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ACCT 505 Week 1-7 All Discussion Questions
ACCT 505 Week 1 Case Study
ACCT 505 Week 2 Quiz Job Order and Process Costing Systems
ACCT 505 Week 2 Quiz Set 2
ACCT 505 Week 3 Case Study II
ACCT 505 Week 4 Midterm Exam
ACCT 505 Week 5 Course Project 1 LBJ Company (New)
ACCT 505 Week 5 Measuring Performance - Course Project A
ACCT 505 Week 6 Quiz Segment Reporting and Relevant Costs for
Decisions
ACCT 505 Week 7 Capital Budgeting Course Project
ACCT 505 Week 7 Course Project 2 Capital Budgeting Decision
(New)
ACCT 505 Final Exam Guide (New) Set 1
ACCT 505 Midterm Exam (New) Set 1
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ACCT 505 Final Exam (Devry)
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ACCT 505 Final Exam
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ACCT 505 Final Exam (New) All 3 Set
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Score 248/250
tiple Choice 2
Short 2
Essay 7
Question 1 : (TCO E) Designing a new product is a(n)
2. Question : (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
1. Question : (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!
2. Question : (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
1. Question : (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
2. Question : (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?
3. Question : (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?
4. Question : (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
5. Question : (TCO F) Bella Lugosi Holdings, Inc. (BLH), has

collected the following
operating information for its current month's activity. Using this
information,
prepare a flexible budget analysis to determine how well BLH
performed in
terms of cost control.
Static Budget
Activity level (in units) 5,250 5,178
Variable costs:
Indirect materials $24,182 $23,476
Utilities $22,356 $22,674
Fixed costs:
Administration $63,450 $65,500
Rent $65,317 $63,904
6. Question : (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.
7. Question : (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.
Set 2
1. (TCO C) Madlem, Inc., produces and sells a single product whose

selling price is $120.00 per unit and whose variable expense is $46.20
per unit. The company's fixed expense is $405,900 per month.
Required: Determine the monthly breakeven in either unit or total
dollar sales. Show your work! (Points : 25)
Question 2.2. (TCO B) Industrial Supply 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.
Ending work in process:

Units in ending work-in-process inventory 1,200
Percentage complete for materials 75%
Percentage complete for conversion 30%
Required: Calculate the equivalent units for conversion for the month
in the first processing department. (Points : 25)
Question 1.1. (TCO D) The following absorption costing income

statement and additional data are available from the accounting
records of Bernon Co. for the month ended May 31, XXXX. During
the accounting period, 17,000 units were manufactured and sold at a
price of $60 per unit. There were no beginning inventories.
Bernon Co.
Absorption Costing Income Statement
for the Month Ended May 31, XXXX
Sales (17,000 @ $60) $1,020,000
Gross profit $ 408,000
Selling and administrative expenses 66,000
Income from operations $ 342,000
Additional Information:
Cost Total Cost Number of Units Unit Cost
Manufacturing costs:
Variable $442,000 17,000 $26
Fixed 170,000 17,000 10
Total $612,000 $36
Selling and administrative expenses:

Variable ($2 per unit sold) $34,000
Fixed 32,000
Total $66,000
Required: Prepare a new income statement for the year using variable
costing. Comment on the differences, if any, between the absorption
costing and the variable costing income statements. (Points : 30)
Question 2.2. (TCO I) (Ignore income taxes in this problem.) Simpson

Beauty Products Corporation is considering the production of a new
conditioning shampoo that will require the purchase of new mixing
machinery. The machinery will cost $700,000, is expected to have a
useful life of 10 years, and is expected to have a salvage value of
$70,000 at the end of 10 years. The machinery will also need a
$45,000 overhaul at the end of Year 5. A $60,000 increase in working
capital will be needed for this investment project. The working capital
will be released at the end of the 10 years. The new shampoo is
expected to generate net cash inflows of $150,000 per year for each of
the 10 years. Simpson's discount rate is 18%.
Items Year(s) Amount 18% Factor Present Value
Cost of machinery Now ($700,000) 1 ($700,000)
Working capital increase Now ($60,000) 1
($60,000)
Annual cash inflows 110 $150,000 4.494 674,100
Overhaul 5 ($45,000) 0.437 ($19,665)
Salvage value 10 $70,000 0.191 13,370
Working capital release 10 $60,000 0.191 11,460
Net present value ($80,735)
Required:
(a) What is the net present value of this investment opportunity?
(b) Based on your answer to (a) above, should Simpson go ahead with
the new conditioning shampoo? (Points : 30)
Question 3.3. (TCO A) The following data (in thousands of dollars)

Corporation for the just-completed year.
Sales 1,700
Direct labor 360
Work-in-process inventory, beginning 120
Work-in-process inventory, ending 150

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)
Question 4.4. (TCO F) Walker Corporation is preparing its 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:
sure to indicate what borrowing, if any, would be needed to attain the
desired ending cash balance(Points : 25)
Question 5.5. (TCO F) The following overhead data are for a

department of a large company.
Actual Costs Incurred Static Budget
Activity level (in units) 360 340
Variable costs:
Electricity $2,536 $2,414
Fixed costs:
Rent $6,310 $6,400
Required: Construct a flexible budget performance report that would

be useful in assessing how well costs were controlled in this
department. (Points : 25)
Question 6.6. (TCO H) McMullen Co. uses 10,000 units of Part X

each year as a component in the assembly of one of its products. The
company is presently producing Part X internally at a total cost of
$125,000 as follows.
Direct materials $40,000

Direct labor 30,000
Variable manufacturing overhead 25,000
Fixed manufacturing overhead 30,000
An outside supplier has offered to provide Part X at a price of $10
per unit. If McMullen stops producing the part internally, one third of
the fixed manufacturing overhead would be eliminated.

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)
Question 7.7. (TCO B) Buckhorn Corporation bases its

predetermined overhead rate on the estimated machine hours for the
upcoming year. Data for the upcoming year appear below.
Estimated variable manufacturing overhead $7.77 per machine hour
Estimated total fixed manufacturing overhead $888,000
Required: Compute the company's predetermined overhead rate.

(Points : 25)
Set 3
(TCO E) Preparing purchase orders is a(n) (Points : 5)
batch-level activity.
product-level activity.
unit-level activity.
organization sustaining activity.
2. (TCO G) Given the following data, what would ROI be?

Sales $70,000
(Points : 5)
28.6%
20.0%
40.0%
50.0%
3. (TCO C) Heckaman Corporation produces and sells a single

product. Data concerning that product appear below.
Fixed expense per month $299,115
4. TCO B) Industrial Supply 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.
5. (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 0
Units sold 7,000
Sales $100,000
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.
costing. Comment on the differences between the absorption costing
and the variable costing income statements. (Points : 30)
6. (TCO I) (Ignore income taxes in this problem.) Simpson Beauty
Products Corporation is considering the production of a new
machinery. The machinery will cost $700,000, is
Required:
Part A: What is the net present value of this investment opportunity?
Part B: Based on your answer to (a) above, should Simpson go ahead
with the new conditioning shampoo? (Points : 30)
PART B:
Simpson should not go ahead and purchase the shampoo machine
since the NPV is negative.
7. (TCO A) The following data (in thousands of dollars) have been
taken from the accounting records of Karmana Corporation for the
just-completed year.
8. (TCO F) Matuseski Corporation is preparing its cash budget for

October. The budgeted beginning cash balance is $54,000. Budgeted
cash receipts total $127,000 and budgeted cash disbursements total
$99,000. The desired ending cash balance is $100,000. The company
can borrow up to $150,000 at any time from a local bank, with
interest not due until the following month.
Required: Prepare the company's cash budget for October in good

form. Make sure to indicate what borrowing, if any, would be needed
to attain the desired ending cash balance. (Points : 25)
9. (TCO F) Bella Lugosi Holdings, Inc. (BLH), has collected the

following operating information for its current month's activity. Using
this information, prepare a flexible budget analysis to determine how
well BLH performed in terms of cost control.

Variable costs:
Utilities $22,356 $22,674
Fixed costs:
Rent $65,317 $63,904
(Points : 25)
10. (TCO H) Lindon Company uses 10,000 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 $100,000 as
follows.
Direct materials............................................... $20,000
Direct labor...................................................... 40,000
Variable manufacturing overhead...................... 16,000
Fixed manufacturing overhead.......................
24,000
Total costs.......................................................100,000
unit. If Lindon stops producing the part internally, one third of the
fixed manufacturing overhead would be eliminated.
11. (TCO B) Wahr Corporation bases its predetermined overhead rate

on the estimated labor hours for the upcoming year. At the beginning
of the most recently completed year, the company estimated the labor
hours for the upcoming year at 35,000. The estimated variable
manufacturing overhead was $7.25 per labor hour and the estimated
total fixed manufacturing overhead was $585,000. The actual labor
hours for the year turned out to be 33,000.
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Score 248/250 Multiple Choice 2 Short 2 Essay 7
Question 1 : (TCO E) Designing a new product is a(n)
2. Question : (TCO G) Given the following data, what would ROI be?
Sales $70,000
1. Question : (TCO C) Longiotti Corporation produces and sells a

single product. Data
concerning that product appear below.
Fixed expense per month $1,686,300
Required:
Determine the monthly breakeven in units or dollar sales. Show your
work!
2. Question : (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.
1. Question : (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 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
Gross margin 40,000
Less selling and admin. expenses 28,000
2. Question : (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?
3. Question : (TCO A) The following data (in thousands of dollars)

Corporation for the just-completed
year.
Sales 1,300
Direct labor 350
Work in process inventory, beginning 150
Work in process inventory, ending 100
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?
4. Question : (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:
sure
to indicate what borrowing, if any, would be needed to attain the
desired
ending cash balance
5. Question : (TCO F) Bella Lugosi Holdings, Inc. (BLH), has

collected the following
operating information for its current month's activity. Using this
information,
prepare a flexible budget analysis to determine how well BLH
performed in
terms of cost control.
Static Budget
Variable costs:
Utilities $22,356 $22,674
Fixed costs:
Rent $65,317 $63,904
6. Question : (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
unit. If
Lindon stops producing the part internally, one third of the fixed
manufacturing overhead would be eliminated.
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.
7. Question : (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 variable manufacturing
overhead $4.50 per machine hour
Estimated total fixed manufacturing
overhead $825,000
Required:
Compute the company's predetermined overhead rate.
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Set 2
1. (TCO C) Madlem, Inc., produces and sells a single product whose

selling price is $120.00 per unit and whose variable expense is $46.20
per unit. The company's fixed expense is $405,900 per month.
Required: Determine the monthly breakeven in either unit or total
dollar sales. Show your work! (Points : 25)
Question 2.2. (TCO B) Industrial Supply 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.
Ending work in process:

Units in ending work-in-process inventory 1,200
Percentage complete for materials 75%
Percentage complete for conversion 30%
Required: Calculate the equivalent units for conversion for the month
in the first processing department. (Points : 25)
Question 1.1. (TCO D) The following absorption costing income

statement and additional data are available from the accounting
records of Bernon Co. for the month ended May 31, XXXX. During
the accounting period, 17,000 units were manufactured and sold at a
price of $60 per unit. There were no beginning inventories.
Bernon Co.
Absorption Costing Income Statement
for the Month Ended May 31, XXXX
Sales (17,000 @ $60) $1,020,000
Gross profit $ 408,000
Selling and administrative expenses 66,000
Income from operations $ 342,000
Additional Information:
Cost Total Cost Number of Units Unit Cost
Manufacturing costs:
Variable $442,000 17,000 $26
Fixed 170,000 17,000 10
Total $612,000 $36
Selling and administrative expenses:

Variable ($2 per unit sold) $34,000
Fixed 32,000
Total $66,000
costing. Comment on the differences, if any, between the absorption
costing and the variable costing income statements. (Points : 30)
Question 2.2. (TCO I) (Ignore income taxes in this problem.) Simpson

Beauty Products Corporation is considering the production of a new
machinery. The machinery will cost $700,000, is expected to have a
useful life of 10 years, and is expected to have a salvage value of
$70,000 at the end of 10 years. The machinery will also need a
$45,000 overhaul at the end of Year 5. A $60,000 increase in working
capital will be needed for this investment project. The working capital
will be released at the end of the 10 years. The new shampoo is
expected to generate net cash inflows of $150,000 per year for each of
the 10 years. Simpson's discount rate is 18%.
Items Year(s) Amount 18% Factor Present Value
Cost of machinery Now ($700,000) 1 ($700,000)
Working capital increase Now ($60,000) 1
($60,000)
Annual cash inflows 110 $150,000 4.494 674,100
Overhaul 5 ($45,000) 0.437 ($19,665)
Salvage value 10 $70,000 0.191 13,370
Working capital release 10 $60,000 0.191 11,460
Net present value ($80,735)
Required:
(a) What is the net present value of this investment opportunity?
(b) Based on your answer to (a) above, should Simpson go ahead with
the new conditioning shampoo? (Points : 30)
Question 3.3. (TCO A) The following data (in thousands of dollars)

Sales 1,700
Direct labor 360
Work-in-process inventory, beginning 120
Work-in-process inventory, ending 150

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)
Question 4.4. (TCO F) Walker Corporation is preparing its 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:
sure to indicate what borrowing, if any, would be needed to attain the
desired ending cash balance(Points : 25)
Question 5.5. (TCO F) The following overhead data are for a

department of a large company.
Activity level (in units) 360 340
Variable costs:
Electricity $2,536 $2,414
Fixed costs:
Rent $6,310 $6,400
Required: Construct a flexible budget performance report that would

be useful in assessing how well costs were controlled in this
department. (Points : 25)
Question 6.6. (TCO H) McMullen Co. uses 10,000 units of Part X

each year as a component in the assembly of one of its products. The
company is presently producing Part X internally at a total cost of
$125,000 as follows.

Direct labor 30,000
Variable manufacturing overhead 25,000
Fixed manufacturing overhead 30,000
An outside supplier has offered to provide Part X at a price of $10 per

unit. If McMullen stops producing the part internally, one third of the
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)
Question 7.7. (TCO B) Buckhorn Corporation bases its predetermined

overhead rate on the estimated machine hours for the upcoming year.
Data for the upcoming year appear below.
Estimated variable manufacturing overhead $7.77 per machine hour
Estimated total fixed manufacturing overhead $888,000
Required: Compute the company's predetermined overhead rate.

(Points : 25)
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(TCO E) Preparing purchase orders is a(n) (Points : 5)
batch-level activity.
product-level activity.
unit-level activity.
organization sustaining activity.
2. (TCO G) Given the following data, what would ROI be?

Sales $70,000
(Points : 5)
28.6%
20.0%
40.0%
50.0%
3. (TCO C) Heckaman Corporation produces and sells a single

product. Data concerning that product appear below.
Fixed expense per month $299,115
4. TCO B) Industrial Supply 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.
5. (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 sold 7,000
Sales $100,000
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.
costing. Comment on the differences between the absorption costing
and the variable costing income statements. (Points : 30)
6. (TCO I) (Ignore income taxes in this problem.) Simpson Beauty
Products Corporation is considering the production of a new
machinery. The machinery will cost $700,000, is
Required:
Part A: What is the net present value of this investment opportunity?
Part B: Based on your answer to (a) above, should Simpson go ahead
with the new conditioning shampoo? (Points : 30)
PART B:
Simpson should not go ahead and purchase the shampoo machine
since the NPV is negative.
taken from the accounting records of Karmana Corporation for the
just-completed year.
8. (TCO F) Matuseski Corporation is preparing its cash budget for

October. The budgeted beginning cash balance is $54,000. Budgeted
cash receipts total $127,000 and budgeted cash disbursements total
$99,000. The desired ending cash balance is $100,000. The company
can borrow up to $150,000 at any time from a local bank, with
interest not due until the following month.
Required: Prepare the company's cash budget for October in good

form. Make sure to indicate what borrowing, if any, would be needed
to attain the desired ending cash balance. (Points : 25)
9. (TCO F) Bella Lugosi Holdings, Inc. (BLH), has collected the

following operating information for its current month's activity. Using
this information, prepare a flexible budget analysis to determine how
well BLH performed in terms of cost control.

Variable costs:
Utilities $22,356 $22,674
Fixed costs:
Rent $65,317 $63,904
(Points : 25)
10. (TCO H) Lindon Company uses 10,000 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 $100,000 as
follows.
Direct materials............................................... $20,000
Direct labor...................................................... 40,000
Variable manufacturing overhead...................... 16,000
Fixed manufacturing overhead.......................
24,000
Total costs.......................................................100,000
unit. If Lindon stops producing the part internally, one third of the
11. (TCO B) Wahr Corporation bases its predetermined overhead rate

on the estimated labor hours for the upcoming year. At the beginning
of the most recently completed year, the company estimated the labor
hours for the upcoming year at 35,000. The estimated variable
manufacturing overhead was $7.25 per labor hour and the estimated
total fixed manufacturing overhead was $585,000. The actual labor
hours for the year turned out to be 33,000.
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ACCT 505 Midterm Exam (New) 6 Sets
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This Tutorial contains 6 Sets of Midterm Exam
1. (TCO A) Direct material cost is a part of (Points : 6)
Conversion Cost NO.... Prime Cost NO.
Conversion Cost YES.... Prime Cost NO.
Conversion Cost YES.... Prime Cost YES.
Conversion Cost NO.... Prime Cost YES.
Question 2.2. (TCO A) Total fixed costs (Points : 6)

will increase with increases in activity.
will decrease with increases in activity.
are not affected by activity.
should be ignored in making decisions because they can never
change.
Question 3.3. (TCO A) Property taxes on a company's factory

building would be classified as a(n) (Points : 6)
variable cost.
opportunity cost.
period cost.
product cost.
Question 4.4. (TCO C) When the activity level is expected to

increase within the relevant range, what effects would be anticipated
with respect to each of the following? (Points : 6)
Fixed costs per unit decrease and variable costs per unit do not
change.
Fixed costs per unit increase and variable costs per unit do not
change.
Fixed costs per unit do not change and variable costs per unit do
not change.
Fixed costs per unit do not change and variable costs per unit
increase.
Question 5.5. (TCO B) Which of the following statements is true?

I. Overhead application may be made slowly as a job is worked on.
II. Overhead application may be made in a single application at the
time of completion of the job.
III. Overhead application should be made to any job not completed at
year end in order to properly value the work in process inventory.
(Points : 6)
Only statement I is true.
Only statement II is true.
Both statements I and II are true.
Statements I, II, and III are true.
Question 6.6. (TCO B) Under a job-order costing system, the product

being manufactured (Points : 6)
is homogeneous.
passes from one manufacturing department to the next before
being completed.
can be custom manufactured.
has a unit cost that is easy to calculate by dividing total
production costs by the units produced.
Question 7.7. (TCO F) Equivalent units for a process costing system

using the FIFO method would be equal to (Points : 6)
units completed during the period, plus equivalent units in the
ending work-in-process inventory.
units started and completed during the period, plus equivalent
units in the ending work-in-process inventory.
units completed during the period and transferred out.
units started and completed during the period, plus equivalent
units in the ending work-in-process inventory, plus work needed to
complete units in the beginning work-in-process inventory.
Question 8.8. (TCO C) The contribution margin equals (Points : 6)

sales - expenses.
sales - variable costs.
sales - cost of goods sold.
sales - fixed costs.
Question 9.9. (TCO C) Which of the following would not affect the
break-even point? (Points : 6)
Variable expense per unit
Number of units sold
Total fixed expenses
Selling price per unit
Question 10.10. (TCO D) Under variable costing, (Points : 6)

inventory costs will be lower than under absorption costing.
inventory costs will be higher than under absorption costing.
net operating income will always be lower than under
absorption costing.
net operating income will always be higher than under
absorption costing.

taken from the accounting records of Larop Corporation for the just-
completed year.
Sales $950
Purchases of raw materials $225
Direct labor $250
Manufacturing overhead $295
Administrative expenses $150
Selling expenses $140
Raw materials inventory, beginning $30
Raw materials inventory, ending $45
Work-in-process inventory, beginning $20
Work-in-process inventory, ending $55
Finished goods inventory, beginning $100
Finished goods inventory, ending $135
Prepare a Schedule of Cost of Goods Manufactured statement in the
text box below. (Points : 15)
Schedule of cost of goods manufactured

Direct materials:
Question 2.2. (TCO B) The Nebraska Company manufactures a

product that goes through three processing departments. Information
relating to activity in the first department during June is given below.
Percentage Completed
Units Materials Conversion
Work in process, June 1 140,000 65% 45%
Work in process, Jun 30 120,000 75% 65%
The department started 580,000 units into production during the

month and transferred 600,000 completed units to the next
department.
Question 3.3. (TCO C) A tile manufacturer has supplied the following

data.
Boxes of tile produced and sold 625,000
Sales revenue $2,975,000
Variable manufacturing expense $1,720,000
Fixed manufacturing expense $790,000
Variable selling and admin expense $152,000
Fixed selling and admin expense $133,000
Question 4.4. (TCO D) The Hampton Company produces and sells a

single product. The following data refer to the year just completed.
Selling price $450

Units sold 22,000
Variable costs per unit:

Direct materials $150
Direct labor $75
Variable manufacturing overhead $25
Variable selling and admin $15
Fixed costs:
Fixed manufacturing overhead $275,000
Fixed selling and admin $200,000
Required:
Compute the cost of a single unit of product under both the absorption
costing and variable costing approaches.
Prepare an income statement for the year using absorption costing.
Prepare an income statement for the year using variable costing.
(Points : 30)
Question 1. Question : (TCO A) The variable portion of advertising

costs is a
Student Answer: Conversion YES... Period NO.

Conversion YES .... Period YES.
Conversion NO.... Period NO.
Conversion NO.... Period YES.
Question 2. Question : (TCO A) A cost incurred in the past that is not

relevant to any current decision is classified as a(n)
Student Answer: period cost.

incremental cost.
opportunity cost.
None of the above
Question 3. Question : (TCO A) Property taxes on a company's

factory building would be classified as a(n)
Student Answer: variable cost.

opportunity cost.
period cost.
product cost.
Question 4. Question : (TCO C) Within the relevant range, variable

costs can be expected to
Student Answer: vary in total in direct proportion to changes in the
activity level.
remain constant in total as the activity level changes.
increase on a per-unit basis as the activity level increases.
increase on a per-unit basis as the activity level decreases.
None of the above
Question 5. Question : (TCO B) Which of the following statements is

true?
Student Answer: Only statement I is true.

Question 6. Question : (TCO B) A job-order cost system is employed

in those situations when
Student Answer: many different products, jobs, or batches of

production are being produced each period.
manufacturing involves a single, homogeneous product that flows
evenly through the production process on a continuous basis.
the product moves from department to department before being
completed.
the unit cost of production is computed by dividing the total
production costs by the number of units produced.
Question 7. Question : (TCO B) The FIFO method only provides a
major advantage over the weighted-average method in that
Student Answer: the calculation of equivalent units is less complex

under the FIFO method.
the FIFO method treats units in the beginning inventory as if they
were started and completed during the current period.
the FIFO method provides measurements of work done during the
current period.
the weighted-average method ignores units in the beginning and
ending work-in-process inventories.
Question 8. Question : (TCO C) The contribution margin ratio

always increases when the
Student Answer: fixed expenses increase.

fixed expenses decrease.
variable expenses as a percentage of net sales increase.
variable expenses as a percentage of net sales decrease.
Question 9. Question : (TCO C) Which of the following would not

affect the break-even point?
Student Answer: Variable expense per unit

Question 10. Question : (TCO D) Under variable costing,
Student Answer: inventory costs will be lower than under

absorption costing.
net operating income will always be lower than under absorption
costing.
net operating income will always be higher than under absorption
costing.
Question 1. Question : (TCO A) The following data (in thousands of

dollars) have been taken from the accounting records of Larden
Sales $950
Direct labor $225

text box below.
Question 2. Question : (TCO B) The Florida Company manufactures

a product that goes through three processing departments. Information
Question 3. Question : (TCO C) Drake Company's income statement

for the most recent year appears below.
Sales (45,000 units) $1,350,000
Less: variable expenses 750,000
Contribution margin 600,000
Less: fixed expenses 375,000
Question 4. Question : (TCO D) The Hampton Company produces

and sells a single product. The following data refer to the year just
completed.
Selling price $450

Units sold 22,000

Direct labor $75
Fixed costs:
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Score 144/150 Multiple Choice 10 Essay 4
1. (TCO A) Direct material cost is a part of (Points : 6)

Conversion Cost NO.... Prime Cost NO.
Conversion Cost YES.... Prime Cost NO.
Conversion Cost YES.... Prime Cost YES.
Conversion Cost NO.... Prime Cost YES.
Question 2.2. (TCO A) Total fixed costs (Points : 6)

will increase with increases in activity.
will decrease with increases in activity.
are not affected by activity.
should be ignored in making decisions because they can never
change.
Question 3.3. (TCO A) Property taxes on a company's factory

building would be classified as a(n) (Points : 6)
variable cost.
opportunity cost.
period cost.
product cost.
Question 4.4. (TCO C) When the activity level is expected to increase

within the relevant range, what effects would be anticipated with
respect to each of the following? (Points : 6)
Fixed costs per unit decrease and variable costs per unit do not
change.
Fixed costs per unit increase and variable costs per unit do not
change.
Fixed costs per unit do not change and variable costs per unit do
not change.
Fixed costs per unit do not change and variable costs per unit
increase.
Question 5.5. (TCO B) Which of the following statements is true?

(Points : 6)
Only statement I is true.
Question 6.6. (TCO B) Under a job-order costing system, the product
being manufactured (Points : 6)
is homogeneous.
passes from one manufacturing department to the next before being
completed.
can be custom manufactured.
has a unit cost that is easy to calculate by dividing total production
costs by the units produced.
Question 7.7. (TCO F) Equivalent units for a process costing system

using the FIFO method would be equal to (Points : 6)
units completed during the period, plus equivalent units in the ending
work-in-process inventory.
units started and completed during the period, plus equivalent units in
the ending work-in-process inventory.
units completed during the period and transferred out.
units started and completed during the period, plus equivalent units in
the ending work-in-process inventory, plus work needed to complete
units in the beginning work-in-process inventory.
Question 8.8. (TCO C) The contribution margin equals (Points : 6)

sales - expenses.
sales - variable costs.
sales - cost of goods sold.
sales - fixed costs.
Question 9.9. (TCO C) Which of the following would not affect the
break-even point? (Points : 6)
Variable expense per unit
Question 10.10. (TCO D) Under variable costing, (Points : 6)

inventory costs will be lower than under absorption costing.
net operating income will always be lower than under absorption
costing.
net operating income will always be higher than under absorption
costing.

taken from the accounting records of Larop Corporation for the just-
completed year.
Sales $950
Direct labor $250

text box below. (Points : 15)
Schedule of cost of goods manufactured

Direct materials:
Question 2.2. (TCO B) The Nebraska Company manufactures a

product that goes through three processing departments. Information
department.
Question 3.3. (TCO C) A tile manufacturer has supplied the
following data.
Question 4.4. (TCO D) The Hampton Company produces and sells a
single product. The following data refer to the year just completed.
Selling price $450

Units sold 22,000

Direct labor $75
Fixed costs:
Required:
Compute the cost of a single unit of product under both the absorption
costing and variable costing approaches.
Prepare an income statement for the year using absorption costing.
Prepare an income statement for the year using variable costing.
(Points : 30)
Extra questions
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Multiple Choice 10 9
Essay 4
Question 1. Question : (TCO A) The variable portion of

advertising costs is a
Student Answer: Conversion YES... Period NO.
Conversion YES .... Period YES.
Conversion NO.... Period NO.
Conversion NO.... Period YES.
Question 2. Question : (TCO A) A cost incurred in the past

that is not relevant to any current decision is classified as a(n)
Student Answer: period cost.
incremental cost.
opportunity cost.
None of the above
Question 3. Question : (TCO A) Property taxes on a

company's factory building would be classified as a(n)
Student Answer: variable cost.
opportunity cost.
period cost.
product cost.
Question 4. Question : (TCO C) Within the relevant range,

variable costs can be expected to
Student Answer: vary in total in direct proportion

to changes in the activity level.
remain constant in total as the activity level

changes.
increase on a per-unit basis as the activity level

increases.
increase on a per-unit basis as the activity level

decreases.
None of the above
Question 5. Question : (TCO B) Which of the following

statements is true?
Student Answer: Only statement I is true.

Question 6. Question : (TCO B) A job-order cost system is

employed in those situations when
Student Answer: many different products, jobs, or

batches of production are being produced each period.
manufacturing involves a single, homogeneous
product that flows evenly through the production process on a
continuous basis.
the product moves from department to
department before being completed.
the unit cost of production is computed by
dividing the total production costs by the number of units produced.
Question 7. Question : (TCO B) The FIFO method only

provides a major advantage over the weighted-average method in that
Student Answer: the calculation of equivalent

units is less complex under the FIFO method.
the FIFO method treats units in the beginning
inventory as if they were started and completed during the current
period.
the FIFO method provides measurements of
work done during the current period.
the weighted-average method ignores units in
the beginning and ending work-in-process inventories.
Question 8. Question : (TCO C) The contribution margin ratio

always increases when the
Student Answer: fixed expenses increase.
fixed expenses decrease.
variable expenses as a percentage of net sales

increase.
variable expenses as a percentage of net sales
decrease.
Question 9. Question : (TCO C) Which of the following

would not affect the break-even point?
Student Answer: Variable expense per unit
Question 10. Question : (TCO D) Under variable costing,
Student Answer: inventory costs will be lower

than under absorption costing.
inventory costs will be higher than under

absorption costing.
net operating income will always be lower than

under absorption costing.
net operating income will always be higher
than under absorption costing.
Question 1. Question : (TCO A) The following data (in

thousands of dollars) have been taken from the accounting records of
Larden Corporation for the just-completed year.
Sales $950
Direct labor $225

text box below.
Question 2. Question : (TCO B) The Florida Company

manufactures a product that goes through three processing
departments. Information relating to activity in the first department
during June is given below.
Question 3. Question : (TCO C) Drake Company's income

statement for the most recent year appears below.
Sales (45,000 units) $1,350,000
Less: variable expenses 750,000
Contribution margin 600,000
Less: fixed expenses 375,000
Question 4. Question : (TCO D) The Hampton Company

produces and sells a single product. The following data refer to the
year just completed.
Selling price $450

Units sold 22,000

Direct labor $75
Fixed costs:
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ACCT 505 Week 1 Case Study (Devry)
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Top Switch Inc. designs and manufactures switches used in
telecommunications. Serious flooding throughout the state of
Tennessee affected Top Switchs facilities. Inventory was completely
ruined, and the companys computer system, including all accounting
records, was destroyed.
Before the unfortunate incident, recovery specialists cleaned the

buildings. The company controller is very nervous and anxious to
recover whatever records he can to support the insurance claim for the
destroyed inventory. After consulting with the cost accountant, they
decide to retrieve the previous years annual report for the beginning
inventory numbers. In addition, they also agreed that they need first
quarter cost data.
The cost accountant was working on the first quarter results before the
storm hit, and to his surprise, the report was still in his desk drawer.
After reviewing the data , the information shows the following
information: Material purchases were $ 325,000; Direct Labor was $
220,000. Further discussions between the controller and the cost
accountant revealed that sales were $ 1,350,000 and the gross margin
was 30% of sales. The cost accountant also discovered, while sifting
through the information, that cost of goods available for sale was $
1,020,000 at cost. While assessing the damage, the controller
determined that the prime costs were $ 545,000 up to the time of the
damage and that manufacturing overhead is 65% of conversion cost.
The cost accountant is not sure about all of this, but he decides to see
what he can do with the information.
The beginning inventory numbers are as follows:

Raw Materials, $ 41,000
Work in Process, $ 56,000
Finished Goods, $ 35,000
Required:
Determine the amount of cost in the Raw Materials, Work in Process,

and Finished Goods Inventory as of the date of the storm. ( Hint: You
may wish to reconstruct the various schedules and statements that
would have been affected by the companys accounts during the
period.)
Grading Rubric for Case Study I:
Category
Points
%
Description
Documentation &
Formatting
10
22%
Worksheet will be done in Excel and will contain formulas to receive
maximum credit
Organization and Cohesiveness
15
33%
Calculations for all parts should be organized and correctly labeled.
Content
20
45%
A quality case study will have all required work completed and will
be correct.
Total
45
100%
A quality project will meet or exceed all of the above requirements.
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ACCT 505 Week 1-7 All Discussion Questions (Devry)
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Week 1DQ 1 Cost Terms, Classifications, and Behavior
Week 1DQ 2 Research and Application
Week 2DQ 1 Job Order and Process Costing Systems
Week 3DQ 1 Variable Costing and CVP Concepts
Week 4DQ 1 Budgeting Case Study
Week 4DQ 2 Exam Review
Week 5DQ 1 Standards, Variances, Flexible Budgets
Week 6DQ 1 Segment Reporting and Relevant Costs
Week 7DQ 1 Capital Budgeting
Week 7DQ 2 Exam Review
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ACCT 505 Week 2 Case 3-29 Ethics and the Manager
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CASE 329 Ethics and the Manager [Course Objective B] Terri

Ronsin had recently been transferred to the Home Security Systems
Division of National Home Products. Shortly after taking over her
new position as divisional controller, she was asked to develop the
divisions predetermined overhead rate for the upcoming year. The
accuracy of the rate is important because it is used throughout the
year and any overapplied or underapplied overhead is closed out to
Cost of Goods Sold at the end of the year. National Home Products
uses direct labor-hours in all of its divisions as the allocation base for
manufacturing overhead.
To compute the predetermined overhead rate, Terri divided her
estimate of the total manufacturing overhead for the coming year by
the production managers estimate of the total direct labor-hours for
the coming year. She took her computations to the divisions general
manager for approval but was quite surprised when he suggested a
modification in the base. Her conversation with the general manager
of the Home Security Systems Division, Harry Irving, went like this:
Ronsin: Here are my calculations for next years predetermined
overhead rate. If you approve, we can enter the rate into the computer
on January 1 and be up and running in the job-order costing system
right away this year.
Irving: Thanks for coming up with the calculations so quickly, and
they look just fine. There is, however, one slight modification I
would like to see. Your estimate of the total direct labor-hours for the
year is 440,000 hours. How about cutting that to about 420,000
hours?
Ronsin: I dont know if I can do that. The production manager says
she will need about 440,000 direct labor-hours to meet the sales
projections for the year. Besides, there are going to be over 430,000
direct labor-hours during the current year and sales are projected to be
higher next year.
Irving: Teri, I know all of that. I would still like to reduce the direct
labor-hours in the base to some- thing like 420,000 hours. You
probably dont know that I had an agreement with your predecessor as
divisional controller to shave 5% or so off the estimated direct labor-
hours every year. That way, we kept a reserve that usually resulted in
a big boost to net operating income at the end of the fiscal year in
December. We called it our Christmas bonus. Corporate headquarters
always seemed as pleased as punch that we could pull off such a
miracle at the end of the year. This system has worked well for many
years, and I dont want to change it now.
Required:
Assume the following information:
Direct Materials $40 per unit
Direct Labor $20 per unit
Total Estimated Manufacturing Overhead
$8,400,000
Manufacturing overhead is allocated based on estimated direct-labor

hours.
Each unit of product requires 1 direct labor hour.
1. Calculate the cost of one unit of product, assuming that the

overhead per unit is based on Terri Ronsons estimate of 440,000
hours. (Round all dollar figures to two decimal places.)
a. If 441,000 units were produced, how much overhead was applied to
work in process.
2. Calculate the cost of one unit of product, assuming that the

overhead per unit is based on her supervisors preferred estimate of
420,000 hours. (Round all dollar figures to two decimal places.)
a. If 441,000 units were produced, how much overhead was applied to
work in process.
3. During the year, the company produced and sold 441,000 units, and
incurred actual overhead of $8,500,000, what is the under/overapplied
overhead if:
a. The estimated Direct Labor Hours is 440,000.
b. The estimated Direct Labor Hours is 420,000.
c. All over-applied and under-applied overhead applied directly to
cost of goods sold. Assume that the company had $1,000,000 in net
operating income before the over/under applied overhead adjustment
is made. What is the revised net income after the over/underapplied
overhead adjustment?
4. Should Terri Ronson go along with the general managers request
to reduce the direct labor hours in the predetermined overhead rate
computation to 420,000 hours? Be sure to discuss the operational and
ethical issues related to this decision.
Deliverables:
1. Submit an Excel spreadsheet that documents the calculations made
for steps 1-3 above. All items should be clearly labeled, and
appropriate formulas should be used to perform your calculations.
2. For step 4, submit a 5-7 minute narrated PowerPoint (preferably
using VoiceThread) that highlights your discussion of the operational
and ethical issues that Teri is facing as a result of the request to
reduce the direct labor hours. Be sure to make a recommendation in
regard to making this decision. The presentation should be 3-4 slides.
3. Post your PowerPoint and workbook on behalf of your team to the
Week 2 Dropbox for the case study.
4. NOTE: as a team project, a team collaboration tool (such as Cisco
Spark) should be used for the students to collaborate on the project!
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ACCT 505 Week 2 Quiz Job Order and Process Costing
Systems (Devry)
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1.
Question :
(TCO F) For which situation(s) below would an organization be more
likely to use a job-order costing system of accumulating product costs
rather than a process costing system?
2.
Question :
(TCO F) Process costing would be appropriate for each of the
following except:
3.
Question :
(TCO F) Lucas Company uses the weighted-average method in its
process costing system. The company adds materials at the beginning
of the process in the Forming Department, which is the first of two
stages in its production process. Information concerning operations in
the Forming Department in October follows:
Units
Material Cost
Work in process on October 1
6,000
$3,000
Units started in October
50,000
$25,560
Units completed and transferred to next Department during October
44,000
What was the materials cost of work in process at on October 31?

4.
Question :
(TCO F) In a job-order costing system, the use of direct materials that
have been previously purchased is recorded as a debit to:
5.
Question :
(TCO F) During December at Ingrim Corporation, $74,000 of raw
materials were requisitioned from the storeroom for use in production.
These raw materials included both direct and indirect materials. The
indirect materials totaled $6,000. The journal entry to record the
requisition from the storeroom would include a:
6.
Question :
(TCO F) Valles Corporation had $22,000 of raw materials on hand on
February 1. During the month, the company purchased an additional
$75,000 of raw materials. The journal entry to record the purchase of
raw materials would include a:
1.
Question :
(TCO F) Whether a company uses process costing or job-order
costing depends on its industry. A number of companies in different
industries are listed below:
i. Brick manufacturer
ii. Contract printer that produces posters, books, and pamphlets to
order
iii. Natural gas production company
iv. Dairy farm
v. Coal mining company
vi. Specialty coffee roaster (roasts small batches of specialty coffee
beans)
For each company, indicate whether the company is most likely to use
job-order costing or process costing.
i. Brick manufacturer Process Costing ii. Contract printer that
produces posters, books, and pamphlets to order Job Order Costing iii.
Natural gas production company Process Costing iv. Dairy farm
Process Costing v. Coal mining company Process Costing vi.
Specialty coffee roaster (roasts small batches of specialty coffee
beans) Job Order Costing
2.
Question :
(TCO F) Job 484 was recently completed. The following data have
been recorded on its job cost sheet:
Direct materials
$57,240
Direct labor hours
1,692 DLHs
Direct labor wage rate
$12 per DLHS
Number of units completed
3,600 units
The company applies manufacturing overhead on the basis of direct

labor-hours. The predetermined overhead rate is $24 per direct labor-
hour.
Compute the unit product cost that would appear on the job cost sheet
for this job.
3.
Question :
(TCO F) Miller Company manufactures a product for which materials
are added at the beginning of the manufacturing process. A review of
the company's inventory and cost records for the most recently
completed year revealed the following information:
Units
Materials
Conversion
Work in process. Jan. 1 (80% complete with respect to conversion
costs)
100,000
$100,000
$157,500
Units started into production
500,000
Costs added during the year:
Materials
$650,000
Conversion
$997,500
Units completed during the year
450,000
The company uses the weighted-average cost method in its process

costing system. The ending inventory is 50% complete with respect to
conversion costs.
Required:
i. Compute the equivalent units of production and the cost per

equivalent units for materials and for conversion costs.
ii. Determine the cost transferred to finished goods.
iii. Determine the amount of cost that should be assigned to the

ending work in process inventory.
4.
Question :
(TCO F) Weisinger Corporation has provided the following data for
the month of January:
Inventories
Beginning
Ending
Raw materials
$28,000
$29,000
Work In process
$16,000
$14,000
Finished goods
$42,000
$54,000
Additional Information
Raw material purchases
$56,000
Direct labor costs
$87,000
Manufacturing overhead cost incurred
$51,000
Indirect materials included in manufacturing overhead costs incurred
$3,000
Manufacturing overhead cost applied to work in process
$55,000
Prepare a Schedule of Cost of Goods Manufactured and a Schedule of
Cost of Goods Sold in good form.
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Essay 4
Multiple Choice 6
Question 1. Question : (TCO B) Assume there is no beginning
work in process inventory and the ending work in process inventory is
100% complete with respect to materials costs. The number of
equivalent units with respect to materials costs under the weighted
average method is
Student Answer: the same as the number of units

completed.
less than the number of units put into

production.
the same as the number of units put into

production.
less than the number of units completed.
Question 2. Question : (TCO B) For which situation(s) below

would an organization be more likely to use a job-order costing
system of accumulating product costs rather than a process costing
system?
Student Answer: A steel factory that processes

iron ore into steel bars
A computer consulting firm
A factory that processes sugar and other

ingredients into candy
All of the above
Question 3. Question : (TCO B) Luft Company uses the

weighted-average method in its process costing system. Operating
data for the first processing department for the month of June appear
below.
Units Percent Complete With Respect to Conversion
Beginning work in process inventory 11,000 90%
Started in production during June 58,000
Ending work in process inventory 17,000 10%
According to the companys records, the conversion cost in beginning

work in process inventory was $79,893 at the beginning of June.
Additional conversion costs of $343,830 were incurred in the
department during the month.
What was the cost per equivalent unit for conversion costs for the
month? (Round to three decimal places.)
Student Answer: $7.891
$8.070
$5.928
$4.584
Question 4. Question : (TCO B) In a job-order costing system,

the use of direct materials that have been previously purchased is
recorded as a debit to
Student Answer: raw materials.
finished goods.
work in process.
manufacturing overhead.
Question 5. Question : (TCO B) During October, Crusan

Corporation incurred $62,000 of direct labor costs and $4,000 of
indirect labor costs. The journal entry to record the accrual of these
wages would include a
Student Answer: debit to work in process of
$66,000.
credit to work in process of $66,000.
debit to work in process of $62,000.
Question 6. Question : (TCO B) During February, Degan Inc.

transferred $60,000 from work in process to finished goods and
recorded a cost of goods sold of $65,000. The journal entries to record
these transactions would include a
Student Answer: debit to finished goods of

$65,000.
credit to cost of goods sold of $65,000.
credit to finished goods of $60,000.
* Times are displayed in (GMT-07:00) Mountain Time (US &

Canada)
Grading Summary
These are the automatically computed results of your exam. Grades
for essay questions, and comments from your instructor, are in the
Details section below. Date Taken: 5/15/2016
Time Spent: 1 h , 27 min , 22 secs
Points Received: 71 / 90 (78.9%)
Grade Details All Questions

Page: 1 2
Question 1. Question : (TCO B) Some companies use process
costing and some use job-order costing. Which method a company
uses depends on its industry. Several companies in different industries
are listed below.
5. Frozen cranberry juice processor

ii. Custom boat builder
iii. Concrete block manufacturer
iv. Winery that produces a number of specialty wines
v. Aluminum refiner that makes aluminum ingots from bauxite ore
vi. External auditing firm
For each company, indicate whether the company is most likely to use
job-order costing or process costing.
Question 2. Question : (TCO B) Job 728 was recently

completed. The following data have been recorded on its job cost
sheet.

Direct labor hours 1,220 labor hours
Direct labor wage rate $15 per labor hour
Machine hours 1,550 machine hours
Number of units completed 4,500 units
The company applies manufacturing overhead on the basis of

machine hours. The predetermined overhead rate is $18 per machine
hour.
Compute the unit product cost that would appear on the job cost sheet
for this job.
Question 3. Question : (TCO B) Harmon Company uses the

weighted average method in its process costing system. The Curing
Department of Harmon Company reported the following information
for the month of November.
Units Percent complete with respect to materials
Percentage complete with respect to conversion
Work in process, November 1 10,000 100% 80%
Units started 28,000
Completed and transferred out 30,000
Work in process, November 30 8,000 100% 30%
Costs for November Materials Conversion

Work in process, November 1 $34,500 $48,600
Added during the month $146,000 $194,400
All materials are added at the beginning of the process.
Required: Compute the following items using the weighted average

method.
5. The equivalent units of production for materials

ii. The cost per equivalent unit for conversion
iii. The total cost assigned to units transferred out of the curing
department during November
iv. The cost assigned to work in process inventory as of November 30
Question 4. Question : (TCO A) Hunsicker Corporation has

provided the following data for the month of January.
Inventories Beginning Ending

Raw materials $30,000 $33,000
Work in process $20,000 $18,000
Finished goods $52,000 $50,000
Additional Information
Raw material purchases $63,000
Direct labor costs $92,000
Manufacturing overhead cost incurred $75,000
Indirect materials included in manufacturing overhead costs
incurred $6,000
Manufacturing overhead cost applied to work in process
$72,000
Prepare a Schedule of Cost of Goods Manufactured and a Schedule of

Cost of Goods Sold in good form.
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ACCT 505 Week 3 Case Study 420 Ethics and the
Manager
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CASE 420 Ethics and the Manager, Understanding the Impact of
Percentage Completion on ProfitWeighted-Average Method
[Course Objective B] Gary Stevens and Mary James are production
managers in the Consumer Electronics Division of General
Electronics Company, which has several dozen plants scattered in
locations throughout the world. Mary manages the plant located in
Des Moines, Iowa, while Gary manages the plant in El Segundo,
California. Production managers are paid a salary and get an
additional bonus equal to 5% of their base salary if the entire division
meets or exceeds its target profits for the year. The bonus is
determined in March after the companys annual report has been
prepared and issued to stockholders.
Shortly after the beginning of the New Year, Mary received a phone
call from Gary that went like this:
Gary: Hows it going, Mary?
Mary: Fine, Gary. Hows it going with you?
Gary: Great! I just got the preliminary profit figures for the division
for last year and we are within $200,000 of making the years target
profits. All we have to do is pull a few strings, and well be over the
top!
Mary: What do you mean? Gary: Well, one thing that would be easy
to change is your estimate of the percentage completion of your
ending work in process inventories. Mary: I dont know if I can do
that, Gary. Those percentage completion figures are supplied by Tom
Winthrop, my lead supervisor, who I have always trusted to provide
us with good estimates.
Besides, I have already sent the percentage completion figures to
corporate headquarters. Gary: You can always tell them there was a
mistake. Think about it, Mary. All of us managers are doing as much
as we can to pull this bonus out of the hat. You may not want the
bonus check, but the rest of us sure could use it.
The final processing department in Marys production facility began
the year with no work in process inventories. During the year,
210,000 units were transferred in from the prior processing
department and 200,000 units were completed and sold. Costs
transferred in from the prior department totaled $39,375,000. No
materials are added in the final processing department. A total of
$20,807,500 of conversion cost was incurred in the final processing
department during the year.
Required:
1. Tom Winthrop estimated that the units in ending inventory in
the final processing department were 30% complete with respect to
the conversion costs of the final processing department. If this
estimate of the percentage completion is used, what would be the Cost
of Goods Sold for the year? (Note: Since all units completed were
sold, the cost of goods transferred out = Cost of Goods Sold.)
2. Gary is recommending that the completion percentage by
adjusted by 10 percentage points in order to assist the team in making
their bonus.
a. Calculate the cost of goods sold if the ending inventory is 20%
complete in regard to conversion costs. Would net income increase or
decrease if this option was chosen over the 30% completion
percentage? How much is the increase?
b. Calculate the cost of goods sold if the ending inventory is 40%
complete in regard to conversion costs. Would net income increase or
decrease if this option was chosen over the 30% completion
percentage? How much is the increase?
c. Based on your calculations, which percentage is Gary suggesting
that Mary use for her ending inventory calculations.
3. Do you think Mary James should go along with the request to
alter estimates of the percentage completion? Why or why not?
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ACCT 505 Week 3 Case Study II (Devry)

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Springfield Express is a luxury passenger carrier in Texas. All seats
are first class, and the following data are available:
Number of seats per passenger train car
90
Average load factor (percentage of seats filled)
70%
Average full passenger fare
$160
Average variable cost per passenger
$70
Fixed operating cost per month
$3,150,000
What is the break-even point in passengers and revenues per month?
What is the break-even point in number of passenger train cars per
month? If Springfield Express raises its average passenger fare to $
190, it is estimated that the average load factor will decrease to 60
percent. What will be the monthly break-even point in number of
passenger cars? (Refer to original data.) Fuel cost is a significant
variable cost to any railway. If crude oil increases by $ 20 per barrel,
it is estimated that variable cost per passenger will rise to $ 90. What
will be the new break-even point in passengers and in number of
passenger train cars? Springfield Express has experienced an increase
in variable cost per passenger to $ 85 and an increase in total fixed
cost to $ 3,600,000. The company has decided to raise the average
fare to $ 205. If the tax rate is 30 percent, how many passengers per
month are needed to generate an after-tax profit of $ 750,000? (Use
original data). Springfield Express is considering offering a
discounted fare of $ 120, which the company believes would increase
the load factor to 80 percent. Only the additional seats would be sold
at the discounted fare. Additional monthly advertising cost would be $
180,000. How much pre-tax income would the discounted fare
provide Springfield Express if the company has 50 passenger train
cars per day, 30 days per month? Springfield Express has an
opportunity to obtain a new route that would be traveled 20 times per
month. The company believes it can sell seats at $ 175 on the route,
but the load factor would be only 60 percent. Fixed cost would
increase by $ 250,000 per month for additional personnel, additional
passenger train cars, maintenance, and so on. Variable cost per
passenger would remain at $ 70. Should the company obtain the
route? How many passenger train cars must Springfield Express
operate to earn pre-tax income of $ 120,000 per month on this route?
If the load factor could be increased to 75 percent, how many
passenger train cars must be operated to earn pre-tax income of $
120,000 per month on this route? What qualitative factors should be
considered by Springfield Express in making its decision about
acquiring this route?
Grading Rubric for Case Study II:
Category
Points
%
Description
Documentation & Formatting
5
11%
Case Study will be completed in Word or Excel and contain necessary
formulas to receive maximum credit
Organization & Cohesiveness
5
11%
Calculations for all parts should be organized and correctly labeled. In
a quality case study, all questions should be addressed in a clear,
concise manner.
Editing
5
11%
Quality work will be free of any spelling, punctuation or grammatical
errors. Sentences and paragraphs ( where appropriate) will be clear,
concise and factually correct
Content
30
67%
A quality project will have all of the required work completed and
will be correct.
Total
45
100%
A quality project will meet or exceed all of the above requirements.
------------------------------------------------------------------------------------
ACCT 505 Week 4 Midterm Exam (Devry)
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1.
Question :
(TCO A) Wages paid to an assembly line worker in a factory are a
2.
Question :
(TCO A) A cost incurred in the past that is not relevant to any current
decision is classified as a(n)
3.
Question :
(TCO A) Depreciation of office buildings and office equipment is
also known as
4.
Question :
(TCO A) When the activity level is expected to increase within the
relevant range, what effects would be anticipated with respect to each
of the following?
5.
Question :
(TCO F) Which of the following statements is true?
6.
Question :
(TCO F) A job-order cost system is employed in those situations
where
7.
Question :
(TCO F) The FIFO method only provides a major advantage over the
weighted-average method in that
8.
Question :
(TCO B) The contribution margin ratio always decreases when the
9.
Question :
(TCO B) Which of the following would not affect the break-even
point?
10.
Question :
(TCO E) In an income statement prepared using the variable costing
method, variable selling and administrative expenses would
1.
Question :
(TCO A) The following data (in thousands of dollars) have been taken
from the accounting records of Larop Corporation for the just-
completed year:
Sales.................................................................................
$910
Purchases of raw materials................................................
$225
Direct labor.......................................................................
$245
Manufacturing overhead....................................................
$265
Administrative expenses....................................................
$150
Selling expenses................................................................
$140
Raw materials inventory, beginning.....................................
$15
Raw materials inventory, ending.........................................
$45
Work-in-process inventory, beginning.................................
$20
Work-in-process inventory, ending.....................................
$55
Finished goods inventory, beginning...................................
$100
Finished goods inventory, ending.......................................
$135
Required: Prepare a Schedule of Cost of Goods Manufactured in the
text box below.
2.
Question :
(TCO F) The Illinois Company manufactures a product that goes
through three processing departments. Information relating to activity
in the first department during June is given below.
department.
Required: Compute the equivalent units of production for the first
department for June, assuming that the company uses the weighted-
average method of accounting for units and costs.
3.
Question :
(TCO B) A tile manufacturer has supplied the following data:
Required:
a. Calculate the company's unit contribution margin.
b. Calculate the company's unit contribution ratio.
c. If the company increases its unit sales volume by 5% without
increasing its fixed expenses, what would the company's net operating
income be?
4.
Question :
(TCO E) Lehne Company, which has only one product, has provided
the following data concerning its most recent month of operations:
Selling price
$ 125
Units in beginning inventory
600
Units oroduced
3000
Units sold
3500
Units in ending inventory
100
Direct materials
$ 15
Direct labor
$ 50
Variable manufacturing overhead
$8
Variable selling and admin
$ 12
Fixed costs:
Fixed manufacturing overhead
$ 75,000
Fixed selling and admin
$ 20,000
The company produces the same number of units every month,
although the sales in units vary from month to month. The company's
variable costs per unit and total fixed costs have been constant from
month to month.
Required:
a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption
costing?
c. Prepare an income statement for the month using the variable
costing method.
d. Prepare an income statement for the month using the absorption
costing method.
------------------------------------------------------------------------------------
ACCT 505 Week 5 Course Project 1 LBJ Company (New)
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COURSE PROJECT 1 INSTRUCTIONS
You have just been contracted as a budget consultant by LBJ
Company, a distributor of bracelets to various retail outlets across the
country. The company has done very little in the way of budgeting
and at certain times of the year has experienced a shortage of cash.
You have decided to prepare a cash budget for the upcoming fourth
quarter in order to show management the benefits that can be gained
from proper cash planning. You have worked with accounting and
other areas to gather the information assembled below.
The company sells many styles of bracelets, but all are sold for the
same $10 price. Actual sales of bracelets for the last three months
and budgeted sales for the next six months follow:
The concentration of sales in the fourth quarter is due to the

Christmas holiday. Sufficient inventory should be on hand at the end
of each month to supply 40% of the bracelets sold in the following
month.
Suppliers are paid $4 for each bracelet. Fifty-percent of a month's

purchases is paid for in the month of purchase; the other 50% is paid
for in the following month. All sales are on credit with no discounts.
The company has found, however, that only 20% of a month's sales
are collected in the month of sale. An additional 70% is collected in
the following month, and the remaining 10% is collected in the
second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
Variable expenses:
Sales commissions 4% of sales
Fixed expenses:
Advertising $220,000
Rent $20,000
Salaries $110,000
Utilities $10,000
Insurance $5,000
Depreciation $18,000
Insurance is paid on an annual basis, in January of each year.
The company plans to purchase $22,000 in new equipment during
October and $50,000 in new equipment during November; both
purchases will be for cash. The company declares dividends of
$20,000 each quarter, payable in the first month of the following
quarter.
Other relevant data is given below:

Cash balance as of September 30 $74,000
Inventory balance as of September 30 $112,000
Merchandise purchases for September $200,000
The company maintains a minimum cash balance of at least $50,000

at the end of each month. All borrowing is done at the beginning of a
month; any repayments are made at the end of a month.
The company has an agreement with a bank that allows the company
to borrow the exact amount needed at the beginning of each month.
The interest rate on these loans is 1% per month and for simplicity we
will assume that interest is not compounded. At the end of the quarter,
the company will pay the bank all of the accrued interest on the loan
and as much of the loan as possible while still retaining at least
$50,000 in cash.
Required:
Prepare a cash budget for the three-month period ending December
31. Include the following detailed budgets:
1.
a. A sales budget, by month and in total.
b. A schedule of expected cash collections from sales, by month and
in total.
c. A merchandise purchases budget in units and in dollars. Show the
budget by month and in total.
d. A schedule of expected cash disbursements for merchandise
purchases, by month and in total.
2. A cash budget. Show the budget by month and in total. Determine
any borrowing that would be needed to maintain the minimum cash
balance of $50,000.
------------------------------------------------------------------------------------
ACCT 505 Week 6 Case Study Balanced Scorecard Case
(700 words Paper)
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ACCT505 Managerial Accounting
Team Case Study 3 Week 6
Balanced Scorecard Case
(Course Objective G)
Many companies are using the Balanced Scorecard System to assist in
their performance management. According to Garrison, Noreen, and
Brewer (2015) a balanced scorecard consists of integrated set of
performance measures that are derived from and support a companys
strategy (p. 490). In a Balanced Scorecard System the companys
strategy is translated into a system of performance measures that are
used to monitor the companys performance in meeting its strategic
objectives.
As part of a two-member team, your task is to identify and discuss the
key performance measures of a balanced scorecard. Then, find three
companies that are currently using a Balanced Scorecard System by
doing an internet and library database search. Internet searches as well
searches of financial databases, such as Yahoo Finance, should help
you in your efforts. Then discuss in as much detail as possible the
specifics of the balanced scorecard that is being used by these
companies.
Deliverable
Your team should prepare a 700 words Paper, explaining the specifics
of the balanced scorecard system of the three companies you selected
in your research. This presentation should include your analysis of the
advantages and disadvantages of each companys Balanced Scorecard
System. Be sure to clearly document the performance measures being
used by each of the three companies.
Your PowerPoint presentation should be narrated using Voice Thread
or similar technology. All team members must participate in the
narration of the PowerPoint presentation.
APA standards are required to be followed for this presentation.
Reference
Garrison, R.H., Noreen, E.C, & Brewer, Brewer, P.C. (2015).
Managerial Accounting (15th ed.). New York, NY: McGraw-Hill.
------------------------------------------------------------------------------------
ACCT 505 Week 6 Quiz Segment Reporting and Relevant
Costs for Decisions (Devry)
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Question :
(TCO D) Return on investment (ROI) is equal to the margin
multiplied by
2.
Question :
(TCO D) For which of the following decisions are opportunity costs
relevant?
The decision to make or buy a needed part
The desision to keep or drop a product line
(A)
Yes
Yes
(B)
Yes
No
(C)
No
Yes
(D)
No
No
3.
Question :
(TCO D) Last year, the House of Orange had sales of $826,650, net
operating income of $81,000, and operating assets of $84,000 at the
beginning of the year and $90,000 at the end of the year. What was
the company's turnover, rounded to the nearest tenth?
1.
Question :
(TCO D) Data for December concerning Dinnocenzo Corporation's
two major business segments-Fibers and Feedstocks-appear below:
Sales revenues, Fibers
$870,000
Sales revenues, Feedstocks
$820,000
Variable expenses, Fibers
$426,000
Variable expenses, Feedstocks
$344,000
Traceable fixed expenses, Fibers
$148,000
Traceable fixed expenses, Feedstocks
S156,000
Common fixed expenses totaled $314,000 and were allocated as
follows: $129,000 to the Fibers business segment and $185,000 to the
Feedstocks business segment.
Required:
Prepare a segmented income statement in the contribution format for

the company. Omit percentages; show only dollar amounts.
2.
Question :
(TCO D) Wryski Corporation had net operating income of $150,000
and average operating assets of $500,000. The company requires a
return on investment of 19%.
Required:
i. Calculate the company's current return on investment and residual

income.
ii. The company is investigating an investment of $400,000 in a

project that will generate annual net operating income of $78,000.
What is the ROI of the project? What is the residual income of the
project? Should the company invest in this project?
3.
Question :
(TCO D) Tjelmeland Corporation is considering dropping product
S85U. Data from the company's accounting system appear below.
Sales
$360,000
Variable Expenses
$158,000
Fixed Manufacturing Expenses
$119,000
Fixed Selling and Administrative Expenses
$94,000
All fixed expenses of the company are fully allocated to products in

the company's accounting system. Further investigation has revealed
that $55,000 of the fixed manufacturing expenses and $71,000 of the
fixed selling and administrative expenses are avoidable if product
S85U is discontinued.
Required:
i. According to the company's accounting system, what is the net

operating income earned by product S85U? Show your work!
ii. What would be the effect on the company's overall net operating
income of dropping product S85U? Should the product be dropped?
Show your work!
4.
Question :
(TCO D) Fouch Company makes 30,000 units per year of a part it
uses in the products it manufactures. The unit product cost of this part
is computed as follows.
Direct Materials
$15.70
Direct Labor
$17.50
Variable Manufacturing Overhead
$4.50
Fixed Manufacturing Overhead
$14.60
Unit Product Cost
$52.30
An outside supplier has offered to sell the company all of these parts
it needs for $51.90 a unit. If the company accepts this offer, the
facilities now being used to make the part could be used to make more
units of a product that is in high demand. The additional contribution
margin on this other product would be $219,000 per year.
If the part were purchased from the outside supplier, all of the direct
labor cost of the part would be avoided. However, $6.20 of the fixed
manufacturing overhead cost being applied to the part would continue
even if the part were purchased from the outside supplier. This fixed
manufacturing overhead cost would be applied to the company's
remaining products.
Required:
i. How much of the unit product cost of $52.30 is relevant in the

decision of whether to make or buy the part?
ii. What is the net total dollar advantage (disadvantage) of purchasing

the part rather than making it?
iii. What is the maximum amount the company should be willing to

pay an outside supplier per unit for the part if the supplier commits to
supplying all 30,000 units required each year?
5.
Question :
(TCO D) Biello Co. manufactures and sells medals for winners of
athletic and other events. Its manufacturing plant has the capacity to
produce 15,000 medals each month; current monthly production is
14,250 medals. The company normally charges $115 per medal. Cost
data for the current level of production are shown below.
Variable Costs
Direct Materials
$969,000
Direct Labor
$270,750
Selling and Administrative
$270,075
Fixed Costs
Manufacturing
$370,550
Selling and Administrative
$89,775
The company has just received a special one-time order for 600
medals at $102 each. For this particular order, no variable selling and
administrative costs would be incurred. This order would also have no
effect on fixed costs.
Required:
Should the company accept this special order? Why?

------------------------------------------------------------------------------------
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Multiple Choice 3
Short 5
Question 1. Question : (TCO D) Return on investment (ROI)
is equal to the margin multiplied by
Question 2. Question : (TCO D) For which of the following

decisions are opportunity costs relevant?
The decision to make or buy a needed part The decision to
keep or drop a product line
Question 3. Question : (TCO D) Last year, the House of

Orange had sales of $826,650, net operating income of $81,000, and
operating assets of $84,000 at the beginning of the year and $90,000
at the end of the year. What was the company's turnover, rounded to
the nearest tenth?
Question 1. Question : (TCO D) Data for December
concerning Dinnocenzo Corporation's two major business segments-
Fibers and Feedstocks-appear below.
Sales revenues, Fibers $870,000
Sales revenues, Feedstocks $820,000
Variable expenses, Fibers $426,000
Variable expenses, Feedstocks $344,000
Traceable fixed expenses, Fibers $148,000
Traceable fixed expenses, Feedstocks $156,000
Common fixed expenses totaled $314,000 and were allocated as
follows: $129,000 to the Fibers business segment and $185,000 to the
Feedstocks business segment.
Required:
Prepare a segmented income statement in the contribution format for

the company. Omit percentages; show only dollar amounts.
Question 2. Question : (TCO D) Wryski Corporation had net

operating income of $150,000 and average operating assets of
$500,000. The company requires a return on investment of 19%.
Required:
i. Calculate the company's current return on investment and residual

income.
ii. The company is investigating an investment of $400,000 in a

project that will generate annual net operating income of $78,000.
What is the ROI of the project? What is the residual income of the
project? Should the company invest in this project?
ii. Return on investment = Net operating income / Average operating

assets = $78,000 / $400,000 = 19.5%
Question 3. Question : (TCO D) Tjelmeland Corporation is
considering dropping product S85U. Data from the company's
accounting system appear below.
Sales $360,000
Variable Expenses $158,000
Fixed Manufacturing Expenses $119,000
Fixed Selling and Administrative Expenses $94,000
All fixed expenses of the company are fully allocated to products in

the company's accounting system. Further investigation has revealed
that $55,000 of the fixed manufacturing expenses and $71,000 of the
fixed selling and administrative expenses are avoidable if product
S85U is discontinued.
Required:
i. According to the company's accounting system, what is the net

operating income earned by product S85U? Show your work!
ii. What would be the effect on the company's overall net operating
income of dropping product S85U? Should the product be dropped?
Show your work!
Question 4. Question : (TCO D) Rosiek Corporation uses part

A55 in one of its products. The company's accounting department
reports the following costs of producing the 4,000 units of the part
that are needed every year.
Per Unit
Direct Materials $2.80
Direct Labor $6.30
Variable Overhead $8.50
Supervisor's Salary $2.60
Depreciation of Special Equipment $6.80
Allocated General Overhead $6.10
An outside supplier has offered to make the part and sell it to the
company for $32.30 each. If this offer is accepted, the supervisor's
salary and all of the variable costs, including direct labor, can be
avoided. The special equipment used to make the part was purchased
many years ago and has no salvage value or other use. The allocated
general overhead represents fixed costs of the entire company. If the
outside supplier's offer were accepted, only $4,000 of these allocated
general overhead costs would be avoided. In addition, the space used
to produce part A55 could be used to make more of one of the
company's other products, generating an additional segment margin of
$26,000 per year for that product.
Required:
i. Prepare a report that shows the effect on the company's total net
operating income of buying part A55 from the supplier rather than
continuing to make it inside the company.
ii. Which alternative should the company choose?
Question 5. Question : (TCO D) A customer has asked

Clougherty Corporation to supply 4,000 units of product M97, with
some modifications, for $40.10 each. The normal selling price of this
product is $48.00 each. The normal unit product cost of product M97
is computed as follows.
Direct Materials $18.50

Direct Labor $1.20
Variable manufacturing overhead $8.40
Fixed manufacturing overhead $3.90
Unit product cost $32.00
Direct labor is a variable cost. The special order would have no effect
on the company's total fixed manufacturing overhead costs. The
customer would like some modifications made to product M97 that
would increase the variable costs by $5.70 per unit and that would
require a one-time investment of $31,000 in special molds that would
have no salvage value. This special order would have no effect on the
company's other sales. The company has ample spare capacity for
producing the special order.
Required:
Determine the effect on the company's total net operating income of

accepting the special order. Show your work!
------------------------------------------------------------------------------------
ACCT 505 Week 7 Course Project 2 Capital Budgeting
Decision (New)
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ACCT 505 Course Project 2 Hampton Company
Capital Budgeting Decision
Hampton Company: The production department has been

investigating possible ways to trim total production costs. One
possibility currently being examined is to make the cans instead of
purchasing them. The equipment needed would cost $1,000,000, with
a disposal value of $200,000, and would be able to produce
27,500,000 cans over the life of the machinery. The production
department estimates that approximately 5,500,000 cans would be
needed for each of the next 5 years.
The company would hire six new employees. These six individuals
would be full-time employees working 2,000 hours per year and
earning $15.00 per hour. They would also receive the same benefits as
other production employees, 15% of wages in addition to $2,000 of
health benefits.
It is estimated that the raw materials will cost 30 per can and that
other variable costs would be 10 per can. Because there is currently
unused space in the factory, no additional fixed costs would be
incurred if this proposal is accepted.
It is expected that cans would cost 50 each if purchased from the
current supplier. The companys minimum rate of return (hurdle rate)
has been determined to be 11% for all new projects, and the current
tax rate of 35% is anticipated to remain unchanged. The pricing for
the companys products as well as number of units sold will not be
affected by this decision. The unit-of-production depreciation method
would be used if the new equipment is purchased.
Required:
1. Based on the above information and using Excel, calculate the
following items for this proposed equipment purchase.
o Annual cash flows over the expected life of the equipment
o Payback period
o Simple rate of return
o Net present value
o Internal rate of return
The check figure for the total annual after-tax cash flows is $271,150.
2. Would you recommend the acceptance of this proposal? Why or
why not? Prepare a short, double-spaced paper in MS Word
elaborating on and supporting your answers.
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ACCT 505 Entire Course (New)

FOR MORE CLASSES VISIT

Question 1 : (TCO E) Designing a new product is a(n)

1. Question : (TCO C) Longiotti Corporation produces and sells a

2. Question : (TCO B) Maverick Corporation uses the weighted-

2. Question : (TCO I) (Ignore income taxes in this problem.) Bill

3. Question : (TCO A) The following data (in thousands of dollars)

4. Question : (TCO F) Walker Corporation is preparing its cash

5. Question : (TCO F) Bella Lugosi Holdings, Inc. (BLH), has

7. Question : (TCO B) Sandler Corporation bases its predetermined

1. (TCO C) Madlem, Inc., produces and sells a single product whose

Question 2.2. (TCO B) Industrial Supply Corporation uses the

Ending work in process:

Question 1.1. (TCO D) The following absorption costing income

Selling and administrative expenses:

Question 2.2. (TCO I) (Ignore income taxes in this problem.) Simpson

Question 3.3. (TCO A) The following data (in thousands of dollars)

Use the above data to prepare (in thousands of dollars) a schedule of

Question 4.4. (TCO F) Walker Corporation is preparing its cash

Question 5.5. (TCO F) The following overhead data are for a

Required: Construct a flexible budget performance report that would

Question 6.6. (TCO H) McMullen Co. uses 10,000 units of Part X

Direct materials $40,000

Required: Prepare a make-or-buy analysis showing the annual

Question 7.7. (TCO B) Buckhorn Corporation bases its

Required: Compute the company's predetermined overhead rate.

2. (TCO G) Given the following data, what would ROI be?

3. (TCO C) Heckaman Corporation produces and sells a single

4. TCO B) Industrial Supply Corporation uses the weighted-average

5. (TCO D) Topple Company produces a single product. Operating

Variable manufacturing costs are $4 per unit. Fixed manufacturing

8. (TCO F) Matuseski Corporation is preparing its cash budget for

Required: Prepare the company's cash budget for October in good

9. (TCO F) Bella Lugosi Holdings, Inc. (BLH), has collected the

Actual Costs Incurred Static Budget

11. (TCO B) Wahr Corporation bases its predetermined overhead rate

1. Question : (TCO C) Longiotti Corporation produces and sells a

2. Question : (TCO B) Maverick Corporation uses the weighted-

2. Question : (TCO I) (Ignore income taxes in this problem.) Bill

3. Question : (TCO A) The following data (in thousands of dollars)

4. Question : (TCO F) Walker Corporation is preparing its cash

5. Question : (TCO F) Bella Lugosi Holdings, Inc. (BLH), has

7. Question : (TCO B) Sandler Corporation bases its predetermined

1. (TCO C) Madlem, Inc., produces and sells a single product whose

Question 2.2. (TCO B) Industrial Supply Corporation uses the

Ending work in process:

Question 1.1. (TCO D) The following absorption costing income

Selling and administrative expenses:

Question 2.2. (TCO I) (Ignore income taxes in this problem.) Simpson

Question 3.3. (TCO A) The following data (in thousands of dollars)

Use the above data to prepare (in thousands of dollars) a schedule of

Question 4.4. (TCO F) Walker Corporation is preparing its cash

Question 5.5. (TCO F) The following overhead data are for a

Required: Construct a flexible budget performance report that would

Question 6.6. (TCO H) McMullen Co. uses 10,000 units of Part X

Direct materials $40,000

An outside supplier has offered to provide Part X at a price of $10 per

Question 7.7. (TCO B) Buckhorn Corporation bases its predetermined

Required: Compute the company's predetermined overhead rate.

2. (TCO G) Given the following data, what would ROI be?

3. (TCO C) Heckaman Corporation produces and sells a single

4. TCO B) Industrial Supply Corporation uses the weighted-average

5. (TCO D) Topple Company produces a single product. Operating