Sample Test 1 - Sample Problems I Questions 1,2 and 3 A...

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Unformatted text preview: Sample Problems I Questions 1,2 and 3 A firm sells two products, A and B, at unit price of $4 and $12. The sales of A and B are simultaneous and always in a ratio of 1 to 3. The overall contribution margin ratio is 40% and the breahieven volume is 6000 (total) units. Question 1 By incurring some extra shipping and sales commission costs, the company can boost volume. The incidence of these costs would be an extra $1.30 per unit of each unit of product A sold in excess of 1500 and $0.90 per Unit of each unit of B sold in excess of 4500 units per year. Calculate the number of A and B units to be sold to make a profit of $30000. é/mooA; 1200013 ‘0. 8000A; 2400013 0. 5000A; 1500013 d. 3000A; 900013 e. 6000A;18000B Question 2 Assume that the incidence of these costs would be an extra $1.30 per unit of each unit of product A sold in excess of 1800 and $0.90 per unit of each unit of B sold in excess of 5400 units per year. Calculate the number of A and B units to be sold to make a profit of $19800. 4000A; 1200013 any 3050A; 91503 5000A; 150003 d. 3000A; 90003 e. 6100A;18450B Question 3 Assume that the incidence of these costs would be an extra $1.30 per unit of each unit of product A sold in excess of 1000 and $0.90 per unit of each unit of B sold in excess of 3000 units per year. Calculate the number of A and B units to be sold to make a profit of $16000. a. 700049100033 @ 3000A; 900013 c. 5000A;15000}3 d. 8000A;120003 e. 6100A;18450B Question 4 Multiple Inc. produces and sells a single product. Assume that the cost and revenue structure is linear over a large range and constant from year to year. The before tax profit was $65,000 when the sales were 25,000 units, while the result was a ($20,000) loss when sates at a sales level of 8,000 units. What is the company’s break~even volume in units? a. 17500 units it). 20000 units fl 12000 units (1. 19550 units e. 22400 units Use the following information for Questions 5, 6 and 7 : The following information pertains to the XYZ Corporation: Finished Goods 19X9 Beginning Inventory 15,000 Production 25,000 Sales 20,000 Direct costs of manufacturing 100,000 finished goods units are: (rate is same for 19X9 as well as for beginning inventory in 19x9) Direct Materials $3 5 0,000 Direct Labor $700,000 (=100,000 hours) The total (fixed and variable) overhead appiication rate is $7.50 per direct labor hour based on norrnai production level of 100,000 hours, of which $3.50 per hour is variable. The same variable and fixed overhead application rates apply to finished goods produced in 19x9, as welt as the beginning inventory in 19X9. Assume that work—in—process inventory baiances are zero at the beginning and end of 19X9. Variable selling expenses are $2.00 per unit sold. Fixed selling and administrative costs are $44,000 per year. The seiling price is $30 per unit. (Assume that any under/over appiied fixed manufacuiring overhead is written off to cost of goods sold.) Question 5 Under direct costing, the amount of fixed manufacturing cost that is charged to the period in i9X9 is: a) $750,000 b $350,000 $400,000 $100,000 e) $800,000 Question 6 Under absorption costing, the under/over applied fixed manufacturing overhead in 19319 that is charged to the period is: Q $300,000 under applied b) $300,000 over applied c) $562,500 under applied d) $562,500 over appiied e) $262,500 under applied f) $320,000 over applied Question 7 Without preparing formai statements, which of the following statements apply to the difference between the absorption and direct costing net incomes for 19X9? @ Net income under absorption costing will be greater by $20,000 . Net income under absorption costing will be less by $20,000 0. Net income under direct costing wiil be greater by $15,000 d. Net income under direct costing wiil be lesser by $15,000 e. Net income under absorption costing will be greater by $35,000 f Net income under absorption costing will be less by $35,000 Question 8 Assume the same data pertaining to XYZ Corporation in Question 7 above except the following: (1) 22500 units were produced (2) Total overhead application rate in 19x9 is $4.25 per hour of which $1.25 per hour is variable (3) fixed overhead apptication rate related to the beginning inventory is the same as in question 7 above and (4) FIFO cost flow assumption is employed. Without preparing formal statements, which of the following statements appiy to the difference between the absorption and direct costing net incomes for 19X9? Net income under absorption costing will be greater by $127,500 Net income under absorption costing will be less by $127,500 Net income under direct costing will be greater by $75,000 Net income under direct costing will be lesser by $75,000 9-997?” e. Net income under direct costing will be greater by $7,5 00 X Net income under direct costing will be lesser by $7,500 g. Net income under absorption costing will be greater by $12,500 h. Net income under absorption costing Wiil be less by $12,500 Use the following information for Questions 9 and 10. The Texas Co. manufactures a single product. The company began operations in 19X9. The following are budgeted data regarding the operations of the company during 19x9. 8611ng price per unit $90 Variable manufacturing cost per unit $25 Denominator level activity 40,000 units Variable selling and administrative expense per unit $5 Fixed seiiing and administrative expense $50,000 Budgeted fixed manufacturing overhead (total) ‘ $800,000 All actuai costs and prices coincide with the budget. The company writes off yearly under/over applied fixed manufacturing overheads to Cost of goods sold. Question 9 Assuming 30000 units were produced during I9X9, the number of units that should have been sold during the year to generate an absorption costing net income of $50,000 is: a. 10000 units b. 15000 units 0. 40000 units d. 30000 units e. 20000 units Question 10 Assuming Texas Co. sold 15000 units during 19x9, the number of units that should have been produced during the year to generate absorption costing net income of $150,000 is: 25000 units 40000 units 15000 units 20000 units 37500 units 951.057?" Question 11 ABC Company has a machine with book value of $70,000 and a remaining life of four years. Its disposal value now is $7000 but it wouid be zero after four years. Variabie operating costs would be $120,000 per year. The company has an opportunity to acquire a new machine to replace its present machines. The new machine would cost $125,000, have a life of four years and a salvage value of $20,00 at the endof four years. Variable operating costs would be $90,000 per year. Ignore present~value calculations and income taxes. Considering the four years in total, what would be difference in profit before income taxes by acquiring the machine as opposed to retaining the present one? a. $22,000 increase e. $92,000 decrease b. $22,000 decrease f. $5,000 decrease c. $42,000 increase g. $5,000 increase d. $42,000 decrease _ h. $2,000 increase e. $92,000 increase i. $2,000 decrease Question 12 The Longhorn Co. has a plant that can produce three different products in any combination. We call these products A, B and C. Data for these products are given below. The company applies variabie indirect costs at $2 per machine hour, and fixed indirect costs at $5 per direct labor hour. The plant capacity is 42000 machine hours and 55000 direct labor hours (D.L. hours) per year and the overhead application rates are based on these capacities. Summary of Prices and Cost data i3roduct A Product 13 Product C Unit sales Price $212 $180 $270 Cost per {Emit Direct Materials _ $80 $39 $60 Direct Labor 5 hours $40 6 hours $48 10 hours $80 Variable Indirect 5 machine hrs $10 4 machine hrs $8 10 machine hrs $20 Fixed Indirect 5 DL hrs $25 6 DL hrs $30 10 DL hrs $50 Total Unit Costs $155 $125 $210 Gross Profit Margin $57 $55 $60 Not more than 5000 units of A, 3000 units of B and 1100 units of C can be sold per year. In order to maximize the company’s yearly profits, the optimal feasible production and sales mix is: (i.e., the number of units of ?roducts A, B and C) that must be produced and sold annually is: - a. 5000A, 3000B, 1100C b. 2500A,3000B,1100C 0. 5000A, 1100B, 1100C (3.. 3800A, 3000B, 1100C 6. 5000A, 3000B, 500C f. 5000A, 1500B, 1100C g. 5000A, 300033 Question 13 Homgren, Datar, Foster, Rajan, and Ittner (HFD) Question 11~37 (all parts) Question 14 HO #5 x/‘W FIJI» N I WV .‘ ...__...,. i’aamm f "5 PC?- ’ 7‘ ' LS F‘d‘. 5.51“ ‘5‘: T A: 3 1—1:“ Q 9. W t: \ 3' E?" i a W {WW 5' a 9‘ w X ,6; 2m"? mm? M ’7’ 7? ,— L ,9 I , L r“ " [min A 47? X6. *»"~ f4,00c.9>r “Wm; H imam " Mo, mam FC‘L I; '— F53”; / r: g/W....’+ 1 3,5“ 1 1 i I 3 ) “ammumwWm_._._w,w'_mw__m C-Nvivinm j 2"" 3‘ 1,5“ i/ 2? PC + dog", 005.; f .r . 5f (’5 X 1: fife”), <30 5“ 6;: Ajtvx. NA“ M J. mynmm ~— f2,me;> was; : (pd? ma.) 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This note was uploaded on 03/03/2011 for the course ACC 359 taught by Professor Atiase during the Spring '07 term at University of Texas at Austin.

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Sample Test 1 - Sample Problems I Questions 1,2 and 3 A...

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