This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Accounting 222 Practice Exam 1. Aerotoy Company makes toy airplanes. One plane is an excellent replica of a 737; it sells for 5$. Vacation Airlines wants to purchase 12,000 planes at $1.75 each to give to children flying unaccompanied. Cost per planes are as follows: Direct materials $1.00 Direct Labor 0.50 Variable Overhead 0.10 Fixed Overhead 0.90 No variable marketing costs would be incurred. The company is operating significantly below the maximum productive capacity. No fixed costs are avoidable. However, Vacation airlines wants its own logo and colors on the planes. The cost of decals is $0.01 per plane and a special machine costing $1,500 would be required to affix the decals. After the order is complete the machine would be scrapped. Should the special order be accepted and how much would income change. 2. Santorino Co. produces two models of a component, Model K-3 and model P-4. The unit contribution margin for Model K-3 is $6; the unit contribution margin for Model P-4 is $14, respectively. Each model must spend time on a special machine. The firm owns two machines that together provide 4,000 hours of machine time per year. Model K-3 requires 15 minutes of machine time. Model p-4 requires 30 minutes of machine time. What is the contribution margin per unit of scarce resource (machine time) for Model p- 4. Now suppose that Santorino can sell only 5,500 units of each model. How many units of P-4 should be produced. 3. Bell Company makes fax machines. Currently Bell makes all components of the fax machine in house. An outside company has offered to supply one component, part number B48 for $8 each. Bells uses 15,000 of these components per years. Costs of B48 are as follows. D.M. $4.00 D.L. 2.00 Variable OH 1.50 Fixed OH 3.00 Assume that fixed overhead is allocated and cannot be avoided. Should Bell purchase the part from the outside supplier and how much will income increase or decrease. 4. Dodge Companys three products: A B C Units Sales per year 250 400 250 Selling Price per unit 9.00 12.00 9.00 Variable cost per unit 3.60 9.00 9.90 Unit Contribution margin 5.40 3.00 (.90) Contribution margin ratio 60% 25% (10%) Assume that product C is discontinued and the extra space is rented for 300$ per year. All other information remains the same as the original data. Annual profits will. 5. Walloon company produced 150 defective units last month at a unit manufacturing cost of 30$. The defective units were discovered before leaving the plant. Walloon can sell them as is for $20 or can rework them at a cost of $15 and sell them at the regular price of $50. The total relevant cost of reworking the defective units is: 6. Autry Company manufactures veterinary products. One joint process involves refining a chemical (dactylyte) into two chemicals- dac and tyl. One batch of 5,000 gallons of dactlytyte can be converted to 2,000 gallons of dac and 3,000 gallons of tyl at a total joint processing cost of $12,000. At the split off point, dac can be sold for $3 per gallon joint processing cost of $12,000....
View Full Document