicks Corporation is
$137,500
The condensed income statement for Hayden Corp. for the past year is as follows: ProductTUSales$680,000$320,000Costs: Variable costs $(540,000)$(220,000) Fixed costs(145,000)(40,000) Total costs$(685,000)$(260,000)Income (loss)$(5,000)$60,000 Management is considering the discontinuance of the manufacture and sale of Product T at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Product U. The amount of change in profit for the current year that will result from the discontinuance of Product T is a
$140,000 decrease
Stryker Industries received an offer from an exporter for 15,000 units of product at $17.50 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price$20Unit manufacturing costs: Variable11 Fixed1 The differential cost from the acceptance of the offer
$165,000
Keating Co. is considering disposing of equipment that cost $50,000 and has $40,000 of accumulated depreciation to date. Keating Co. can sell the equipment through a broker for $25,000 less a 5% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $48,750. Keating will incur repair, insurance, and property tax expenses estimated at $8,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential profit or loss from the sell alternative is a
$17,000 loss
Mallard Corporation uses the product cost method of product pricing. Below is cost information for the production and sale of 45,000 units of its sole product. Mallard desires a profit equal to a 12% return on invested assets of $800,000. Fixed factory overhead cost$82,000Fixed selling and administrative costs45,000Variable direct materials cost per unit5.50Variable direct labor cost per unit7.65Variable factory overhead cost per unit2.25Variable selling and administrative cost per unit0.90 The cost per unit for the production of the company's product is
$17.22
Magpie Corporation uses the total cost method of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% return on invested assets of $700,000. Fixed factory overhead cost$38,700Fixed selling and administrative costs7,500Variable direct materials cost per unit4.60Variable direct labor cost per unit1.88Variable factory overhead cost per unit1.13Variable selling and administrative cost per unit4.50 The dollar amount of desired profit from the production and sale of Magpie's product is
$175,000
Delaney Company is considering replacing equipment that originally cost $600,000 and has accumulated depreciation of $420,000 to date. A new machine will cost $790,000 and the old equipment can be sold for $8,000. The sunk cost in this situation is
$180,000
Delaney Company is considering replacing equipment that originally cost $600,000 and has accumulated depreciation of $420,000 to date. A new machine will cost $790,000. The sunk cost in this situation is
$180,000
ABC Corporation has three support departments with the following costs and cost drivers: Support DepartmentCostCost DriverGraphics Production$200,000number of copies madeAccounting500,000number of invoices processedPersonnel400,000number of employees ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows: MicroMacroSuperRevenues$700,000$850,000$650,000Direct operating expenses50,00070,000100,000Number of copies made20,00030,00050,000Number of invoices processed700800500Number of employees130145125 The support department allocation rate for Graphics Production is
$2.00
The management of River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: YearOperatingIncomeNet CashFlow1$20,000 $95,000 220,000 95,000 320,000 95,000 420,000 95,000 520,000 95,000 The net present value for this investment is
$20,140
ABC Corporation has three support departments with the following costs and cost drivers: Support DepartmentCostCost DriverGraphics Production$200,000number of copies madeAccounting500,000number of invoices processedPersonnel400,000number of employees ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows: MicroMacroSuperRevenues$700,000$850,000$650,000Direct operating expenses50,00070,000100,000Number of copies made20,00030,00050,000Number of invoices processed700800500Number of employees130145125 The operating income of the Super Division after all support department allocations will be
$200,000
Mallard Corporation uses the product cost method of product pricing. Below is cost information for the production and sale of 45,000 units of its sole product. Mallard desires a profit equal to a 12% return on invested assets of $800,000. Fixed factory overhead cost$82,000Fixed selling and administrative costs45,000Variable direct materials cost per unit5.50Variable direct labor cost per unit7.65Variable factory overhead cost per unit2.25Variable selling and administrative cost per unit0.90 The unit selling price for the company's product is
$21.25
Using the variable cost method, determine the selling price (rounded to the nearest dollar) for 30,000 units using the following data: Variable cost per unit$15Total fixed costs$90,000Desired profit$150,000
$23
Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $31 per pound and costs $26 per pound to produce. Product C would sell for $57 per pound and would require an additional cost of $23 per pound to produce. The differential cost of producing Product C is
$23 per pound
Grace Co. can further process Product B to produce Product C. Product B is currently selling for $60 per pound and costs $38 per pound to produce. Product C would sell for $95 per pound and would require an additional cost of $13 per pound to produce. The differential revenue of producing and selling Product C is
$35 per pound
ABC Corporation has three support departments with the following costs and cost drivers: Support DepartmentCostCost DriverGraphics Production$200,000number of copies madeAccounting500,000number of invoices processedPersonnel400,000number of employees ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows: MicroMacroSuperRevenues$700,000$850,000$650,000Direct operating expenses50,00070,000100,000Number of copies made20,00030,00050,000Number of invoices processed700800500Number of employees130145125 The support department cost that will be allocated to the Super Division is
$350,000
Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales 7 hours; and Wales 1 hour. The contribution margin per machine hour for Tales is
$4
ABC Corporation has three support departments with the following costs and cost drivers: Support DepartmentCostCost DriverGraphics Production$200,000number of copies madeAccounting500,000number of invoices processedPersonnel400,000number of employees ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows: MicroMacroSuperRevenues$700,000$850,000$650,000Direct operating expenses50,00070,000100,000Number of copies made20,00030,00050,000Number of invoices processed700800500Number of employees130145125 The support department cost that will be allocated to the Macro Division is
$405,000
Jacoby Company received an offer from an exporter for 22,100 units of product at $19 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price$23Unit manufacturing costs: Variable12 Fixed5 The differential revenue from the acceptance of the offer is
$419,900
Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates to only one customer's lean cell for the coming year. For the year, projected labor and overhead was $7,370,000 and materials costs were $28 per unit. Planned production included 4,000 hours to produce 27,500 motor drives. Actual production for August was 1,600 units, and motor drives shipped amounted to 1,380 units. Conversion costs are applied based on units of production From the foregoing information, determine the production costs transferred to Finished Goods during August.
$473,600
Lofty Airlines has a flight for which the regular ticket price is $200 and the variable costs per passenger are $50. Fixed costs assigned to each flight are $12,000. Each flight has a capacity of 125 seats, with an average of 95 seats sold at the regular price. To attract customers to the last 30 unsold seats, Lofty discounts the tickets by 50% for standby passengers. The contribution margin per standby passenger is
$50
Flyer Company sells a product in a competitive marketplace. Market analysis indicates that its product would probably sell at $48 per unit. Flyer management desires a 12.5% profit margin on sales. Flyer's current full cost for the product is $44 per unit. The desired profit per unit is
$6
The amount of the estimated average annual income for a proposed investment of $90,000 in a fixed asset, giving effect to depreciation (straight-line method), with a useful life of 4 years, no residual value, and an expected total income yield of $25,300, is
$6,325
The amount of the average investment for a proposed investment of $120,000 in a fixed asset with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total income of $21,600 for the 4 years is
$60,000
Mason Corporation had $1,018,000 in invested assets, sales of $1,294,000, operating income amounting to $223,000, and a desired minimum return on investment of 14%. The investment turnover for Mason Corporation is
1.27
Farris Company is considering a cash outlay of $500,000 for the purchase of land, which it could lease for $40,000 per year. If alternative investments are available that yield a 15% return, the opportunity cost of the purchase of the land is
$75,000
Clydesdale Company has sales of $4,500,000, invested assets of $2,000,000, and operating expenses of $3,600,000. The company has established a minimum return on investment of 7%. Clydesdale Company's residual income is
$760,000
Nighthawk Inc. is considering disposing of an old machine with a book value of $22,500 and an estimated remaining life of three years. The old machine can be sold for $6,250. A new machine with a purchase price of $68,750 is being considered a replacement. It will have a useful life of three years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $43,750 to $20,000 if the new machine is purchased. The three-year differential effect on profit from replacing the machine is a(n)
$8,750 increase
Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $21.35 per pound and costs $14.85 per pound to produce. Product D would sell for $41.05 per pound and would require an additional cost of $8.50 per pound to produce. The differential cost of producing Product D is
$8.50 per pound
Mason Corporation had $1,071,000 in invested assets, sales of $1,225,000, operating income amounting to $226,000, and a desired minimum return on investment of 12%. The residual income for Mason Corporation is
$97,480
Stryker Industries received an offer from an exporter for 15,000 units of product at $17.50 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price$20Unit manufacturing costs: Variable11 Fixed1 The amount of profit or loss from acceptance of the offer is a
$97,500 profit
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: YearOperatingIncomeNet CashFlow1$18,750 $93,750 218,750 93,750 318,750 93,750 418,750 93,750 518,750 93,750 The cash payback period for this investment is
4 years
Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales 7 hours; and Wales 1 hour. The product with the highest contribution margin per machine hour is
Wales
Starling Co. is considering disposing of a machine with a book value of $12,500 and estimated remaining life of five years. The old machine can be sold for $1,500. A new high-speed machine can be purchased at a cost of $25,000. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $26,000 to $23,500 if the new machine is purchased. The five-year differential effect on profit from replacing the machine is a(n)
decrease of $11,000