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ACCT 6273
Final Exam
100 points, total.
For partial credit, formulas and work, appropriately labeled, must be shown. There is no partial credit for multiple choice or true/false questions.
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1.     Lincoln Company manufactures and sells small electric heaters for homes and offices. The company’s income statement for the FY2014 is given below:
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                                                                                      Total          Per unit
Sales (30,000 units)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â $1,800,000Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â $60
Less variable expenses                   1,440,000                   48
Contribution margin                           360,000                 $12
Less fixed expenses                           264,000
Net income                                     $  96,000
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a.      Compute the company’s break-even point in units. [8 points]
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                                                                                        Answer____________________
b.     If Lincoln Company increases its price to $100, do you expect the breakeven point in units to be more or less than the number you calculated in question 1a above? Why?
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Circle (or highlight) one [1 point]: More than question 1a                  Less than question 1aÂ
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Explain why, but do not use calculations. [3 points]
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c.      Confirm your answer to question 1a above by preparing a contribution margin income statement. [4 points]
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d.     Assume that next year management wants the company to earn a minimum profit of $162,000. How many units be sold to meet this target profit figure? [3 points]
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Answer: ____________________
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The following information pertains to the next three questions 2-4.
Fifer Company produces two types of entry doors: the Hollow Core and the Solid Door models. The Company has used direct labor dollars to allocate the overhead cost of $47,450,000.
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The company’s CFO, Brian Smythe, has offered the following information regarding the two products:
 |
Hollow Core |
Solid Door |
Sales in units |
400,000 |
50,000 |
 |
 |
 |
Sales price per unit |
$475.00 |
$650.00 |
Direct materials per unit |
55.00 |
130.00 |
Direct labor cost per unit |
75.00 |
50.00 |
 |
 |
 |
The company has hired you as an outside consultant to review the cost system and make recommendations. You decide that an Activity Based Cost system should be considered and compile the following information based on conversations with the production manager:
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Activity |
Cost Driver |
Cost |
Order Taking |
Number of orders |
$Â Â Â Â 500,000 |
Setups |
Number of setups |
5,000,000 |
Machine cost |
Number of machine hours |
41,950,000 |
 |
 |
 |
The number of transactions for each cost driver is as follows:
Cost Driver |
Total |
Hollow |
Solid |
|
Number of orders |
500 |
100 |
400 |
|
Number of setups |
2,500 |
2,000 |
500 |
|
Number of machine hours |
600,000 |
300,000 |
300,000 |
|
 |  |  |  |  |
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2. Compute the product cost per door (i.e., per unit) using the traditional allocation system based on direct labor dollars [8 points]
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                                                Hollow Core                                      Solid Door
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Product Cost per door             ____________                                   ____________
3. Compute the product cost per door (per unit) using activity based costing for each product.        [10 points]
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                                                Hollow Core                                      Solid Door
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Product Cost per door             ____________                                   ____________
4. How should Mr. Smythe explain the reasons for any differences observed in your analysis above?        [4 points]
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5.     Barker Company produces a single product. The standard direct costs for the product are as follows:
     Direct materials (4 yds.@ $5/yd.)                                 $20
     Direct labor (1.5 hrs.@ $10/hr.)                                    $15
During a recent period the company produced 1,200 units of product. Various costs associated with the production of these units are given below:
     Direct materials purchased (5,000 yds.)                $24,500
     Direct materials used in production                   4,700 yds.
     Direct labor cost incurred (1,900 hours)                $18,297
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a.      The materials price variance for the period is: [4 points]
Answer: _______________
b.     The materials quantity (or usage) variance for the period is: [4 points]
Answer: ______________
c.      The labor rate variance for the period is: [4 points]
Answer: ______________
d.     The labor efficiency variance for the period is: [4 points]
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Answer: ______________
6.     Youngstown Company provides the following standard cost data:
Direct Material (3 gallons @ $5 per gallon)Â Â Â Â Â Â Â Â Â Â Â Â Â $15.00
Direct Labor (2 hours @ $12 per hour)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â $24.00
During the period, Youngstown Company produced and sold 24,000 units. Following are the amounts of material and labor used to produce the 24,000 units, and their respective actual costs:
Direct Material:Â 73,100 gallons at $5.05 per gallon
Direct Labor:Â Â Â Â Â 48,000 hours at $12.08 per hour
Circle (or highlight) the correct answer.
a.      The Direct Material price variance was: [3 points]
A) F
B) U
C) 0
b.     The Direct Material usage variance was: [3 points]
A) F
B) U
C) 0
c.      The Direct Labor rate variance was: [3 points]
A) F
B) U
C) 0
d.     The Direct Labor efficiency variance was: [3 points]
A) F
B) U
C) 0
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7.     Following is Perry Corporation’s original budget for 2013, and their actual results for 2013. [32 points]
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 |
 |
Original Budget |
 |
 |
(100,000 units) |
Materials |
 |
 |
     Fabric |
100,000 yds @ $5.40/yd |
$540,000 |
     Steel tubing |
25,000 lbs @ $12.10/lb |
302,500 |
     Padding |
50,000 lbs @ $.50/lb |
25,000 |
Direct Labor |
 |
 |
     Machining |
30,000 hrs @ $19/hr |
570,000 |
     Assembly |
10,000 hrs @ $11.80/hr |
118,000 |
Overhead |
 |
 |
     Rent |
 |
100,000 |
     Property taxes |
 |
10,000 |
     Other Overhead      (25% variable) |
 |
200,000 |
Total |
 |
$1,865,500 |
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Actual Results |
 |
 |
(120,000 units) |
Materials |
 |
 |
     Fabric |
125,000 yds @ $5.50/yd |
$687,500 |
     Steel tubing |
32,000 lbs @ $12.20/lb |
390,400 |
     Padding |
65,000lbs @ .49/lb |
31,850 |
Direct Labor |
 |
 |
     Machining |
35,000 hrs @ $18/hr |
630,000 |
     Assembly |
11,000 hrs @ $11.50/hr |
126,500 |
Overhead |
 |
 |
     Rent |
 |
96,000 |
     Property taxes |
 |
10,000 |
     Other Overhead  |
 |
210,000 |
Total |
 |
$2,182,250 |
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Using the format on the following page, prepare the flexible budget needed to evaluate Perry Corporation’s performance for 2013, and compute the Flex-Actual Variances. Show your calculations.
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Put your answers to Question 7 here:
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 |
Calculations |
 Flexible Budget |
Actual (120,000 units) |
Flex – Actual |
 |
 |
 |
 |
 |
Materials |
 |
 |
 |
 |
     Fabric |
  |
 |
$687,500 |
 |
     Steel tubing |
  |
 |
390,400 |
 |
     Padding |
  |
 |
31,850 |
 |
Direct Labor |
 |
 |
 |
 |
     Machining |
  |
 |
630,000 |
 |
     Assembly |
  |
 |
126,500 |
 |
Overhead |
 |
 |
 |
 |
     Rent |
  |
 |
96,000 |
 |
     Property taxes |
  |
 |
10,000 |
 |
     Other Overhead      (25% variable) |
 |
 |
210,000 |
 |
Total |
 |
  |
$2,182,250 |
ACC-----------T 6-----------273----------- Fi-----------nal----------- Ex-----------am -----------ACC-----------T62-----------73 -----------Fin-----------al -----------Exa-----------m -----------Â -----------