ACCOUNTING 6321
FINAL EXAM, Chapters 7 to 12
Instructions
Read the instructions carefully and completely before starting the exam. After reading the instructions,
read each question/problem carefully. Identify each requirement per question/problem. This exam is
open-book and open notes (your book and your notes, not someone else’s – that’s cheating). Be sure
to complete all 19 questions. You will see a large “The end of Final Exam” printed at the end of the
test.
Solution file: Create your solution file using MS Excel. For the multiple choice questions, simply give
the question number and your answer (A,B,C, or D). For True/False, simply give T or F. Do NOT
include the question in your solution file. Show each step of your work for the exercises & problems.
This will help me give partial credit. Clearly label the answers to your problem. If I cannot easily find
your answers, you will not receive credit for them. Save your solution file with the name “6321 Final
Exam (your first and last name)”.
Submission: You must send the file to me via CLASS EMAIL in Blackboard. Send the solution file
using the subject line “Final Exam (your last name)”.
Due Date: Your exam is due the earlier of three (3) days (or 72 hours) from the time you downloaded
this file or Monday, May 11th at 8am for non-graduating students/Saturday May 9 th at noon for
graduating students. Note that Blackboard timestamps when you download the file, so I will know if
you turn it in late. I will deduct 5 points for every hour your exam is late, for a maximum of 15 pts per
day, so be on time.
Cheating: This exam in NOT a collaborative effort. You need to complete the exam on your own
efforts without any help from others or the internet. YOU ARE NEITHER TO RECEIVE NOR GIVE
HELP ON THIS EXAM! I will give a grade of ZERO to all parties with no appeals for any shared work
or plagiarism (or appearance thereof) to any degree on this exam. Depending on the extent of
plagiarism or sharing, an F may be given for the ENTIRE exam. For blatant cases, I will give an F for
the course. Please do not disappoint me or yourselves. Also, do not share this file with any other
students now or in the future. Do not discuss this exam with your classmates until after the due date.
In addition, remember the honor pledge: “On my honor, I have followed the DBU Honor Code while
completing this exam.” Please take it seriously.
Grading: Multiple Choice questions 1-8 are worth 2 points each. Exercises 9-13 are worth 5 pts
each. Problems 14 – 19 are worth 10 pts each. You have 1 bonus point built in.
Section 1 Multiple Choice/True False – 2 pts each
1. Which of the following statements describes a legitimate disadvantage of cost-based pricing?
A)
B)
C)
D)
Marginal costs and revenues are difficult to measure.
Determining the amount a customer is willing to pay may require estimation.
Customers may not be willing to pay the price determined by the procedure.
Most cost data are not readily available.
2.
A)
B)
C)
D)
Generally, the first of the following budgets to be prepared is the:
Cash budget
Operations budget
Sales budget
Purchases budget
3.
A static budget is a budget prepared before the beginning of the budget period based on
expected level of operations; whereas, a flexible budget is prepared after the fact based on
actual operations.
True or False
4.
Assume the following information for a product line:
Sales revenue
Variable manufacturing costs
Fixed manufacturing costs
Variable selling/administrative
costs
Fixed selling/administrative
costs
$2,200,000
200,000
150,000
120,000
100,000
What is the product line’s contribution margin?
A) $1,650,000
B) $1,880,000
C) $1,780,000
D) $ 900,000
5. The accounting rate of return method requires dividing a project’s annual cash inflows by the
economic life of the project.
True or False
6.
Urbana Corporation is considering the purchase of a new machine costing $152,000. The
machine would generate net cash inflows of $46,426 per year for 5 years. At the end of 5
years, the machine would have no salvage value. Urbana’s cost of capital is 12 percent.
Urbana uses straight-line depreciation. The present value factors of annuity of $1.00 for
different rates of return are as follows:
Period
4
5
6
12%
3.037
3.605
4.111
14%
2.914
3.433
3.889
16%
2.798
3.274
3.685
18%
2.690
3.127
3.498
The proposal’s internal rate of return (rounded to the nearest percent) is:
12 percent
14 percent
16 percent
18 percent
A)
B)
C)
D)
7. Clarinet Publishing is considering the purchase of a used printing press costing $38,400. The
printing press would generate a net cash inflow of $20,000 a year for 5 years. At the end of 5
years, the press would have no salvage value. The company’s cost of capital is 10 percent.
The company uses straight-line depreciation.
The investment’s payback period in years (rounded to two decimal points) is:
A) 2.56
B) 2.13
C) 1.92
D) 3.00
8.
A cost that is assigned to a department as a result of an indirect allocation, or reassignment,
from another department, such as a service department, would be classified as an indirect
departmental cost.
True or False
Section 2 Exercises – 5 pts each
Anka Company has two service departments, Maintenance Department and Personnel
Department, and two producing departments, X and Y. The Maintenance Department costs of
$135,000 are allocated on the basis of standard service hours used. The Personnel
Department costs of $45,000 are allocated on the basis of number of employees. The direct
costs of Departments X and Y are $30,000 and $57,000, respectively. Data on standard
service-hours and number of employees are as follows:
9.
Maint. Dept.
Number of employees
Dept. X
Dept. Y
180
115
670
500
6
Standard service hours
used
Person.
Dept.
15
60
55
Using the direct method, calculate the cost of the Personnel Department allocated to
Department X and to Department Y.
b) Using the direct method, calculate the cost of the Maintenance Department allocated to
Department X and to Department Y.
a)
10. Tracey Sales Co. has predicted the following costs for this year for 500,000 units:
Variable
Fixed
Total
Manufacturing
$ 600,000
1,200,000
$1,800,000
Selling and Administrative
$300,000
350,000
$650,000
a)
b)
What is the markup on variable manufacturing costs needed to break even?
What is the markup on selling and administrative costs needed to break even?
11.
The following information pertains to an item sold by Fritz Company:
Unit sales
Unit selling price
Unit standard variable
costs
Budget
4,300
$900
Actual
3,800
$875
$250
a. Determine the sales price variance (be sure to include F or U).
b. Determine the sales volume variance (be sure to include F or U).
Willowbrook Company has the following data for this year:
12.
Average operating assets
Contribution margin
Operating income
Sales
Weighted-average cost of
capital
Bottling
Division
$320,000
168,000
90,000
525,000
Mixing
Division
$ 800,000
515,000
120,000
1,400,000
18%
18%
Willowbrook Company has a target ROI of 18 percent.
Required: Calculate the following amounts for each division:
a. Operating investment turnover
b. ROI
c. Residual income
Budgeted sales of gloves for Perfect Fit Hands for the first six months of the year 2014
are as follows:
13.
Months
January
Unit Sales
February
765,000
810,000
March
650,000
April
700,000
May
1,400,000
June
1,800,000
The beginning inventory for 2014 is 250,000 units. The budgeted inventory at the end of a month
is 60 percent of units to be sold the following month.
Required: Prepare a purchases budget in units for each month, January through May.
Section 3 – Problems – 10 pts each
Anka Company has two service departments, Maintenance Department and Personnel
Department, and two producing departments, X and Y. The Maintenance Department costs of
$135,000 are allocated on the basis of standard service hours used. The Personnel
Department costs of $45,000 are allocated on the basis of number of employees. The direct
costs of Departments X and Y are $30,000 and $57,000, respectively. Data on standard
service-hours and number of employees are as follows:
14.
Maint. Dept.
Person.
Dept.
Dept. X
Dept. Y
180
115
670
500
6
20
30
25
Standard service hours
used
Number of employees
Using the step method, if Personnel Department costs are allocated first, calculate the cost of:
a)
b)
c)
Personnel Costs allocated to appropriate departments
Maintenance Costs allocated to appropriate departments
Total Costs in Dept. X & Y
15. Good Deal Electronics, Inc. manufactures two products, DVD Recorders and DVD Players,
both on the same assembly line. The predicted sales are 21,000 DVD Recorders and 23,000
DVD Players. The predicted costs for the year 2014 are as follows:
Materials
Other
Variable
$350,000
550,000
Fixed
$1,000,000
1,800,000
Each product uses 50 percent of the materials costs. Based on manufacturing time, 70 percent of
the other costs are assigned to the DVD Recorders, and 30 percent of the other costs are
assigned to DVD Players. The management of Good Deal Electronics desires an annual profit of
$375,000.
Required:
a. What price should Good Deal Electronics charge for each DVD Recorder and each DVD
Player if management believes the Recorders should sell for 55 percent more than the DVD
Players? (Rounded to 2 decimal places.)
b. What is the total profit per product?
Band Instruments Company has the following sales budget for the first three months of
the current year:
16.
Month
January
February
March
Sales Revenue
$665,000
180,000
500,000
Historically, the following trend has been established regarding cash collection of sales:
73 percent in month of sale
20 percent in month following sale
6 percent in second month following sale
1 percent uncollectible
November and December sales were $200,000 and $300,000, respectively.
Required: Prepare a schedule of budgeted cash collections from sales for January, February, and
March.
Augustus Company manufactures a single product that has a standard materials cost of
$125 (5 units of raw materials at $25 per unit) and standard direct labor cost of $40 (1 hour per
unit).
17.
The following data pertain to operations for May of this year:
Raw materials purchased and used in production of
1,550 units of finished product
Direct labor used
6,500 units or raw material
costing $67,000
1,450 hours costing
$59,000
Required:
a. Compute the following variances (show calculations):
1. Materials quantity, price, and total variance (be sure to include F or U).
2. Labor efficiency, rate, and total variance (be sure to include F or U).
b. Give one possible explanation for each of the six variances computed in requirement (a).
The Chip Division of Computer Co. has just revised its actual cost data for the year just
ended. Chip Division transfers circuit boards to the Assembly Division, and incurs no selling
expense for such transfers. Assembly Division can buy the same goods in the open market for
$130 each. Chip’s new cost data are:
18.
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expenses
Fixed selling and administrative
expenses
Total costs
$ 66
29
15
8
2
10
$130
Current production is 375,000 units, and Chip has a capacity of 650,000 units.
Required:
a. What is the lowest price Chip should charge for the internal transfer of its goods?
b. What is the highest price Assembly should pay Chip for the units?
c. Give the primary reason why Chip should reduce its price for internal transfers below the
market price.
Accio Company is evaluating a proposal to purchase a new machine that would cost
$95,000 and have a salvage value of $16,000 in 8 years. The new machine will provide
annual net cash inflows of $19,000 annually. If Accio purchases the new machine, it will sell
the old one for its current salvage value of $15,000.
19.
Accio’s cost of capital is 18 percent.
Required: Determine the proposal’s net present value of the investment using the tables below.
Present Value of $1
Periods (n)
6%
1
.943
2
.890
3
.840
4
.792
5
.747
6
.705
7
.665
8
.627
9
.592
8%
.926
.857
.794
.735
.681
.630
.583
.540
.500
Present Value of an annuity $1
Periods (n)
6%
8%
1
.943
.926
2
1.833
1.783
3
2.673
2.577
4
3.465
3.312
5
4.212
3.993
6
4.917
4.623
7
5.582
5.206
8
6.210
5.747
9
6.802
6.247
10%
.909
.826
.751
.683
.621
.564
.513
.467
.424
12%
.893
.797
.712
.636
.567
.507
.452
.404
.361
14%
.877
.769
.675
.592
.519
.456
.400
.351
.308
16%
.862
.743
.641
.552
.476
.410
.354
.305
.263
18%
.847
.718
.609
.516
.437
.370
.314
.266
.225
10%
.909
1.736
2.487
3.170
3.791
4.355
4.868
5.335
5.759
12%
.893
1.690
2.402
3.037
3.605
4.111
4.564
4.968
5.328
14%
.877
1.647
2.322
2.914
3.433
3.889
4.288
4.639
4.946
16%
.862
1.605
2.246
2.798
3.274
3.685
4.039
4.344
4.607
18%
.847
1.566
2.174
2.690
3.127
3.498
3.812
4.078
4.303
The end of
Final Exam
