A306 Final Review

Cycling Inc. has one factory where it produces two segments, custom and non-custom cycling shoes. Total fixed costs for January 2022 were $100,000, of which $40,000 is traceable. Custom shoes account for 75% of fixed costs. How much common fixed costs can be eliminated by dropping the custom segment (yet continuing to produce non-custom shoes?

$0

Hodge Corporation had a $1000 favorable spending variance last quarter. During the past quarter, its supplier unexpectedly raised prices, which caused in an unfavorable price variance of $600. What was the material quantity variance for the past quarter?

$1,600 F

Vermont Corporation manufactures and sells water bottles. October will be its first month of operations and managers are trying to decide on a selling price. Fixed costs for October are projected to be $20,000 and unit variable costs are $2. If they would like to breakeven by selling 2,500 units, what should they decide on selling price?

$10

Given the following regression output table which estimates total costs based on number of shirts produced, what is the estimated total cost of the company producing 12,000 shirts, and based on the table values given, is this equation reliable? Coefficient P-Value Intercept 34,567 0.00145 Shirts Produced 5.6314 0.02487 R-Squared 0.97314

$102,143.80, yes

Indiana Corporation has the following maintenance costs (classified as mixed) and has provided the following data from 2022": Month Hours of Maintenance Total Cost September 400 $3,500 October 350 $4,000 November 600 $7,000 December 750 $8,500 Using the high-low method, what is the unit variable cost?

$11.25

Colorado Red Rocks Music Venue had a margin of safety percentage of 22% after its summer concert series. What were breakeven ticket sales if actual sales were $150,000?

$117,000

Direct Materials: $45,000 Indirect Materials(all fixed): $8,000 Direct Labor(all variable): $64,000 Indirect Labor(50% variable): $30,000 Net Operating Income: $91,000 Sales: $258,000 Other manufacturing overhead(all fixed): $15,000 Selling & Admin Expense(all fixed): $5,000 What are the total conversion costs?

$117,000

Georgia uses job-order costing and produces fan apparel consisting of shirts, sweatshirts and jackets. Overhead is allocated based on 30% of Direct Labor cost. The following data is from November 2022 where there was $0 in Finished Goods Inventory as of November 1, 2022. All jobs were completed as of November 30, 2022, and Jobs 25 and 45 were completed and delivered to the customers. Job Number Hours of Maintenance Total Cost #20-shirts $2,800 $770 #25-sweatshirts $3,000 $1,200 #45-jackets $5,500 $1,000 What is COGS for November 2022?

$12,780

Florida Co. uses ABC (Activity Based Costing) and makes manv products. Florida uses two predetermined overhead rates based on department (Department A and B). A Department's rate is based on machine hours while B Department's rate is based on direct labor hours. On January 1, 2022, Florida provided the following estimates for 2022: DEPT A DEPT B Direct labor hours 10000 14,000 Machine hours 50000 4,000 Fixed MOH Cost $350,000 $84,000 Variable MOH per/DLH $1.40 Variable MOH per/MH $1.75 Florida started a job on April 1, 2022 and finished it April 15, 2022 with the following job cost record values: DEPT A DEPT B Direct labor hours 35 75 Machine hours 60 24 Direct materials cost $560 $450 Direct labor cost $790 $990 If the completed job contained 40 units produced and Florida establishes selling price based on a 30% markup percentage, how much should it charge per unit? (Round to the nearest cent)

$125.78

Sherman Company quickly switched operations in 2022 as a response to market conditions at a cost of $300,000. The following net cash flows are expected: 2023: $150,000 2024: $100,000 2025: $75,000 The project will be discontinued after 2025. The cost of capital is 12% Sherman is expecting annual intangible benefits in addition to cash flows. How much would these intangible benefits have to increase cash flows each year for the project to be worth it?

$13,726

Jess Sims Co. has two departments: Comma and Exclamation. Comma's segment margin is $150,000 and Exclamation's segment margin is $201,000. Jess Sims' net operating income is $218,900. What is the amount of common fixed costs not traceable to either Comma or Exclamation, and, based on this information alone, should Jess Sims drop either department?

$132,100 and keep both departments

Direct Materials: $45,000 Indirect Materials(all fixed): $8,000 Direct Labor(all variable): $64,000 Indirect Labor(50% variable): $30,000 Net Operating Income: $91,000 Sales: $258,000 Other manufacturing overhead(all fixed): $15,000 Selling & Admin Expense(all fixed): $5,000 What is the Contribution Margin?

$134,000

Strength Inc. is considering a project with an initial investment of $45,000 that will generate annual net cash flows of $12,000 for the next 6 years. Cost of capital is 10%. What is the Internal Rate of Return- (IRR), and based off only that value, should Strength accept the project?

Greater than 15%, accept

Which of the following statements are correct related to Direct Materials? I. The purchasing manager is responsible for quantity variances. II. The cost of materials and equipment issues can cause quantity variances. III. The production manager, who is involved in worker training, is responsible for quantity variances.

III is correct

Which of the following is true regarding contribution margin?

If given variable costs and the contribution margin, total revenue can be calculated

Rawles Company makes all sales on account. 35% of sales are collected in the month of sale, 60% in the following month, and the remaining 5% is collected two months after the sale. Bad debts can be ignored. November 2019 sales were $100,000 and December 2019 sales were $250,000. Budgeted sales for the first quarter of 2020 are: Budgeted Sales January 2020 $175,000 February 2020 $200,000 March 2020 $220,000 What is the accounts receivable balance on March 30, 2020?$

$153,000

Front of the Pack Company is considering making a new product. To do so, it will purchase a machine for $100,000 which will be depreciated on a straight-line basis and at the end of 5 years, be sold for its salvage value, $10,000. Cash revenues and cash operating expenses will increase $100,000 and $25,000, respectively. Cost of capital is 15%. What is the project's NPV?

$156,384

Direct Materials: $45,000 Indirect Materials(all fixed): $8,000 Direct Labor(all variable): $64,000 Indirect Labor(50% variable): $30,000 Net Operating Income: $91,000 Sales: $258,000 Other manufacturing overhead(all fixed): $15,000 Selling & Admin Expense(all fixed): $5,000 What is the Cost of Goods Sold?

$162,000

Rawles Company makes all sales on account. 35% of sales are collected in the month of sale, 60% in the following month, and the remaining 5% is collected two months after the sale. Bad debts can be ignored. November 2019 sales were $100,000 and December 2019 sales were $250,000. Budgeted sales for the first quarter of 2020 are: Budgeted Sales January 2020 $175,000 February 2020 $200,000 March 2020 $220,000 What are expected cash collections in February?

$187,500

Prime costs for Maine Co. in 2021 totaled $367,000. Direct material is 60% of prime costs and manufacturing overhead is $53,000. What are total conversion costs?

$199,800

Jacobs Company has the following information: Budgeted selling price per unit $45 Actual selling price per unit $47 Flex budget sales dollars $45,000. What is the sales price variance?

$2,000 Favorable

The Master Budget for Slope Co. in 2022 had Fixed Selling and Administrative Costs budgeted for $12,000. Slope's Actual Budget incurred $15,000 in Fixed Period Costs and $9,000 in Fixed Manufacturing Overhead (MOH) expenses. The Flexible Budget for 2022 assumed Fixed MOH amounted to $10,000. What is the Fixed Cost Spending Variance and is it favorable or unfavora

$2,000 U

Indiana Corporation has the following maintenance costs (classified as mixed) and has provided the following data from 2022": Month Hours of Maintenance Total Cost September 400 $3,500 October 350 $4,000 November 600 $7,000 December 750 $8,500 Predict January total costs if they are planning to produce 250 units.

$2,875

Leaderboard Corporation has received a special order offering to purchase all of its available/ idle capacity, 500 units. Unit product costs include direct labor of $6, direct materials of $4, and manufacturing overhead (MOH) of $10. ½ of the MOH is fixed costs. A selling cost will be incurred of $7,500 if the order is accepted. What is the minimum acceptable selling price Leaderboard will entertain?

$20

Intercept Inc. sells graphing calculators. In late 2021, the Managerial Accounting team predicted in 2022 the company would sell 10,000 units at a price of $80 each, incurring $35 unit variable cost and $5 unit fixed cost. On 12/31/2022, the team reported Intercept sold 9,500 units at $85 per unit with a unit variable cost of $33 and $4.50 unit fixed cost. What is the company's Sales Volume Variance and is it Favorable or Unfavorable?

$22,500 U

Franklin Company has the following assumptions for next year's budget: 1. 10,000 units will be sold at a price of $20 per unit. 2. Selling price is 125% of the Direct Materials and Overhead cost of a unit. 4. Direct Labor requires 1 hour per 20 units at a wage rate of $8 an hour. 5. Period expenses (including $1,500 depreciation on office equipment) will be 4% of revenue. What is the budgeted Net Income before taxes?

$28,000

Pyle Production Company is considering increasing direct labor costs by 12.5% which will allow them to increase monthly sales from 1,000 units to 1,250 units. Each unit is sold for $25. Direct labor costs are currently $8 per unit. By how much will the monthly contribution margin change?

$3,000 increase

Briscoe Company produces clear boxes to store and display basketballs. Briscoe's supply cost formula is $12.50 per box plus monthly fixed costs of $12,000. In August, the company planned an activity level of 1400 boxes, but actual number of boxes produced was 1460. The actual cost of supplies for August was $33,450 including fixed costs of $12,500. The supplies cost spending variance for August is closest to:

$3,200 Favorable

Wilpers Co. is considering a capital project which has uncertainty regarding the discount rate. The accountants have determined the following table of scenarios: Scenario Discount Rate NPV Probability Case I 6% $100,000 5% Case II 10% $75,000 20% Case III 12% $40,000 50% Case IV 15% ($27,000) ??? Based on the table above, what is the expected value for the project?

$33,250

Louisiana Company has monthly fixed costs of $5,000 and variable costs of $10 per item produced. For every 5 items produced, there is a $40 fee for storage. If from one month to the next, production increases by 25 items, what is the increase in costs?

$450

Oregon Company uses a plantwide predetermined overhead rate using an activity base of direct labor hours. In December 2020, Oregon predicted the company would use 240 direct labor hours, 650 machine hours, incur fixed manufacturing overhead of $450,000 and incur variable manufacturing overhead of $120 per direct labor hour. During 2021, Oregon incurred actual manufacturing overhead cost of $475,000 with 250 direct labor hours and 600 machine hours. Based on the information above, what is the correct amount of manufacturing overhead cost applied to all jobs in 2021?

$498,750

McNutt Inc. had the following data for 2020: Master Budget Actual Results Revenue $125,000 $120,000 Variable Costs $20,000 $22,000 Contribution Margin $105,000 $98,000 Actual fixed costs are $12,000 and fixed cost spending variance is $2,000 F. What is the total profit variance?

$5,000 Unfavorable

A young entrepreneur starts a business and sells one product. It has a contribution margin ratio of 85% and each product sells for $50. If their sales increase by 12 units, how much does net operating income change?

$510

For November and December, Sample Gates Corporation has budgeted direct materials cash outflows of $1,000 and $1,200, respectively. Cash collections from sales are $20,000 (Nov) and $22,000 (Dec). Variable MOH (in cash) will be $500 (Nov) and $700 (Dec). Fixed expenses are estimated to be $10,000 cash each month. November cash beginning balance is $5,400 and direct labor expense for the month will be $2,000. The capital budget includes the purchase of a new machine in December for $17,000 cash. Assume there are no financing amounts budgeted on the November cash budget. If the budget shows a cash deficiency in December of $1,000, what is the budgeted December labor cost?

$6,000

Last month, Kelley Company budgeted to make 1,500 units and use 300 hours of labor. The company budgets to pay its employees $12 per labor hour. Kelley actually made 1,000 units and used 250 hours of labor, and paid its employees $3,000 for the 250 hours of labor. What is Kelley's labor efficiency variance?

$600 Unfavorable

California Co. makes multiple items in its factory. During 2022 it reported the following costs: Raw Materials Purchased: $240,000 Sales Commissions paid to Marketing team: $560,000 Fees paid to electronic billing company: $45,000 Insurance on factory building: $32,000 Salary of production line employee: $60,000 Depreciation on printers in administrative office: $3,000 What is the total amount of indirect costs?

$640,000

Alaska Company had a net operating income of $50,000 in 2021. The contribution margin was 65% of revenue, with total revenue being $100,000. Variable costs per unit were $5. What was the unit contribution margin?

$9.29

Peloton Inc. manufactures exercise bikes. As of now, Peloton is buying 35,000 components each year from an external manufacturer costing $26 per unit. Peloton is also spending $28,000 each year in expenses to communicate with this manufacturer. Peloton Inc. is considering sourcing their own components by manufacturing instead as they have the space and machinery to do so. Direct materials, direct labor, and variable manufacturing overhead are estimated to be $28 to produce each unit. Peloton would no longer need to communicate with this manufacturer if they made the component. How much money would Peloton save (or lose) if they decide to make the component?

($42,000)

A customer has requested that Endurance Corporation fill a special order for 2,000 units for $35.00 a unit. While the product would be modified slightly for the special order, the normal unit product cost is $21: Direct Materials: $6 Direct Labor: $4 Variable Manufacturing Overhead: $3 Fixed Manufacturing Overhead: $8 Direct labor is a variable cost. The special order would have no efiet on the snipails total fixed manufacturing overhead costs. The customer would like modifications made to the product that would increase the variable costs by $1.20 per unit and that would require an investment of $15,000 in special printers that would have no salvage value. The company has maximum capacity of producing 30,000 units per year and there is a current demand for all 30,000 units. The company currently sells 30,000 units per year for $31.00 per unit. If the special order is accepted, the company's overall net operating income would increase (decrease) by:

($9,400)

Adrian Williams Corporation is considering updating its equipment, so that each machine will only need two workers instead of three. Equipment costing $40,000 would have to be purchased, with a useful life of 10 years and a $5,000 salvage value. Old equipment would then be sold for $4,000, the salvage value. Total wage expense saved each year is estimated to be $10,000. What is the simple rate of return (SRR) and should the company accept the project? Williams requires an SR of 15% to accept a project.

18.06%, yes

Which of the following is true?

A special order should always be accepted if incremental benefits or revenue is greater incremental costs.

At Ballantine Corporation, each unit requires 4 yards of raw materials. Raw materials inventory on 1/1/2020 is 200 yards. Inventory on hand at the end of the month should be 20% of the next month's (crease production requirement. Raw materials cost $4 per yard. The production budget lists amounts for January and February of 500 units and 750 units, respectively. How many yards of raw materials need to be purchased in January?

2,400 yards

Precor Co. produces and sells two types of treadmills: Basic and Deluxe. The demand for treadmills has been increasing since March 2020. Precor has the following limited resource due to a lack of skilled laborers: Available Direct Labor Hours: 1000 Total Fixed Costs: $35,000 The table below shows information for the past month: Basic Deluxe CR Sales (in units) 3,200 800 Selling price/ unit $1500 $2400 Variable cost/ unit $900 $1500 Contribution Margin/unit $600 $900 Units per Direct Labor Hour 4.0 2.5 How many basic and deluxe treadmills should be produced this month given the limited resource?

3200 basic and 500 deluxe

Utah Corporation manufactures chalkboards. It is considered rebranding as a dry erase board company. To do so, fixed expenses would increase by $10,000 while variable costs would be $7.50 per unit. Currently, net operating income is $15,000, and Utah decides to make that the target profit in the first year of operations as a new company. Utah Corporation's fixed expenses are currently $12,000. How many units would have to be sold at a price of $17.50?

3700

Ally Love Co. is considering a $2,000,000 project tO upgrade their technology. With the upgrade, Love anticipates employee productivity to increase, resulting in 4,500 additional billable hours per year. Love's employees bill clients at a rate of $80 per hour. Love believes the technology upgrade will A improve productivity at this rate for the next 6 years, and the new technology will be depreciated evenly over each of those 6 years with expected $O salvage value. Love's discount factor is 8.5% on capital projects and the company will need to spend $1,500 each year for maintenance of the new technology. Ignoring taxes, what is the approximate payback period for the project?

5.58 years

Which of the following is not a benefit of Vertical Integration?

A company can recognize economies of scale through purchasing items from a mass producing company.

The budget for Read Company to make I unit includes direct materials of 4 yards at $2.75 per yard. 75 units are expected to be made. 100 units were actually made. Actual direct materials to make a unit is 4 yards at $3 per yard. Which statement below is true?

All of the above

Coach Corporation is deciding between two projects: Project A has an initial investment of $40,000, Present Value of Cash Inflows of $53,000, Net Present Value of $13,000 and expected length of project 5 years. Project B has an initial investment of $12,000, Present Value of Cash Inflows of $16,000, Net Present Value of $4,000 and expected length of project 4.5 years. Which project should Coach choose?

B: is has a profitability index of 1.333, while project A has a profitability index of 1.325

Which of the following is correct regarding budgeting?

Conflict in creating a budget comes from an inherent tension between planning and control.

_________ involves gathering feedback to ensure plans are being followed and to develop reports.

Controlling

Nordic Track Inc. plans to discontinue its heart rate monitor segment. Last year, this segment generated a contribution margin of $45,000 and incurred $50,000 in fixed costs. Discontinuing the segment will allow the company to avoid half of the fixed costs. What effect is expected to occur to the company's overall profit?

Decrease $20,000

Which of the following is NOT a possible reason there is a Fixed Cost Spending Variance?

Labor strike resulted in higher hourly Direct Labor wages

Alex Co. is deciding between sourcing their own widgets or buying the widgets externally from Cody Inc. If the company decides to purchase from Cody, Alex will use the factory space for manufacturing. other products and fixed Tasty Costs will still be incurred. However, the specific factory equipment associated with making these widgets was a special purchase for this widget specifically and cannot be used for any other product. This equipment has no resale value. The table below displays revenue and cost information for each: Source Internally Purchase Revenues $150,000 $150,000 Purchase price/unit $200 Materials/Unit $140 Total annual depreciation on factory equipment $5000 ??? Fixed factory manager salary $12,000 $22,000 Factory overhead $18,000 ??? What are the relevant benefits and costs associated with sourcing the widgets internally?

Materials/unit and transportation

Which of the following is correct?

Net present value uses future projected cash flows and assigns them an amount that it is worth today.

Portland Corporation can sell 500 more units next year by purchasing an ad campaign for $2,500. Currently, total contribution margin is $4,000 and they sell 1,000 units. Should Portland purchase the ad campaign?

No, the contribution margin will increase by $2,000 which does not cover the cost of the campaign

What is the correct order of events in the start of the Variance Analysis cycle?

Prepare Performance Report, Analyze Variances, Note Satisfactory and Unsatisfactory Results and Raise Questions

A single specialized machine is a constrained resource and is used to produce three products (A, B and C) at Hannah Frankson Corporation. Data concerning those products appear below: Product A Product B Product C Selling price/unit $105 $530 $560 Variable cost/unit $105 $530 $560 Minutes on the constraint required to produce each unit $105 $530 $560 Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized.

Product C, A,B

Which of the following is NOT one of the ways price and quantity are determined for the Revenue Budget?

Projected raw material and direct labor costs

What is the correct order of events in creating the Cash Budget in a Master Budget?

Record Beginning Cash Balance, Ask and Answer Questions, Calculate Cash Inflows and Outflows, Calculate Excess (Deficiency), Calculate Financing Needs (if applicable) and Determine Ending Cash Balance

Which of the following is correct with an increase in production?

Rent expense will be less per unit produced

What is one major drawback in using standard cost variance analysis reports and what is another tool to help reduce this drawback?

Reports are often delayed and outdated so use non-financial measures such as customer satisfaction surveys and process control charts

Which of the following is the correct order for the first five budgets in creating a Master Budget?

Revenue, Production, Direct Materials/ Labor/ MOH

Which of the following is the only term listed which is not a synonym for the others?

Risk free rate

Margin of safety is a measure of ______ and how is it calculated?

Risk, Actual (or budgeted) sales - Breakeven sales

What step in the AMPS Process is demonstrated when accountants give a presentation to the CFO recommending selecting one capital budget project over another?

S

New Mexico Corporation is deciding whether or not to buy a new factory, costing $250,000, which will allow them to expand operations by 50%. Which of the following is/are relevant to making the decision of whether or not to expand?

The cost of hiring new supervisors & If the factory isn't purchased, the $250,000 can be used for a marketing campaign

Which of the characteristics is more descriptive of managerial accounting versus financial accounting?

The level of detail of information represents a segment of the organization.

Which variances require the master budget in order to calculate?

Total profit variance and sales volume variance