Acct 285 Final Exam Review Questions
1. A cost is $3 per unit when there are 1000 units and is $1 per unit when there are 3000 units. Is it a variable, fixed, or a mixed cost?
2. For 2009, the company’s budgeted fixed overhead cost is $40000 and its budgeted variable overhead cost is $30000. The estimated direct labor hours for the year is 2000 hours. What is the overhead application rate for the year?
3. A mixed cost is 16000 at a volume of 2000 units. At this volume of production, the fixed cost is $5 per unit. What is the total cost when the volume is 3000 units?
4. Tricia Corporation is a single product firm that sells its product for $4.00 per unit. Variable expense per unit at Tricia is $2.00. Tricia expects fixed expenses to total $18,800 for next year.
5. Kiefer Company, which has only one product, has provided the following data concerning its most recent month of operations:
The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.
What is the net operating income for the month under variable costing?
6. Betz Company's sales budget shows the following projections for next year:
The product is selling for $3 per unit. Assume that sales are 70% collected in the quarter of the sale and 30% in the quarter after the sale. What will collections be for April?
7. The following labor standards have been established for a particular product:
What is the labor rate variance for the month?
8. The following selected data pertain to Beck Co.'s Beam Division for last year:
Sales / $2,180,000Variable expenses / $660,000
Traceable fixed expenses / $880,000
Average operating assets / $443,100
Minimum required rate of return / 15%
Note: the traceable fixed expenses do not include any interest expense.
How much is the residual income?
9. Division P of the Nyers Company makes a part that can either be sold to outside customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows:
Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. Consider each part below independently.
If outside customers demand 80,000 units and if, by selling to Division Q, Division P could avoid $4 per unit in variable selling expense, then according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?
10. The following selected data pertain to Beck Co.'s Beam Division for last year:
Sales / $2,070,000Variable expenses / $700,000
Traceable fixed expenses / $790,000
Average operating assets / $570,000
Minimum required rate of return / 25%
Note: the traceable fixed expenses do not include any interest expense.
How much is the return on the investment?
11. KPN Corporation makes two products: A and B. A takes 20 minutes to make and has a contribution margin of $40 per unit. B takes 30 minutes to make and has a contribution margin of $50 per unit. There only 3800 minutes available. Demand for each product is 100 units. How many each of the product should be made?
12. Boney Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs $53 to buy from farmers and $18 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $25 or processed further for $18 to make the end product industrial fiber that is sold for $39. The beet juice can be sold as is for $32 or processed further for $28 to make the end product refined sugar that is sold for $79.
How much profit (loss) does the company make by processing one batch of sugar beets into the end products industrial fiber and refined sugar?
13. Plains Corporation is considering a special order of 5000 units. Its normal selling price is $8 per unit, but the special order’s price is $6 per unit. Instead of $4 of variable cost, the special order will only have $3 per unit of variable cost. The total fixed cost will not be impacted. How will income change if Plains Corporation accepts the special order?
14. The following standard costs pertain to a component part manufactured by Bor Company:
Direct materials / $ 4Direct labor / 13
Manufacturing overhead / 40
Standard cost per unit / $57
An outside supplier has offered to supply all of the parts needed by Bor Company for $50 each. The 30% of the manufacturing overhead cost that is fixed would be unaffected by this decision. Should they make or buy the component?
15. Chee Company has gathered the following data on a proposed investment project:
Investment required in equipment $226,800
Annual cash inflows $49,000
Salvage value $0
Life of the investment 8 years
Required rate of return 6%
What is the pay back period for this investment project?
16. The management of Plotnik Corporation is investigating purchasing equipment that would increase sales revenues by $489,000 per year and cash operating expenses by $166,000 per year. The equipment would cost $414,000 and have a 9 year life with no salvage value. What is the simple rate of return for this equipment?
17. An equipment with an initial investment of $42,000 will generate a cash flow of 10,000 for 8 years. What is the internal rate of return for the project?
18. Chee Company has gathered the following data on a proposed investment project:
Investment required in equipment / $233,800Annual cash inflows / $56,000
Salvage value / $0
Life of the investment / 11 years
Required rate of return / 7%
What is the net present value of the project?