ACCT 505 Final Examination – latest 2016

ACCT 505 Final Examination – latest 2016
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ACCT 505 Final Examination – latest 2016
1. (TCO E) Designing a new product is a(n) (Points : 5)
batch-level activity.
product-level activity.
unit-level activity.
organization sustaining activity.
Question 2.2. (TCO G) Given the following data, what would ROI be?
Sales $70,000
Net operating income $10,000
Contribution margin $20,000
Average operating assets $50,000
Stockholder’s equity $25,000

(Points : 5)
6.0%
15.0%
12.5%
20.0%
1. RspGF=”font-family:’Arial’;font-size:10pt;”(TCO C) Longiotti Corporation produces
and sells a single product. Data concerning that product appear below.
Selling price per unit $375.00
Variable expense per unit $144.00
Fixed expense per month $1,686,300
Required:
Determine the monthly breakeven in units or dollar sales. Show your work! (Points : 25)
2. TCO B) Maverick Corporation uses the weighted-average method in its process costing
system. Data concerning the first processing department for the most recent month are
listed below.
Work in process, beginning:
Units in beginning work in process inventory 400
Materials costs $6,900
Conversion costs $2,500

Percent complete for materials 80%
Percent complete for conversion 15%
Units started into production during the month 6,000
Units transferred to the next department during the month 5,600
Materials costs added during the month $112,500
Conversion costs added during the month $210,300
Ending work in process:
Units in ending work-in-process inventory 800
Percentage complete for materials 70%
Percentage complete for conversion 30%
Required: Calculate the equivalent units for conversion for the month in the first processing
department. (Points : 25)\
1. TCO D) Topple Company produces a single product. Operating data for the company
and its absorption costing income statement for the last year are presented below.
Units in beginning inventory 2,000
Units produced 9,000
Units sold 10,000
Sales $100,000
Less cost of goods sold:
Beginning inventory 12,000
Add cost of goods manufactured 54,000
Goods available for sale 66,000
Less ending inventory 6,000
Cost of goods sold 60,000
Gross margin 40,000

Less selling and admin. expenses 28,000
Net operating income $12,000
Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totals $18,000 for
the year. The fixed manufacturing overhead was applied at a rate of $2 per unit. Variable selling
and administrative expenses were $1 per unit sold.
Required: Prepare a new income statement for the year using variable costing. Comment on the
differences between the absorption costing and the variable costing income statements. (Points :
30)
2. TCO I) (Ignore income taxes in this problem.) Bill Anders retires in 8 years. He has
$650,000 to invest and is considering a franchise for a fast-food outlet. He would have to
purchase equipment costing $500,000 to equip the outlet and invest an additional
$150,000 for inventories and other working capital needs. Other outlets in the fast-food
chain have an annual net cash inflow of about $160,000. Mr. Anders would close the
outlet in 8 years. He estimates that the equipment could be sold at that time for about
10% of its original cost. Mr. Anders’ required rate of return is 16%.
Required:
Part A: What is the investment’s net present value when the discount rate is 16%?
Part B: Refer to your calculations. Is this an acceptable investment? Why or why not? (Points :
30)
3. TCO A) The following data (in thousands of dollars) have been taken from the
accounting records of the Maroon Corporation for the just-completed year.
Sales 1,300

Raw materials inventory, beginning 25
Raw materials inventory, ending 30
Purchases of raw materials 250
Direct labor 350
Manufacturing overhead 500
Administrative expenses 300
Selling expenses 250
Work in process inventory, beginning 150
Work in process inventory, ending 100
Finished goods inventory, beginning 80
Finished goods inventory, ending 110
Use the above data to prepare (in thousands of dollars) a schedule of Cost of Goods
Manufactured and a Schedule of Cost of Goods Sold for the year. In addition, what is the impact
on the financial statements if the ending finished goods inventory is overstated or understated?
(Points : 25)
4. TCO F) Walker Corporation is preparing its cash budget for November. The budgeted
beginning cash balance is $43,000. Budgeted cash receipts total $117,000 and budgeted
cash disbursements total $122,000. The desired ending cash balance is $55,000. The
company can borrow up to $100,000 at any time from a local bank, with interest not due
until the following month.
Required:
Prepare the company’s cash budget for November in good form. Make sure to indicate what
borrowing, if any, would be needed to attain the desired ending cash balance (Points : 25)
6. (TCO H) Lindon Company uses 7,500 units of Part Y each year as a component in the
assembly of one of its products. The company is presently producing Part Y internally at
a total cost of $119,000 as follows.

Direct materials
$26,000
Direct labor
28,000
Variable manufacturing overhead
20,000
Fixed manufacturing overhead
45,000
Total costs
$119,000

An outside supplier has offered to provide Part Y at a price of $12 per unit. If Lindon stops
producing the part internally, one third of the fixed manufacturing overhead would be
eliminated.
Required: Prepare a make-or-buy analysis showing the annual advantage or disadvantage of
accepting the outside supplier’s offer. Please state clearly whether the part should be made or
bought and share your work.
(Points : 30)
7. TCO B) Sandler Corporation bases its predetermined overhead rate on the estimated
machine hours for the upcoming year. Data for the upcoming year appear below.
Estimated machine hours 75,000
Estimated variable manufacturing overhead $4.50 per machine hour
Estimated total fixed manufacturing overhead $825,000
The actual machine hours for the year turned out to be 77,000.
Required:
Compute the company’s predetermined overhead rate. (Points : 25)