FinalSolutionAutumn10_A_

FinalSolutionAutumn10_A_ - ‘ KEY 69 in Stanford...

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Unformatted text preview: ‘ ' KEY 69 in Stanford University Fall 2010 Final Exam: MSE 1-l0i240 Name I40 [Joints ( Questions 1—40 at 3 Points each and question 41 at 20 Points } MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. I] Assume the sales price is $l00 per unit and the total fixed costs are 575,000. The break—even I} l '2 volume in dollar sales is $250,000. What is the variable cost per unit? A) $100 6 $70 Lt} $30 0) $125 3} Assume ZZZ Company has the following information avaiiable: 2) fl Belling price per unit 5100 Variable cost per unit 545 Fixed costs per year 5420.000 Expected sales per year (units) 20,000 If fixed costs increase $200,000, what is the expected operating income? . ® $400,000 3} $1,380,000 C) 5680.000 D) $230,000 3} "File following information is available for Donald Corporation: 3) i I Total fixed costs $333,500 Variable costs per unit $99 Selling price per unit 5154 _ ' total fixed costs increased to $394,850, then the break—even volume in dollars would increase by i 1 a . A) 10.0% 0} 12.3% C} 34.3% G») 13.4% 4) Assume the following information for Janice Company: 4) A Selling price per unit . $144 Variable costs per unit _ $30 Total fixed costs $80,000 [f fixed costs increased by 10% and management wanted to m ' 01' e original break—even point, 01 the selling price per unit would have to be in to l 6 5150.40 8} $5203.00 $155.20 D] $153.40 3) Berea Company expects to Sell 19,000 units. Total fixed costs are 384,000 and the contribution 5) l ,: margin per unit is 56.00. Berea's tax rate is 40%. W hat ‘ the margin of safety in units? A) 3,000 units , 4,000 units 65,000 units D] 7,500 units l0 ll ’1 00 33 D ’25 '24, 23» 22 r1] Assume the following int'orl'l‘lnlion [or lwn products. Hawaii lii‘lntusrx;I and Hawaii Joy. I-lawaii Fantasv Hawaii ov Soles mix 41min: 1 unit Selling price per unit 515 $100 Variable cost per unit 59 $30 Fixed expenses total $475,300 per year. What is the breakeven point in units for each product? A} 4,575 units of Hawaii Fantasy and 18,300 units of Hawaiiloy @ 13,300 units of Hawaii Fantasy and 4,575 units of Hawaii Joy (I) {8,300 units of l'tuwaii Fantasy and 18,360 units of Hawaii on D} none of the above 3'] Company '[TT has the following information available: Total fixed costs $84,000 Targeted after—tax net income $18,000 Contribution margin per unit $56.20 Tax rate 40% How many units must be sold to achieve the targeted after-tax net income? 13,387 3} 14223 C) 17,853 D} 21,504 8) Cat Company makes nleiai signs for businesses and residences. These signs are made of sheet meta l, which the owner paints by hand. The owner is concerned that he does not have a good measure of support costs for the signs. Currently, he predicts support costs to be 30 percent of the cost of materials. Close investigation of the business reveals that $10 per direct labor hour is a more plausible and reliable support cost measure. Cat Company has the following information available: Small Sigfl Lu Si Materials cost $3 8700 Direct labor hours 5 11 Using direct labor hours as the cost driver, what amount of support costs is assigned to the small sign? A) $160 8) $200 @ 550 D) 5110 9] Where a specific manuiacmred product is the cos object, the sala of the security arc! in the fa ry would probably be classified as atri) w pro 0qu (40$ é indirect production cost B} direct nonproduction cost ‘} direct production cost D) indirect nonproduction cost :3] l 3 EL :0) The following intbrmation was taken from the accounting records of Jackson Manufacturing Company: Direct . Direct materials used $15,000 Direct manufacturing labor costs Wow-w Sales salaries 35,000 Miscellaneous facto . ministrative expenses 40,000 Finished goods inventory, beginning 10,000 Finished goods inventory, end 12,000 Work in process inventory, beginning 0 Work in process inventory, end 0 What is Cost of Goods Manufactured? .~\}$111,000 @smooo C] $130,000 D) $132,000 11} Which of the following is NOT a component of the op '2‘. ' 3 budget? A} budgeted income statement cash budget C} sales budget D) operating expense budget 12} Diamond Company has the following sales budget for the last six months of 2010: luly $100,000 August ' 30000 September 1 10,000 October ' 90,000 November 100,000 December 94,000 Historically, the cash collection of sales has been as follows: 65% of sales collected in month of sale 35% of sales collected in month following sale 8% of sales collected in second month following sale 2’33 of sales uncollectible What is the expected cash collection of sales in October? A) $99,500 Ci) 592,400 C) $53,500 D) $86,000 8 [3} Denver Company has the lollowmg inforn‘mlion: \lonth Budgeted Sales is: m mryF $31.01!] February 35.000 N lard} "3.000 .\pril mm Budgeted £3me Per Month Wages "515.000 Advertising Illlfill Depreciation 3,000 Other expenses 4% of 5;: [05 All cash expenses are paid as incurred. What are the total expenses budgeted for the month of january? A} $30,040 B} 531,200 0‘) $00,000 @0300 H} Godwin Company is preparing a cash budget for the month of June. The following information is available: Cash Balance, May 31, 2010 Cash collections from customers in june Cash paid for merchandise in June Paid operating expenses in June Purchase furniture for cash in June Depreciation expense in Jlune Amortization expense in June $10,000 46,000 42000 12,000 3,000 1 .000 1,000 The minimum cash balance desired is $10,000. What are the net cash receipts and disbursements for the month of june? $11,000} B) $(8,000] C) $( 13.000) 0) $9,000) “I A [5) Schlichting Company is preparing a cash budget for the month of june. The following information 15] Q! is aVailable: Cash Balance. May 31, 2010 Cash collections from customers in june Cash paid for merchandise in June Cash paid for operating expenscs in June Cash dividend paid in June The minimum cash balance desired is 55,000. What A} $2,000 5} $3,000 311,000 43,000 20,000 20,000 5,000 a Lint should be borrowed at june 30. 2010? Q 50 D) $4,000 .-\--'1- to iii) A cmnpanv is trying to decide which Product to manufacture. the following information is available: t .‘osts Product .'-\ Direct Materials I “32.00 per unit illirect Materials 2 “.25 per unit Direct A-later‘iats 3 £0.50 per unit Direct Labor ‘50.?0 per unit W ich product cost is relevant to the decision? Direct Materials 3 C) Direct Materials 2 Product 3 $2.00 per unit "9 I .2?- per um! 50.50 per unit 50.70 per unit 0) Direct Labor 1)) Direct Materials 1 I?) Arkansas Company provided the foIIOwing data for its only product: Selling price per unit Direct materials used Direct labor Variable factory overhead Variable selling and administrative expenses Fixed factory overhead Fixed selling and administrative expenses Units produced and sotd $65 1 50,000 225,000 140,000 (10,000 370.000 30.000 20.000 Assu me there is excess capacity. T here is a special order outstanding for 1,000 units at .00 per unit. If Arkansas Company accepts the special order, net income would m A] decrease $23,750 C) increase $40,000 producing the oats is 000 A) $00,000 .030000 B) decrease $10,000 ® increase $11,250 18} Nestle Company paid $130,000 for a machine used to mill oats. The annual contribution margin from oat sales is $60, . The machine could be sold for $80,000. The opportunity cost of C} $130,000 D) $20,000 19) Bird Company manufactures a part for its production cycle. “to costs per unit for 38,000 units of the part are as follows: Direct materials Direct labor Variable factory overhead Fixed factory overhead Total costs $3.00 5.00 4.00 is“! a 05.00 The fixed factory overhead costs are unavoidable. Assume no other use for the facilities. What is pa from an outside supplier? @512 D} so the highest price Bird Company should pay for the A} $8 B] 516 ”250 17] i l 18} g 19) C, 9.0) takers Colnpanv manufactures a part for its production cycle. '[he annual costs per unit for 5,000 20) I I units of the part are as follows: ' Direct materials _ “53.00 Direct labor 3.00 Variable factory overhead 4.00 Fixed factory overhead 2—00 Total costs $14.00 The fixed factory overhead costs are unavoidable. Spalding Company has offered to sell 5,000 units of the same part to Lakers Company for $14 per unit. The facilities currently used for the part could be used to make 5,000 units annually of a new product that would have 53 hi ghcr contribution margin than the current 34111.10on 'tional fixed costs would e in d with the new it . takers 1 £36 P 1;) Company should .‘ll‘Q/ HEM} pro Qua ’H‘?. 5M .3 WW4 . A} make the part to save $3 per unit 0} make the new product and buy the part to sa ve $1 per unit make the part to save $1 per unit a make the new product and buy the part to save $3 per unit 21] Deuce Company currently produces 10,000 units of a key part at a total cost of $512,000 annually. 21} g : Variable Costs are $300,000 annually. 0f the annual fixed costs, $140,000 relate specifically to this part. The remaining fixed costs are unavoidable. Another manufacturer has offered to supply the part for $48 per unit. The facilities currently used to manufacture the part could be used to manufacture a new product with an expected contribution margin of $30,000 per year. Alternatively, the facilities could be rented out at $60,000 per year. Given all of these altematlves. what is Deuce Company's lowest net relevant cost per unit for the part? A} $44 a) $48 @542 o} 530 22) Sanama Industries has three product lines: A, B and C. The following annual information is 22} 1' if available: Product A Product B Product C Sales $100.0“) 590,000 $38,000 Variable costs @0100 48,000 79,000 Contribution margin 24.000 42.000 9,000 Avoidable fixed costs 9.000 18,000 3,000 Unavoidable fixed costs {5% m w Operating incomefloss) $9.000 $155000 69,400} Sanama Industries is thinking about dropping Product C because it is reporting a loss. Assume Sana ma industries drops Product C and the space formerly used to produce Product C is rented out f 15,000 per year. What will happen to operating income? g increase $9,000 B) increase $14,400 C] increase $15,000 D) increase $6,600 A -6 a 23} Super Corporation manufactures two products, Superl and SuperZ. 'l he following annual intormu lion was gathered: “111ng Super? 'ielling price per unit 5-17.00 “326.00 ‘3 .1 riahle cost per unit 8.00 22.00 Total annual fixed costs are $25,000. Assume Super Corporation manufactures and sells three units of Superl for every two units of Superz. The company produced and sold 1,500 units of Superl. W t is the operating income {loss} for this year? ${13,500) [3] 3534.500 C) $22,500 D) $(25,000) 2'4) Ernie Compzpv l5 considering replacingo machine that 15 currently used In the production process. The 'il relevant to the replacement decision. A} cost of the new machine B} disposal value of old machine C) annual operating cost of old machine @book value of old machine 35) Bert Company is considering the replacement of a machine that is presently used in production. lite following data are available: 0th Machine New Machine Original cost $7,000 $35,000 Useful life in years 17 3 Current a1 ge in yea rs 12 it Book value $69,000 I a Disposal value new $8,000 — Disposal value in 5 years 0 0 Annual cash operating costs 51000 54,000 Adding all Eivee 355; ther, the difference in total cost between the old machine and the new machine $231— A) $37,000 In favor of replacing 22.000 in favor of keeping C} $22,000 in favor of replacing $12,000 in favor of keeping 26} Using the net present value me d Hewitt-fin the present values of all expected future cash flows from the project and A) ignore the initial investment Gsubtract the initial investment C) add the initial investment D) add the depreciation expense 27) A manager is considering the following investment Estimated capital investment 5270.000 Estimated useful life 3 years Estimated disposal value in 3 years (1 Estimated annual savings in cash operating costs 5150.000 Minimum desired rate of return 12% Present value of ordinaryI annuity, 3 periods at12% 2.4018 Present value of one, 3 periods at12'3‘5 0.7118 Assume straig t—line depreciation is used. Ignore income taxes. The net present value of the investment is M A) $360,270 5) $180,000 C) H492] '90270 24) D 25) H machine. There are no r ired rate of return concerns for future cash flows. 26) B— 2 J1 38) As the minimig mtguirg iénte of return increases tor an investment project. the net present value of to project __ . [ I. \‘itlotl there are no net cash out flows in the future. A decreases B} increases (j) becomes positive 1)) does not change 39) Globe Company will purchase a truck for $100,000. The tmck‘s depreciable life is 5 years. The truck has no terminal salvage value. Assume a tax rate of30% and a required after—tax rate of return of 12%. The company uses the straight-line method of depreciation for tax purposes. What 1 annual after—lax cash flow from depreciation expense? .000 cash intlow B} $12,000 cash outflow C] $6,000 cash outflow D) $12,000 cash inflow 30) Gonzalez Company is considering the purchase of equipment for $600,012”. The equipment will have a ten year life with no terminal salvage value. Straight—line depreciation will be used for tax purposes. It is expected that the equipment will generate annual sales of $400,000 and annual production costs, exCIusive of depreciation, of $300,000. The tax rate is 40%. What is the net annual after—tax cash flow from the equipment? A) $64,000 cash inflow ' 0) $96,000 cash inflow 6) $84,000 cash inflow D] $72,000 cash inflow 31] An investment of $42,000 is expected to generate the following annual cash flows: Year 1 $10,000 Year 2 f5} 5,000 Year 3 $15,000 Year 4 $512,000 Assume straight-line depreciation is used. ignore income taxes. What is the p ., ck period? A} 3 years 3} 4 years C) 3.83 years a 3.17 years 32} North Division sells a part internally to South Division. South Division uses the part to produce inexpensive products sold at discount stores. North Division incurs costs of $1.50 per part, while South Division incurs additional costs of $4.80 per product. North Division sells the part to South Division for $2.00 per part. The final product is sold to external customers for $8.00 each. Which of éoflowing formulas correctly reflects the company's operating income? $3.00 — $1.50 — 54.80 = $1.70 8) $8.00 - $1.50 = $650 $8.00 - $1.50 - $4.80 - $2.00 = $0130} D) 58.00 - $4.30 -$2.00 = $1.20 31) All Irnrn West Division for $334 per unit. The West Division wants to increase the price of the part it "walls to East Division by $96 to $480. The manager of the East Division has stated that he cannot pay that much insofar as the division's profit goes below zero. The manager of Hie East Division can buy the part from an outside supplier for $448 per unit. The cost data pertaining to the part is uupplied by the West Division: Direct materials $136 Direct labor 200 Variable overhead 40 Fixed overhead 42 if West Division does not produce the parts for the East Division. it will be able to avoid one-third of the fixed manufacturing overhead costs. The West Division has excess capacity but no alternative uses for the facilities. From the standpoint of the company as a whole, should the East D' ‘ ion buy the part from the West Division or the outside supplier? East Division should buy the part from the West Division because the company's profit will be $58.00 per unit larger. 8} East Division should buy the part from the West Division because the company's profit will be $32.00 per unit larger. I C) East Division should buy from an outside supplier. D) East Division should buy the part from the West Division because the Company's profit will be $14.00 per unit larger. - from West Division for $384 per unit. The West Division wants to increase the price of the part it sells to East Division by $96 to 5430. The manager of the East Division has stated that he cannot pay that much insofar as the division's profit goes below zero. The manager of the East Division can buy the part from an outside supplier for $448 per unit. The cost data pertaining to the part is supplied by the West Division: - Direct materials $136 Direct labor 200 Variable overhead 40 Fixed overhead siZ lf West Division does not produce the parts for the East Division. it will be able to avoid one—third of the fixed manufacturing overhead costs. The West Division has excess capacity but no alternative uses for the facilities. What is the minimum transfer price per unit that West Division should charge East Divisi a.“ A) $443 a $390 C) 5376 D) 5480 \-9 til} l'he West and l-‘ast Divisions are part of the same company. Currently the East Division buys .1 part B) i l 34) The West and East Divisions are part of the same company. Currently the East Division buys a part 34} i g 15‘} Campos Company’s records reveal the following: Division A Market price oi finished part to outsiders ST; Variable costs per part i Coatribution margin per part ‘524 “idle price of finished product per unit :5 Nil-i Variable costs: Division All part] 5] Division B Processing 2? Division 3 Selling g Contribution margin per unit g The variable costs of Division B will be incurred whether it buys from Division A or from an outside supplier. Assume Division A is working at full capacity. Division B can buy the parts from an outside supplier at $75 per unit. What is the lowest transfer price per unit Division A _' ld accept from Division B? ' @2575 B) $24 C) 3566 D) $51 36) A division of Saskowski Company is located in Bulgaria. The country places restrictions on the amount of funds that may be paid as dividends to foreign owners. If Saskowski Company wants to a_ 'mize the amoquif'casq recei from the foreign division, Saskowski Company should set a Woe, 1" 5w 2 i J high transfer price for g transferred out of Bulgaria @th transfer price for goods transferred into Bulgaria low transfer price for goods transferred into Bulgaria D) low transfer price for goods transferred out of Bulgaria 37} The variable cost of Part X is $50 per unit and the full cost of the part is $80 per unit. The part is produced in Country Z and transferred to a plant in Country B. Country Z has a 30% income tax rate. Country B has a 50% income tax rate and an import duty equal to 10% of the price of the item. Part X can be transferred at full cost or variable cost. Assume Part X is transfe d fol! st. By using full cost instead of variable cost for the transfer price, the net savings is . A) $9 per unit B} 56 per unit C) $15 per unit per unit A-lfJ .16) 5; 33b 38) The following information was obtained from the accounting records of Stevie Nicks Incorporated: 33} 1 3 Direct materials urchased 580,05] Direct manufacturin a orcosts l Indirect manufacturing labor costs 13,000 Selling expenses Administrative expenses 22,000 Work in rocess inv to . end 0 Fi ' 8 _'_HI inventory, ' ' ' Finished goods inventory, end What is Cost of Goods Sold? A) $211,000 @ $207,000 0'} $227,000 D) $231,000 39) When considering the cash operating inflows resulting from an investment, taxes will 99d“ 39) B A) reduce the amount of the cash inflows by {1 minus the tax rate) 19X r reduce the amount of lthe cash inflows by the tax rate C) increase the amount of the cash inflows by {1 minus the tax rate) D) increase the amount of the cash inflows by the tax rate 40] Forever Company has a tax rate of 40% and a required rate of return of 10%. Depreciation expense 40) i 2 relating to operating equipment is $100.0“) per year. Whatis the after—tax cash flow from the annual depreciation expense? A) $60,000 cash inflow :_ $60,000 cash outflow C) $40,000 cash outflow at. .,000cash inflow SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 41) Lakers Company produces two products. The following information is available: Product X Product Y Selling price per unit 3546 $36 Variable cost per unit $33 5524 Total fixed costs are $234,...
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