Accounting 285 – Final Exam – Fall 2004\
NOTE - THERE WILL BE MORE QUESTIONS FROM CHAPTERS 9 THAN APPEAR ON THIS FINAL. SEE OLD EXAM II FOR EXAMPLES.
Use the following information for the next three questions.
Robertson Company planned to produce 60,000 units during 2005. Robertson uses a standard cost system and allocates overhead based on units produced. At the planned level of production, it was estimated that fixed overhead would be $1.00 per unit and variable overhead would be $2.50 per unit. During the year, Robertson produced 63,000 units and had actual overhead costs of $230,000.
1. What is the amount of applied (standard) overhead?
A. $215,700
B. $220,500
C. $210,000
D. $230,000
2. What is Robertson’s controllable overhead variance?
A. $9,500 unfavorable
B. $3,000 favorable
C. $12,500 unfavorable
D. $20,000 unfavorable
3. What is Robertson’s overhead volume variance?
A. $9,500 unfavorable
B. $3,000 favorable
C. $12,500 unfavorable
D. $20,000 unfavorable
4. If a manager is evaluated based on ROI, and is managing a division which has attained a high ROI, the manager
A. may not want to invest in projects that have an ROI that is higher than the firm’s cost of capital, but lower than the division’s ROI.
B. should invest in projects that have an ROI lower than the firm’s cost of capital.
C. should only consider projects that have a negative NPV.
D. may prefer to invest in projects that have an ROI that is very close to the firm’s cost of capital.
5. On a balanced scorecard, the measure of the number of new patents developed through research and development would be an example of a measure in the:
A. learning and growth dimension
B. internal process dimension
C. the customer dimension
D. the financial dimension
Use the following information for the next five questions.
Slimy has the following standard cost to produce a king size party sub.
DM 4 lbs @ $3.00 per lb. = $12.00 per sub
DL 1/2 hour @ $8.00 per hour = $ 4.00 per sub
During December, Slimy produced 1,000 party subs, bought and used 4,100 pounds of meat at $3.20 per lb. and used 490 hours of labor at a total cost of $4,018.
6. What is the total standard direct cost of producing the 1,000 subs?
A. $16,000
B. $17,238
C. $16,220
D. $16,900
7. What is the direct material price variance?
A. $800 favorable
B. $820 unfavorable
C. $800 unfavorable
D. $820 favorable
8. What is the direct material usage variance?
A. $300 favorable
B. $300 unfavorable
C. $1,200 favorable
D. $320 unfavorable
9. What is the direct labor rate variance?
A. $98 favorable
B. $98 unfavorable
C. $100 favorable
D. $100 unfavorable
10. What is the direct labor efficiency variance?
A. $80 favorable
B. $80 unfavorable
C. $82 favorable
D. $82 unfavorable
11. Which of the following is not a reason that most managers support the use of attainable standards rather than ideal standards?
A. Attainable standards allow for an occasional equipment failure.
B. Attainable standards recognize that there may be some raw materials defects.
C. Attainable standards are more reflective of real life.
D. Attainable standards motivate employees to achieve perfection.
12. Which of the following is not a characteristic of a decentralized organization?
A. risk of costly duplication of activities
B. most decisions made at the highest level of management
C. provides excellent training for future top-level executives
D. able to respond quickly to changing circumstances
13. Goal congruence refers to the match between
A. locations of manufacturing plants and customers.
B. evaluations based on profits and those based on ROI.
C. number of units produced and number of units sold.
D. goals of the individual managers and those of the company as a whole.
14. Oakland Division of Major Company earned a net income of $520,000. Oakland is taxed at a rate of 30% and had interest expense of $85,000. What was Oakland’s NOPAT?
A. $605,000
B. $579,500
C. $545,500
D. $494,500
15. Economic value added (EVA) is:
A. essentially the same as residual income except that adjustments are made to income and assets to eliminate “accounting distortions” particularly as they relate to expensing research and development costs.
B. essentially the same as return on investment except that adjustments are made to income and assets to eliminate “accounting distortions” particularly as the relate to expensing research and development costs.
C. the use of many different measures to evaluate performance.
D. the same as cost of capital.
16. Gamma is one of the divisions of Beta Corporation. Gamma’s invested capital is $600,000. Last year, Gamma recorded income (NOPAT) of $90,000 on sales of $360,000. Gamma’s profit margin, turnover, and ROI are
A. 25%, .60, and 15%.
B. 50%, 1.50, and 15%.
C. 60%, .25, and 15%.
D. 50%, .30, and 60%.
17. Koppin’s Kreations’ cost of capital is 15%. The company has noninterest-bearing current liabilities of $50,000 and total assets of $250,000. Koppin’s NOPAT is $100,000. What is Koppin’s residual income?
A. $70,000
B. $100,000
C. $62,500
D. $130,000
18. If a project has a positive net present value, then:
A. the project is expected to have a internal rate of return greater than the cost of capital.
B. the project should be rejected.
C. the company’s return on investment will immediately increase if the project is accepted.
D. the project earns less that the cost of capital.
19. Activity Based Costing is better than plantwide overhead application because:
A. It charges products with all the activities that the products consume.
B. It provides better information for pricing decisions.
C. It helps to identify and eliminate non-value added activities
D. All of the above
20. Information in on three different costs appears below.
Activity Level
9,000 10,000 11,000
Cost A $12,000 $12,000 $12,000
Cost B 27,000 30,000 33,000
Cost C 28,000 30,000 32,000
By looking at the level of the costs at varying activity levels, determine for each cost if it is fixed, variable, or mixed. Select the response below which correctly identifies each cost.
Cost A Cost B Cost C
A. Mixed Variable Fixed
B. Fixed Mixed Mixed
C. Variable Mixed Mixed
D. Fixed Variable Mixed
21. Which of the following is not a product cost?
A. Direct labor
B. Direct material
C. Glue used to manufacture furniture
D. Commissions
22. Which of the following in an unavoidable cost in the decision of whether to close the K-Mart Store in Ames?
A. The cost of the store manager's salary
B. The cost of weekly advertising in the Ames Tribune
C. The remaining rent on the 10 year noncancelable lease
D. All the above costs are avoidable
Use the following for the next two questions:
ColdCup Enterprises makes and sells snow cones at several locations around a small city.
The information below represents its cost structure:
Selling price $2.50
Variable cost per unit: $0.50
Fixed costs per year: $100,000
23. Unit sales and dollar sales at the breakeven point are, respectively:
A. 40,000; $100,000
B. 50,000; $100,000
C. 40,000; $125,000
D. 50,000; $125,000
24. How many units must be sold to earn a profit before tax of $80,000 before tax?
A. 40,000
B. 50,000
C. 80,000
D. 90,000
25. Slow Turnover Computer Company has 100 200-megahertz computers in stock that it paid $1000 each for one year ago. The current selling price of these computers is $600. Slow could change the processors in these computers to 500-megahertz processors for $400 each and sell them for $1200. What should Slow do and why?
A. Sell them now for $600 to avoid putting any more money into this losing situation.
B. Update them because the $400 it is spending is less than the $600 in increased revenue.
C. Give them to charity since there will be a loss either way.
D. Continue to hold on to them and hope that slow computers become popular again.
26. Inman Manufacturing makes a single product - the Slinky. Information for 2004 appears below:
Sales in units: 200,000
Production in units: 250,000
Beginning inventory: 0
Variable production cost per unit: $2.00
Variable selling cost per unit: $0.30
Fixed production cost per year $100,000
Fixed selling and administrative cost per year $50,000
Selling price per unit $3.00
What is the absorption cost per unit of inventory?
A. $2.00
B. $2.30
C. $2.40
D. $2.50
27. Jerry Company estimates that its sales will be $50,000 in March; $60,000 in April; $70,000 in May; and $65,000 in June. Sales are collected 30% in the month of purchase, and 70% in the month following purchase. Cost of goods sold is 60% of sales, and desired ending inventory is 25% of the next month's cost of goods sold. Selling and administrative expenses consist of variable costs of 15% of sales and fixed costs (including depreciation of $2,000) of $5,000 per month. All selling and administrative expenses are paid in the month incurred. What are cash collections for May?
A. $21,000
B. $63,000
C. $53,000
D. $18,000
28. Wilhelm Enterprises planned to produce 90,000 pairs of boots in March, but the winter went on forever and demand was much stronger than expected so Wilhelm actually produced 104,000 pairs of boots in March. The boot factory is evaluated as a cost center. Labor is considered a variable cost and was included in the original budget at $540,000. Actual labor cost was $620,000. How did the plant manager do in regard to cost control for labor for the month (what would the flexible budget variance be for labor)?
A. $80,000 unfavorable
B. $4,000 favorable
C. $14,000 favorable
D. $14,000 unfavorable
29. Rocco Company, which uses a normal job order costing system, budgeted that 6,000 direct labor hours would be worked in 2000. The overhead application rate is $7.00 per direct labor hour. During the year, actual overhead cost was $44,000, and actual direct labor hours worked were 6,070. What is the amount of under or overapplied overhead at the end of the year?
A. $2,000 underapplied
B. $2,000 overapplied
C. $1,510 underapplied
D. $1,510 overapplied
30. A cost is $8.00 per unit at a volume of 10,000 units and $8.00 per unit at a volume of 12,000 units. The cost is:
A. fixed
B. variable
C. mixed
D. sunk
KEY - FINAL1 / B
2 / C
3 / B
4 / A
5 / A
6 / A
7 / B
8 / B
9 / B
10 / A
11 / D
12 / B
13 / D
14 / B
15 / A
16 / A
17 / A
18 / A
19 / D
20 / D
21 / D
22 / C
23 / D
24 / D
25 / B
26 / C
27 / B
28 / B
29 / C
30 / B