Practice Final Exam_Sol Problems

# Practice Final Exam_Sol Problems - PRACTICE FINAL EXAM Key...

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PRACTICE FINAL EXAM Key to Problems

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Chapter 1 1. During 2010, Eddy Co. paid \$16,000 for direct material, \$ 17,000 in wages for production workers, and \$24,000 in wages for sales personnel. Lease payments and utilities on the production facilities amounted to \$7,000 . General, selling, and administrative expenses were \$6,000. The company owns a manufacturing equipment. The original cost of the equipment is \$30,000 and has a salvage value of \$5,000 after 5 years. Depreciation on sales car equals \$6,000. The company produced 5,000 units and sold 3,000 units at a price of \$10.00 a unit. The cost of goods sold is which of the following amounts? A. \$64,000 B. \$32,000 C. \$27,000 D. \$45,000 Equipment Depreciation = (30,000 – 5,000) / 5 = 5,000 Product cost = 16,000 + 17,000 + 7000 + 5000 = \$ 45,000 Average product cost = \$45,000 / 5,000 units = \$ 9 COGS = 3000 units x \$9 = 27,000
Relevant Information for Special Decisions 2. What is the effect on the financial statements of recording a \$10,000 payment for sales personnel in cash? Assets = Liab. + Equity Rev. - Exp. = Net Inc. A) +- / n/a n/a n/a + - B) - n/a - n/a + - C) - n/a - n/a n/a n/a D) + / - n/a n/a n/a n/a n/a Chapter 1 If instead this was for productions workers Product Cost: No effect on IS BS Inventory Asset + Inventory - Cash Period Cost: Expense Immediately on IS IS + Expenses & - NI BS - Cash & - Equity (RE)

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Chapter 2 What amount was the company's operating leverage factor? a. 0.44 b. 2.27 c. 2.36 d. 2.72 6. The following income statement is provided for Barron Company in 2010: Contribution Income Statement: Sales Revenue 50,000 Minus VC: COGS 20,000 Supplies 5,000 25,000 Contribution Margin 25,000 Operating leverage = CM / NI = = 25,000 / 11,000 = 2.27
Chapter 2 7. The magnitude of operating leverage for Perkins Corporation is 3.4 when sales are \$100,000. If sales increase to \$110,000, profits would be expected to increase by what percent? a. 2.9% b. 34% c. 60% d. 37% % increase in profit = Operating Leverage x % increase in sales = 3.4 x 10% = 34%

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Chapter 2 8. Handy Hiking produces backpacks. In 2010, its highest and lowest production levels occurred in July and January, respectively. In July, it produced 4,000 backpacks at a total cost of \$110,000. In January, it produced 2,500 backpacks at a total cost of \$87,500. Using the high/low method, the average variable cost of producing a backpack was: a. \$15.00 b. \$31.25 c. \$30.38 d. \$0.067 Backpacks Cost \$ High 4000 110,000 Low 2500 87,500 Difference 1500 \$22,500 Unit VC = \$22,500 / 1500 = \$15 / backpack
Chapter 2 9 . Handy Hiking produces backpacks. In 2010, its highest and lowest production levels occurred in July and January, respectively. In July, it produced 4,000 backpacks at a total cost of \$110,000. In January, it produced 2,500 backpacks at a total cost of \$87,500. Using the high/low method, the total fixed cost of producing a backpack was: a. \$50,000 b. \$1,500 c. \$22,500 d. \$109,733 Unit VC = \$22,500 / 1500 = \$15 / backpack Fixed cost = 110,000 – (4000 x 15) = 110,000 – 60,000 = \$50,000

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Chapter 3 10. CMA, Inc. produces a product that has a variable cost of \$2.50 per unit. The company's fixed costs are \$30,000. The product is sold for \$5.00 per unit and the company desires to earn a target profit of \$10,000. What amount of sales that will be necessary to earn the desired profit?
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## This note was uploaded on 02/22/2012 for the course BUAD 2050 taught by Professor Nicholasw.schroeder during the Spring '09 term at Toledo.

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Practice Final Exam_Sol Problems - PRACTICE FINAL EXAM Key...

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