ACCT 346 DeVry Week 6 Quiz 2 Different Sets

ACCT 346 DeVry Week 6 Quiz 2 Different Sets
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ACCT 346 DeVry Week 6 Quiz (2 Different Sets)
ACCT 346 DeVry Week 6 Quiz (Version 1)
1. (TCO 7) Elliot’s Escargots sells commercial and home snail extraction tools and serving pieces. Currently, the snail
extraction line of products takes up approximately 50 percent of the company’s retail floor space. The CEO of Elliot’s
wants to decide if the company should continue offering snail extraction tools or focus only on serving pieces. If the
snail extraction tools are dropped, salaries and other direct fixed costs can be avoided and serving piece sales would
increase by 13 percent. Allocated fixed costs are assigned based on relative sales.
Snail Extraction
Serving
Tools Pieces Total
Sales $1,200,000 $800,000 $2,000,000
Less cost of goods sold 700,000 500,000 1,200,000
Contribution margin 500,000 300,000 800,000
Less direct fixed costs:
Salaries 175,000 175,000 350,000
Other 60,000 60,000 120,000
Less allocated fixed costs:
Rent 14,118 9,882 24,000
Insurance 3,529 2,471 6,000
Cleaning 4,117 2,883 7,000
Executive salary 76,470 53,530 130,000
Other 7,058 4,942 12,000
Total costs 340,292 308,708 649,000
Net income $159,708 ($ 8,708) $151,000
2. (TCO 4) Paschal’s Parasailing Enterprises has estimated that fixed costs per month are $115,600 and variable
cost per dollar of sales is $0.38.
(a) What is the break-even point per month in sales?
(b) What level of sales is needed for a monthly profit of $67,000?

(c) For the month of August, Paschal’s anticipates sales of $585,000. What is the expected level of profit?
3. (TCO 6) Princess Cruise Lines has the following service departments; concierge, valet, and maintenance. Expense
for these departments are allocated to Mediterranean and Trans-Atlantic cruises. Expenses for the departments are
totaled (both variable and fixed components are combined) and as follows:
Concierge $2,500,000
Valet $1,750,000
Maintenance $4,250,000
The sea miles logged are 6,000,000 for the Mediterranean and 18,000,000 for the Trans-
Atlanticvoyages.
Based upon the sea miles logged, allocate the service department costs.
4. (TCO 9) Thurman Munster, the owner of Adams Family RVs, is considering the addition of a service center his
lot. The building and equipment are estimated to cost $1,100,000 and both the building and equipment will be
depreciated over 10 years using the straight-line method. The building and equipment have zero estimated residual
value at the end of 10 years. Munster’s required rate of return for this project is 12 percent. Net income related to each
year of the investment is as follows:
Revenue $450,000
Less:
Material cost $ 60,000
Labor 100,000
Depreciation 110,000
Other 10,000 280,000
Income before taxes 170,000
Taxes at 40% 68,000
Net income $102,000
(a) Determine the net present value of the investment in the service center. Should Munster invest in the service center?
(b) Calculate the internal rate of return of the investment to the nearest ½ percent.
(c) Calculate the payback period of the investment.
(d) Calculate the accounting rate of return.
5. (TCO 5) The following information relates to Vice Versa Ventures for calendar year 20XX, the company’s first year
of operations:
Units produced 20,000
Units sold 17,000
Selling price per unit $35
Direct material per unit $5
Direct labor per unit $5
Variable manufacturing overhead per unit $2
Variable selling cost per unit $3
Annual fixed manufacturing overhead $160,000

Annual fixed selling and administrative expense $80,000
(a) Prepare an income statement using full costing.
(b) Prepare an income statement using variable costing.
6. (TCO 8) Leekee Shipyards has a new barnacle removing product for ocean going vessels. The company invests
$1,200,000 in operating assets and plans to produce and sell 400,000 units per year. Leekee wants to make a return
on investment of 20% each year. Leekee needs to know what price to charge for this product.
Use the absorption costing approach to determine the markup necessary to make the desired return on investment
based on the following information:
Per Unit
Total
Direct Materials $ 2.00
Direct Labor $ 1.50
Variable Manufacturing Overhead $ 1.00
Fixed Manufacturing Overhead $ 100,000
Variable Selling and Administrative Expense $ 0.10
Fixed Selling and Administrative Expense $ 100,000
ACCT 346 DeVry Week 6 Quiz (Version 2)
Question 1. Question : Which of the following costs is not relevant in decision making?
Sunk cost
Incremental cost
Opportunity cost
Differential cost
Question 2. Question : Which of the following does not take the time value of money into account?
Internal rate of return
Net present value
Payback period
None of the above
Question 3. Question : Which of the following is not a capital budgeting decision?
Purchasing new equipment
Replacing old equipment
Producing a film project
Planning for retirement
Question 4. Question : Which of the following is an example of a sunk cost?
Direct materials
Variable overhead
Equipment depreciation

Future cost
Question 5. Question : A revenue that differs between alternatives is called a(n):
Incremental revenue.
Irrelevant revenue.
Joint revenue.
Opportunity revenue.
Question 6. Question : Capital expenditure decisions
are also called capital budgeting decisions.
involve the acquisition of long-lived assets.
have a major, long-term effect on a firm’s operations.
All of the above are correct
Question 7. Question : The rate of return that equates the present value of future cash flows to the investment
outlay is the
hurdle rate.
internal rate of return.
payback return.
accounting rate of return.
Question 8. Question : Which of the following is never considered in incremental analysis?
Incremental revenue
Sunk costs
Incremental profit
Differential costs
Question 9. Question : Which of the following is often not a differential cost?
Direct labor
Direct material
Variable manufacturing overhead
Fixed manufacturing overhead
Question 10. Question : The required rate of return used to calculate an investment’s net present value is related
to the firm’s
contribution margin.
cost of capital.
depreciation methods.
fixed costs.