Exam 3 Spring 2011

Exam 3 Spring 2011 - ‘7) 4 r" ‘2 s" saw _ '...

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Unformatted text preview: ‘7) 4 r" ‘2 s" saw _ ' 1.. Comparing actual results to a budget based on actuai activity for the period is possible with the use of a: A) monthly budget. B) master budget. C) flexible budget. D) rolling budget. 2., A static budget is: A) a budget for a particular level of activity. B) a budget that ignores inflation. C) used only for fixed costs. D) used when the mix of products does not change. 34. Division X and Division Y are both subsidiaries of Company Z. Division X manufactures a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customer-3.... . . . . . . . .. $ 155 Variablecostperunit.. $75 Contributionmarginperunit .. $80 Iotalfixedcosts.....,........,,...,. ..,................,,..$500,000 Fixed costperunitatcapacity..,...,..,.,... $20 Capacityinunits....,.............._.., 50,000units Division Y would like to use the part manufactured by Division X in one of its products. Division Y currently purchases a similar pait made by an outside company for $88 per unit and would substitute the part made by Division Xi. Division Y requires 5,000 units of the part each period. Division X is currently producing and selling 25,000 units to outside customers. Producing additional parts for Division Y would not affect these sales. What is the minimum acceptable transfer price from the standpoint of Division X? A) $75 B) $80 C) $88 D) $155 4.. HugeFish Manufacturing Corporation has prepared the following overhead budget for next month. Activity . . 6,800 machine—hows Vaziable overhead costs: Supplies . $ 22,440 Indirect labor ., . . . .. 55,760 P ixed overhead costs: Supervision . 19,300 Utilities“........... 5,700 Depreciation ,. 7,400 Total overhead cost $110,600 The company's variable overhead costs are driven by machine—hours. What would be the total budgeted overhead cost for next month if the activity level is 6,100 machine—hours rather than 6,800 machine—hours? A) $100,370 B) $102,550 C) $106,300 D) $108,350 Page 1 .. Which of the following performance measures will increase if the minimum required rate of return on an investment decreases? Return on Residual Investment Income A) Yes Yes B) No Yes C) Yes No D) No No §<AH other things equal, which of'the following would decrease a division's residual income? A) Increase in expenses. B) Decrease in average operating assets. C) Decrease in minimum required rate ofretum.. D) Increase in operating income. >< Residual income: A) is the return on investment (ROI) percentage multiplied by average operating assets. B) is the operating income earned above a certain minimum required retuxn on sales. C) is the operating income earned above a certain minimum required return on aVerage operating assets. D) will always be greater than zero. K Given the following data: Return on 0.33 821168.. $100,000 Operating assets, Januaxy 1.“. . $600,000 Opeiating assets, December31....m..,... . $700,000 Total capital employed. . . ...,,.r. V ,4 .4 ., .. , . $850,000 Tumover.,,,.. ,. . , 30 Minimum required rate of‘refum. . , , 0 ‘22 Operating income. , . . .. $245,000 The residual income would be: A) 3 98,250 B) 55' 99,700 C) $ 100,850 30) $ 102,000 033009SP0901 - Page 2 9.. The following information pertains to SillyFish Company’s Gold Division for 2008: 12., Under absorption costing, PRODUCT costs include: Fixed Variable Manufacturing Manufacturing Direct Direct Overhead Overhead Materials Labor A) No No Yes Yes B) No ‘ ’ Yes Yes No C) Yes Yes Yes Yes D) No Yes No Yes Sales $411,000 Variable expenses , ,. ,,,,,.,. . , m $ 250,000 Fixed expenses , . m . $ 80,000 Operating assets, lanuary I ,. K .. .. . S 600,000 Operating assets, December 31 ...w, , . .. $ 1,000,000 The Gold Division's return on investment (ROI) is: A) 8.100% B) 10,.125% C) 13 500% D) 15.425% The following information pertains to RawFish Company: Sales....,....,, ,. V $811,000 Operating Income (before tax), . . . . . , , . $ 655,000 Operating Income (after—tax).,,, t.” ...,.. . .. r. $ 370,000 Fixed expenses,” , . , $150,000 Operating assets, January 1.. ,. , .0 . ., .r.,,. $ 600,000 Operating assets, December 31W. . . ,. ,N. $ 700,000 Iota] capital employed.“ , , . r... .,., . ,. ..,. $ 850,000 Minimum required return on assets“. .. 19% Actual % cost of'capital,.., . I , . , . . ......., .4. .l 12% RawFish Company’s Economic Value Added is: A) $264,600 B) $266,200 C) $268,000 D) $3 09,600 Hal Etoesus currently works as the fry guy at Burger Breath Drive Thru but is thinking of quitting his job to attend college full time next semester. Which of the following would be considered an opportunity cost in this decision? A) the cost ofthe textbooks B) the cost of'the cola that Hal will consume during class C) Hal's lost wages at Burger Breath D) the cost ofaduit beverage consumed after class 0330098190901 - Page 3 13. 14.. 15.. 16,. Relevant costs are: A) sunk costs that have no affect on current depreciation expense. B) future costs that are the same between alternatives. C) future costs that differ between alternatives, D) historical capital expenditures on pr'opelty, plant, and equipment. When a multinpr'oduct factory operates at full capacity, decisions must be made about what productsto emphasize. In making such decisions, products should be ranked based on: A) selling price per unit of'the constraining resource B) variable cost per unit ofthe constraining resource C) fixed cost per unit ofthe constraining resource D) contribution margin per unit ofthe constraining resource CookedFish Company produces high quality, environmentally friendly t—shirts but only in green. These shirts are manufactured and sold in Ontario, Canada. CookedFish has been approached by a new customer with an offer to purchase 2,900 t—shirts at a price 013 7 .40 each. The new customer is geographically separated from Cookchish’s other customers, and existing sales will not be aflected.. CookedFish has sufficient capacity to manufacture 12,000 green t—shirts but this year plans to produce and sell only 9,000. The normal selling price for the green t—shirts is $37 (they’re really nice shirts). Unit cost information for each t—shirt follows: Direct materials $2 .75 Direct labor 2.80 Variable overhead 1.40 Fixed overhead _2_._OQ Total $8.95 The new customer requires a special label with its own name sewn into each shirt, CookedFish would have to purchase a special labeling machine that will cost $8,700.. The machine will be able to label the 2,900 units and then it will be scrapped (with no further value). (N 0 other fixed overhead activities will be affected.) What is the minimum price CookedFish should charge per t—shirt for the special order (the costs necessary to not lose money on the sale)? A) s 8.95 B) s 9.95 C) $1040 D) $3700 Kahn Company produces and sells 8,000 units of Product Zebra each year. Each unit of Product Zebra sells for $10 and has a contr ibutiou margin of$6. Kahn is considering dropping Product Zebra and wants to know What the effect will be on operating income. It is estimated that if’Product Zebra is discontinued, $50,000 of the $60,000 in fixed costs charged to Product Zebra could be eliminated. These data indicate that it'Product Zebra is discontinued, overall company operating income should: A) B) C) D) increase by $2,000 per year decrease by $2,000 per year increase by $38,000 per year decrease by $3 8,000 per year 033009SP0901 - Page 4 17.. BigFish Company budgeted sales of 4,000,000 non-programmable calculators at $40 per unit last year. Variable manufacturing costs were budgeted at $19 per unit, and fixed manufacturing costs at $1 per unit. A special order for 50,000 non-programmable calculators at $29 each was received by BigFish in March. BigFish has sufficient plant capacity to manufacture the additional quantity without incurring any additional fixed manufacturing costs; however, the production would have to be done on an overtime basis at an estimated additional labor cost 0183 per calculator. Acceptance of’the special order would not affect BigFish's normal sales and no additional selling expenses would be incurred. What would be the effect on operating income if the special order were accepted? A) $220,000 decrease B) $220,000 increase C) $3 50,000 decrease D) $350,000 increase 18‘. Marley Company makes three products (X, Y, & Z) with the following characteristics: Product X Y Z Selling piice per unit , 0, $10 $15 $20 Valiable cost perunit $6 $10 $10 Machine hours per unit .. 2 4 10 The company has a capacity ol‘10,000 machine hours and there is a maximum demand of 3,000 units of each product. In order to maximize operating income, how many units of each product should the company produce? A) 2,000 units of X, 2,000 units of'Y, and 2,000 units on B) 1,000 units ofX, 0 units of'Y, and 1,200 units of'Z C) 3,000 units of'X, 1,000 units on, and 0 units of'Z D) 2,500 units ofX, 0 units on, and 500 units of’Z 033009SP0901 - Page 5 Use the following to answer Questions 19—21: LittleFish Company makes four products in a single manufacturing facility. Each unit must pass through multiple processes including forging, shaping, and grinding. These products have the following unit product costs: A B C D Direct mateiials:.......:.....,.....,...,..,..,,. $10 70 $ 5.40 $ 5.10 $ 720 Direct labor.......,,.,. 19.10 21 40 29 00 34 40 VaIiable manufactuting ova-head , 1.20 1,50 1.80 1.60 Fixed manufactming overhead. . ., 22.40 16.00 15.00 17.60 Unit product cost”. 53.40 44.30 $50.90 $60 80 Additional data concerning these products ale listed below, Product A B C D Grinding minutes permit , , . , ., 2.20 1-20 1-70 1.80 Selling piice per unit , $65.40 $58.50 $70.70 $76.20 Valiable selling cost per unit $360 $3.80 $2 .00 $3.40 Montlfly demand in units 1,000 4,000 1,000 4,000 There is sufficient capacity in forging and shaping but the grinding machines are potentially the constraint in the production facility. A total 01'16,400 minutes are available per month on these machines. Direct labor is a variable cost in this company. 19.. How many minutes ot'grinding machine time would be required to satisfy demand for all four products? 113*} l n A r30 L U’TU 13) 12,900 C) 14,400 D) 15,900 20.. Which product makes the LEAST profitable use oi'the grinding machines? A) Product A B) Product B C) Product C D) Product D 21. How many units of A, B, C, and D should he produced if the maximum demand for each product is unlimited? A) 0 units of'A; 5,680 units ofB; 0 units ofC; 0 units of}? B) 2,420 units of'A; 0 units ot'B; 5,830 units ofC; 1,950 units ot‘D C) 0 units of'A; 2,600 units ofB; 3,800 units of'C; 650 units of D D) 0 units ofA; 13,667 units ofB; 0 units ofC; 0 units of‘D 0330098P0901 - Page 6 22.. RedFish Company is considering the purchase of an investment that has a positive net 23.. 24.. present value based on a discount rate 01'12%.. The internal rate of return would be: A) zero. B) 12%. C) greater than 12%. D) less than 12%. The net present value ofa proposed investment is negative. Therefore, the discount rate used must be: A) greater than the project's internal rate oi'retum. B) less than the project's intemal rate ofretum. C) greater than the minimum required rate dictum. D) less than the minimum required rate of return. \~ A sunk cost is best described as: A) The benefit given up or sacrificed when one altemative is chosen over another. B) The cost sacrificed when a better altemative is selected over a superior alternative. C) Costs for which the outlay has not already been made and can be afiected by a future decision. D) Costs for which the outlay has already been made and that cannot be affected by a future decision. Use the following information to complete Questions 25 — 28: YellowFishwithOrangeSpots Enterprises, LLC wants to buy an automated machine to he used in producing gears for manufacturers of large construction equipment. The initial investment required is $1,500,000. The machine will last five years with no expected salvage value. The expected after—tax cash flows associated with the project are as follows: Year Cash Revenues Cash Expenses 1 $1,500,000 $1,000,000 2 $1,500,000 $1,000,000 3 $1,500,000 $1,000,000 4 $1,500,000 $1,000,000 5 $1,500,000 $1,000,000 Y 25.. What is the accounting rate of return for the automated machine? goo ' 009 n" 3 26,. ymw if akinrggj figpém‘i‘ 91:, {j,*§oo,ece~o)/g :: $00,590:} 520,000 3 239,000 A) 6.5% 200 000 B) 13.3% fl” C) 17.5% 1,300,090 D) 33.3% What is the net present value closest to (slight differences may occur due to rounding) of the investment in the automated machine assuming a required rate of return of 14 percent? . A) $195,700 B) $216,500 C) $288,800 D) $337,300 033009SP0901 - Page 7 27 .. What is the investment’s internal rate of return closest to (slight differences may occur due to rounding)? A) 14% - 16% B) 16% - 18% C) 18% — 20% D) 20% - 22% 28.. What is the payback period for the investment in the automated machine? A) 1 [67 years B) 245 years C) 3 ,00 years D) 4 .20 years 29,, Present value is: A) The current value of a future cash flow. It represents the amount that must be invested now if'the future cash flow is to be received assuming compounding at a given rate of interest, B) The past value ofa current cash flow. It represents the amount that must have been invested in the past if'the current cash flow is being received after realizing compounding at the given rate of interest C) The value that will accumulate by the end Ofan investment’s life if'the investment earns a specified compound return, D) None ofthese is correct, 30‘. The best university in Oklahoma is: A)Oklahoma State ~ GO POKESH 0330098130901 - Page 8 ...
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This note was uploaded on 01/22/2012 for the course ACCT 2203 taught by Professor Staff during the Fall '08 term at Oklahoma State.

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Exam 3 Spring 2011 - ‘7) 4 r" ‘2 s" saw _ '...

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