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Exam Review
Capital Budgeting
Exam Review
ACCT 505 Week 1 Case Study
ACCT 505 Week 2 Quiz Job Order and Process Costing Systems
ACCT 505 Week 3 Case Study II
ACCT 505 Week 4 Midterm Exam
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
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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.
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 2 QUIZ JOB ORDER AND PROCESS COSTING SYSTEMS (DEVRY)
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
(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.
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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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.
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III. Overhead application should be made to any job not completed at year end in order to properly value the work in
process inventory.
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
$ 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.
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ACCT 505 WEEK 6 QUIZ SEGMENT REPORTING AND RELEVANT COSTS FOR DECISIONS
(DEVRY)
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:
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:
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