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ACCT 346 DeVry Week 6 Quiz 2 Different Sets

(c) For the month of

(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

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