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MS_E240Final_2009Su - MS&E140/240 Summer 2009 Final...

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Unformatted text preview: MS&E140/240 Summer 2009 Final Exam 1/ Name_____\F/_ul§____ 150 Points ( Questions 1-35 at 4 points each and question 36 at 10 points) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) As the cost—driver activity level increases within the relevant range . . 1) D A) total fixed costs increase - B) variable costs per unit decrease C) total variable costs decrease D) fixed costs per unit decrease 2) Suppose the Holiday Inn Hotel has annual fixed costs applicable to its rooms of $1.2 million for its 2) C, BOO—room hotel, average daily room rents of $50, and average variable costs of $10 for each room rented. It operates 365 days per year. The percent of occupancy for the year needed to breakeven is ___..- __\_______,_._. r. 3 obi) ., _ I. A) 25% , B) 3.65% C) 27.4% D) 100% i go 3) a 132%— 27 vii-5a R 365 3) If the sales price per unit is $34, the unit variable cost is $19, and the break-even point is 12,000 3) A” units, then the total fixed costs are . PC 1 \I 060 " , A) $180,000 B) $530,000 z—q’q‘ ‘ a . 11,000 at lb 1 I 5”? 00‘ C) $340,000 D) $190,000 $3: ‘ V c. 4) If the sales price per unit is $100, the total fixed costs are $75,000, and the break—even volume in 4) C, dollar sales is $250,000, then the variable cost per unit is . '7 5,0, 00%;. _ 5 A) $100 B) $75,000 C) $70 D) $30 .00 ' 3 SD M 3 7‘” ' , 760031; 150,000" 307° 5) Walnut Corporation sells desks at $480 per desk. The costs associated with each desk are as 5) I ) follows: 5 ? 1.) 3,0 Direct materials $195 Direct labor .. 126 31 L Variable factory overhead 51 (L m IOX Total fixed costs for the period are $456,840. The contribution margin per desk is . A) $126 B) $51 C) $195 D) $108 6) Cherry Wood Company sells desks at $480 per desk. The costs associated with each desk are as 6) Q follows: 5 p ‘I 70 Direct materials $195 - Direct labor 126 E 371 2 3 ,5 2 Variable factory overhead 51 0. M '0? Total fixed costs for the period are $456,840. The contribution—margin ratio is . A) 77.5% B) 40.6% C) 22.5% D) 29.0% 7) will decrease a company's break—even point. 7) C— A) Decreasing contribution margin per unit B) Increasing variable cost per unit C) Reducing its total fixed costs D) Decreasing the selling price per unit 8) Assume the following cost information for Marie Company: 8) A Sellingprice perunit $144) 610" Fa H's“ N 1" Variable costs per unit $80 90,000 A. Hombb ’ r, l375VM'fi Total fixed costs $80,000 W . Tax rate 40% L" 6M TM”), ‘M o, 0 00 of sales dollars is required to earn an after-tax net income of $24,000. 1 ( I "07.) 1 V0, 900 A) $270,000 ' B) $216,000 C) $315,000 D) $252,000 9) Assuming a constant mix of 3 units of Zip for every 1 unit of Zap, a selling price of $21.60 for Zip 9) 0/ and $28.80 for Zap, variable costs per unit of $14.40 for Zip and $16.80 for Zap, and total fixed costs of $53,760, the break- even point in units would be . ZN? 1 A9 A) 1,200 units of Zip and 400 units of Zap ’39 auto 2 W» B) 1,600 units of Zip and 4,800 units of Zap V b N. w w. C) 4,800 units onip and 1,600 units of Zap if: Zza 42.00 D) 40,320umts onlp and 13,440umtsonap elm/mm gfi. X) 2 7’3.“ . 60 FL. 00 10) Kym Manufacturing provided the following information for last month: F C 53 7 L V 10) CL # z/LW (3:41:00 221° Sales $12,000 x 1— : 2““) Urn/m */ 3. (ob Variable costs 4,000 X ‘L z 3'. ° “0 [6 a” ‘3’ I 1, b 00 2MP Fixed costs 1 ,000 323... Operating income £75000 (5‘ cu D If sales double next month, what is the projected operating income? - A) $18,000 B) $19,000 C) $15,000 D) $14,000 11) Period costs: 11) A A) include the cost of selling, delivering, and after—sales support for customers B) should be treated as an indirect cost rather than as a direct manufacturing cost C) include only fixed costs D) seldom influence financial success or failure 12) The following information was extracted from the accounting records of Petunia Manufacturing 12) D Company: Direct materials purchased $95,000 Direct materials used 76,000 791°C“) 0 Direct manufacturing labor costs 10,000 ‘ 0' ° ° ‘7 , lib) 00 Indirect manufacturing labor costs 12,000 ‘1‘ 01:17 Sales salaries 33,000 2 1 o o O Other factory expenses 22,000 ‘ Selling and administrative expenses 40,000 The cost of goods manufactured is . A) $128,000 B) $154,000 C) $162,000 D) $120,000 13) The following information was extracted from the accounting records of Lowe Company: 13) A Direct materials purchased $80,000 1 2.005 Direct materials used 76,000 t 09 a U 0 Direct manufacturing labor costs 10,000 Indirect manufacturing labor costs 12,000 (1460 0 Sales salaries 14,000 32‘“, b Other factory expenses 22,000 TIT-#1 ) Sellmg and admimstrative expenses 20,000 ’ 52.060 wa tn)" ,— 0‘ as The finished goods inventory was $0 at the beginning of the period and $30,000 at the end of the q 0,000 period. The cost of goods sold is A) 90,000 B) $1—4—7,0_00—' C) $139,000 D) $113,000 14) Pinto Company has the following data: 7 ’ ‘ , 14) D. M Budgeted Sales ‘ ‘ January $108,000 ‘53:; 3:333 mo m m April 120,000 and the inventory at the end of December was $19,000. ’ The average markup on products is 40%, is the desired ending ,er W920 ,. C) “3:200 D) None of these answers ls correct 15) Diamond Corporah'on has the following sales budget for the last six months of 20X0: 15) 6 July $100,000 October $90,000 August 80,000 November 100,000 _ September 110,000 December 94,000 our 0.0. “)0 x 4‘2) $33-01) sap “mantras?“ 3‘ 31.3"") mt- ?oymox 870,?— LHOO 65% of sales collected in month of sale D 25% of sales collected in month following sale Q 2“N 0 8% of sales collected in second month following sale 2% of sales are uncollectible Historically, the cash collection of sales has been as follows: is the expected cash collection in October. A) $99,500 B) $92,400 C) $58,500 D) None of these answers is correct 16) Taurus Company has the following data: Month Budgeted Sales '1 ‘ January $108,000 x 002,1 4"”00' February 132,000 x 60700179, 200x307,» 25160 March . 144, 000 -< 607, 4.957” x36Z12fi2, 3 7’ 7 6 0 April _ 120,000 _ ”may GVVQO The gross profit rate is 40% and the inventory at the end of December was $19, 000. Desired inventory levels are 30% of next month's sales at cost. is the expected total purchases budgeted for February. A) $79,200 B) $81,360 C) $105,120 ‘ D) None of these answers is correct 17) St. Louis Company's expected sales for April are $27,600. Information about other budgeted expenses is presented below. Budgeted Expenses per Month Wages $2,000 Advertising 1,680 Depreciation 1,440 Rent 2,560 Other 5% of sales is a noncash expense. A) Advertising , B) Rent C) Depreciation D) All of these answers are correct 18) Donald Company has the following information: Month Budgeted Purchases January $30,000 x ‘l 9‘2) 7- ‘7-(3‘3 9 February 29,000 March 30,520 April 29,480 May 27,680 Purchases are paid for in the following manner: 10% in the month of purchase 50% in the month after purchase 40% two months after purchase is the estimated cash disbursement in March from January purchases. A) $12,000 B) $13,400 C) $12,208 D) $3,052 L”"“‘ 16) M 7m) Fae pm 2 $920+Ec. m: Ibo 23700 6% 17) 18) i Answer the following questions using the information below: Merriman Company provides the following ABC costing information: DH. 91— A Activities Total Costs Activig-cost drivers 30 0° ._, ‘80, 000 Account inquiry hours $400,000 10,000 hours 2 L’ O ’1 V ' a 0 3 Z 8 W Account billing lines . $280,000 4,000,000 lines ”— '01 x. M “u D 7 3 1 I“ 0 Account verification accounts $150,000 40,000 accounts ”— 3'75/ \ 0‘ ° ._ ‘ 1‘ $01) Correspondence letters § 50,000' 4,000 letters ,_ )1 4'0 X ‘\ 0 ° 0 " W Total costs $880,000 5 0 ,_-—"£'~"_———— The above activities are used by Departments A and B as follows: Department A Department B Account inquiry hours 2,000 hours 4,000 hours Account billing lines 400,000 lines 200,000 lines Account verication accounts 10,000 accounts 8,000 accounts Correspondence letters 1,000 letters 1,600 letters p 19) How much of the total costs will be assigned to Department A? 19) D V A) $880,000 B) $80,000 C) $224,000 D) $158,000 20) Design costs are an eXample of: ’ 20) g A) product—sustaining costs B) batch—level costs C) unit-level costs D) facility—sustaining costs 21) Nestle Company paid $130,000 for a machine used to mill oats. The annual contribution margin 21) )2 from oat sales is $60,000. The machine could be sold for $80,000. The opportunity cost of producing wheat flour is . A) $20,000 B) $60,000 C) $130,000 D) $80,000 22) Birch Company manufactures a part for its production cycle. The costs per unit for 5,000 units of 22) 0/ this part are as follows: AW! an 3w. 5 MW“— Direct materials $3 5 Direct labor 5 57 Variable factory overhead 4 V Fixed factory overhead _4_ ’1 Total costs go: It '5 The fixed factory overhead costs are unavoidable. palding Corporation has offered to sell 5,000 units of the same part to Birch Company for $15 a unit. Assuming no other use for the facilities, Birch Company should . A) buy from Scalding Corporation to save $3 per unit B) buy from Scalding Corporation to save $1 per unit C) make the part to save $3 per unit D) make the part to save $1 per unit 23) Birdflu Company manufactures a part for its production cycle. The costs per unit for 38,000 units of this part are as follows: Direct materials $3 Direct labor 5 Variable factory overhead . 4 Fixed factory overhead 4 Total costs L Aooluno LT” < q $TL The fixed factory overhead costs are unavoidable.Assuming no other use of their facilities, the highest price that Birdflu Company should be willing to pay for the part is A) $16 B) $8 C) $12 D) in 24) Goldwater Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows: 9M5 Direct materials $20 7-” 5‘” Direct labor 15 / 5’, Variable factory overhead 16 / ‘9 Fixed factory overhead _1_0 v (3‘ 2 Total costs $6_ ° Cm WEST \E.‘ MR R The fixed factory overhead costs are unavoidable. Assume that Comater Company can buy 10, 000 units of the part from another producer for $56 each. The current facilities could be used to make 10, 000 units of a product that has a contribution margin of $20 per unit No additional fixed costs would be incurred. Goldwater Company should A) make the new product and buy the part to earn an extra $5 per unit contribution to profit B) make the new product and buy the part to earn an extra $15 per unit contribution to profit C) continue to make the part to earn an extra $15 per unit contribution to profit D) continue to make the part to earn an extra $5 per unit contribution to profit 25) Riverside Industries has three product lines, A, B, and C. The following information is available: A. 13; 9 Sales $100,000 $90,000 $44,000 Variable costs 76,000 48,000 35,000 Contribution margin $24,000 $42,000 $9,000 [n 0,017 Fixed costs: > Avoidable 9,000 18,000 3,000 Unavoidable §LO_0_Q 94.9%). 2,109 Operating income $9,000 $15,000 $11,700) Riverside Industries is thinking of dropping product line C because it is reporting a loss. Assuming Riverside drops line C and does not replace it, the operating income will A) increase by $2,400 B) decrease by $9,000 C) decrease by $6,000 D) increase by $600 23) 24) 25) 26) The most recent income statement for the Strongsville Branch of the July Company is presented 26) A below. Sales $57,000 . Variable costs 31,500 (560 Contribution margin $25,500 \1/ Fixed costs: 7 Avoidable 13,500 Unavoidable' 20,000 Operating income $385000) The July Company is thinking of eliminating the Strongsville Branch because it is showing a loss. If the Strongsville Branch is eliminated, July‘s operating income will A) decrease $12,000 B) not change C) increase $8,000 D) decrease $31,500 27) LeBron Corporation manufactures two products, XX and YY. The following information was 27) A gathered: 4 W I)!” M x‘ E as) 9 Selling price per unit $37.00 D $26007? L Variable cost per unit 32. 22.00 Total fixed costs $18,000 If LeBron Corporation could produce and Sell either 10,000 units of XX or 5,000 units of YY at full «capacity, it should produce and sell ‘ A) 10,000 units of xx and none of W . " B) 3,000 units of YY and 6,000 units of XX C) either XX or W because LeBron is indifferent to Whether XX or YY is produced D) 5,000 units of YY and none of XX 28) Deadwood Company is considering replacing a machine that is presently used in the production of 28) ,0 its product. The following data are available: Replacement Old Machine Machine Original cost ‘ $99,000 $88,000 Useful life in years 9 6 Current age in years 3 0 Book value $33,000 — Disposal value now $28,000 - Disposal value in 5 years $1,000 $6,000 Annual cash operating costs $17,000 $14,000 The is a sunk cost. A) disposal value of the old machine B) annual cash operating costs of the replacement machine C) annual cash operating costs of the old machine D) original cost of the old machine 29) Bert Company is considering replacing a machine that is presently used in the production of its 29) D product The following data are available: Replacement Old Machine Machine C 355,060) Original cost $57,000 $35,000 Useful life in years 17 5 Current age in years 12 0 Book value $39,000 — 5’ W0 Disposal value now $8,000 - Disposal value in 5 years 0 0 I Annual cash operating costs $7,000 $4,000 ’— 300 O x 0 3 ‘51009 On coo) The difference in cost between keeping the old machine and replacing the old machine, ignoring income taxes, is the old machine. A) $22,000 in favor of replacing B) $22,000 in favor of keeping ' C) $37,000 in favor of replacing D) $12,000 in favor of keeping 30) The lower the minimum desired rate of return, the . 30) D A) lower the present value of each future cash outflow B) higher the net—present-value of the project C) lower the present value of each future cash inflow D) higher the present value of each future cash outflow 31) When comparing projects using the total project approach, a manager should choose the . 31) D A) first project considered if the present value is pesitive " B) project with the largest negative net present value C) second project considered if the present value positive D) project with the largest positive net present value 32) A company is considering the purchase of some equipment that in the second year of operation 32) A should cause an increase in sales of $150,000, an increase in cash expenses of $90,000, and a 5 \{q 090 depreciation deduction of $45,000. If the appropriate tax rate is 20%, the after—tax effect of this in» ‘iqoov equipment on cash flows in year two is . ' 6 0 0" 0 A) net after-tax cash inflows of $57,000 B) no effect ,fll— C) net after-tax cash inflows of $9,000 D) net after-tax cash inflows of $15,000 onw‘l m 9879;)” w W 33) If the appropriate tax rate is 40%, the after-tax effect of a single depreciation deduction of $100,000 33) Q/ is a A) $60,000 net after-tax cash inflow B) $60,000 net after-tax cash outflow ‘22:" a '4 C) $40,000 net after—tax cash inflow D) $40,000 net after—tax cash Outflow J— at 34) An initial investment of $270,000 is expected to generate $140,000 in annual cost savings over the - 34) B ' asset's expected 3—year life. Assume straight—line depreciation and ignore income taxes. The payback period is . A) 2.40 years ‘ B) 1.93 years C) 0.75 years D) 3.00 years :Nvms’t’ 210,000 ‘ '13 MW" m’ Mair ’0; 35) Diaz Company makes internal transfers at 180% of full cost. The Soda Refining division purchases 35) 0 30,000 containers of carbonated water per day, on average, from a local supplier who delivers the water for $30 per container via an external shipper. To reduce costs, the company located an independent producer in Iowa who is willing to sell 30,000 containers at $20 each, delivered to Diaz 30 ’ 00 D Company's shipping division in Iowa. The company's Shipping Division in Iowa has excess 3 3 “70 capacity and can ship the 30,000 containers at a variable cost of $3.50 per container. is the W total cost of purchasing the water from the Iowa supplier and shipping it to the Soda Division. ' A) $600,000 B) $1,080,000 C) $705,000 D) $1,215,000 SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 36) Bedtime Bedding Company manufactures pillows. The Cover Division makes covers and “iv; :WL._.-,_.., m. ,_ the Assembly Division makes the finished products. The covers can be sold separately for $5.00. The pillows sell for $6.00. The information related to manufacturing for the most recent year is as follows: Cover Division manufacturing costs $6,000,000 Sales of covers by Cover Division Market value of covers transferred to Assembly 6 000,000 Sales of pillows by Assembly Division 7,200 000 Additional manufacturing costs of Assembly Division 1,500,000 Required: Compute the operating income for each division and the company as a whole. Use market value as the transfer price. Are all managers happy with this concept? EXplain. 36) Cover Assembly Compan Revenue: External $ 4,000,000 $7,200,000 $1 1,200,000 Internal 6 000 000 Total $10,000,00 $7,200,000 $11,200,000 Cost of goods: Incurred $ 6,000,000 $1,500,000 $ 7,500,000 Transferred—in 6 000 000 Total $ 6,000,000 $7,500.00 $ 7,500,000 Operating income 4 000 000 300 000 g 3E700E000 The Assembly manager is probably not happy because the division is showing a loss. The manager would probably argue for a transfer price at something less than market price. However, since the market is open and competitive, the market price can be justified. The division needs to either increase its price or reduce its costs if it expects to show a profit. ...
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