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by: Odell Schimmel

IntroToManagerialAccounting ACC222

Marketplace > Miami University > Accounting > ACC222 > IntroToManagerialAccounting
Odell Schimmel
GPA 3.91


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This 0 page Class Notes was uploaded by Odell Schimmel on Sunday November 1, 2015. The Class Notes belongs to ACC222 at Miami University taught by RonaldCollins in Fall. Since its upload, it has received 294 views. For similar materials see /class/233337/acc222-miami-university in Accounting at Miami University.

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Date Created: 11/01/15
Accounting 222 Practice Exam 1 Aerotoy Company makes toy airplanes One plane is an excellent replica of a 737 it sells for 5 Vacation Airlines wants to purchase 12000 planes at 175 each to give to children flying unaccompanied Cost per planes are as follows Iquot 5 Direct materials 100 Direct Labor 050 Variable Overhead 010 Fixed Overhead 090 No variable marketing costs would be incurred The company is operating significantly below the maximum productive capacity No fixed costs are avoidable However Vacation airlines wants its own logo and colors on the planes The cost of decals is 001 per plane and a special machine costing 1500 would be required to affix the decals After the order is complete the machine would be scrapped Should the special order be accepted and how much would income change Santorino Co produces two models ofa component Model 3 and model P4 The unit contribution margin for Model K3 is 6 the unit contribution margin for Model P4 is 14 respectively Each model must spend time on a special machine The firm owns two machines that together provide 4000 hours of machine time per year Model K3 requires 15 minutes of machine time Model p4 requires 30 minutes of machine time What is the contribution margin per unit of scarce resource machine time for Model p4 Now suppose that Santorino can sell only 5500 units of each model How many units of P4 should be produced Bell Company makes fax machines Currently Bell makes all components of the fax machine in house An outside company has offered to supply one component part number B48 for 8 each Bells uses 15000 of these components per years Costs of B48 are as follows DM 400 DL 200 Variable OH 150 Fixed OH 300 Assume that fixed overhead is allocated and cannot be avoided Should Bell purchase the part from the outside supplier and how much will income increase or decrease Equot 9 Dodge Company s three products A B C Units Sales per year 250 400 250 Selling Price per unit 900 1200 900 Variable cost per unit 360 900 990 Unit Contribution margin 540 300 90 Contribution margin ratio 60 25 10 Assume that product C is discontinued and the extra space is rented for 300 per year All other information remains the same as the original data Annual profits will Walloon company produced 150 defective units last month at a unit manufacturing cost of 30 The defective units were discovered before leaving the plant Walloon can sell them as is for 20 or can rework them at a cost of 15 and sell them at the regular price of 50 The total relevant cost of reworking the defective units is Autry Company manufactures veterinary products One joint process involves refining a chemical dactylyte into two chemicals dac and tyl One batch of 5000 gallons of dactlytyte can be converted to 2000 gallons of dac and 3000 gallons of tyl at a total joint processing cost of 12000 At the split off point dac can be sold for 3 per gallon and tyl at a joint processing cost of 12000 At the split off point dac can be sold for 3 per gallon and tyl can be sold for 4 per gallon Autry has just learned of a new process to convert dac and prodac The new process costs 4000 and yields 1700 gallons of prodac for every 2000 gallons of dac Prodac sells for 5 per gallon Should Autry process further dac further and by how much 7 Paetner Company had the following historical accounting data per unit DM 60 DL 30 Variable OH 15 Fixed OH 24 Variable Selling 45 Fixed Selling 9 The units are normally transferred internally from Division A to Division B The units may be sold externally for 210 per unit The minimum profit level accepted by the company is a markup of 30 There were no beginning or ending inventories What would be the transfer price if Division X uses full cost plus markup The following information pertains to Nova Co39s costvolumeprofit relationships Breakeven point in units sold 1000 Variable expenses per unit 500 Total xed expenses 150000 How much will be contributed to net operating income by the 1001st unit sold 10 Black Company39s sales are 600000 its fixed expenses are 150000 and its variable expenses are 60 of sales Based on this information the margin of safety is During last year Thor Lab supplied hospitals with a comprehensive diagnostic kit for 120 At a volume of 80000 kits Thor had fixed expenses of 1000000 and net operating income of 200000 Because of an adverse legal decision Thor39s liability insurance expenses this year will be 1200000 more than they were last year Assuming that the volume and other costs are unchanged what should be the sales price this year if Thor is to make the same 200000 net operating income Mason Enterprises has prepared the following budget for the month of July Selling Variable Unit price per unit cost per unit sales Product A 1000 400 15000 Product B 1500 800 20000 Product C 1800 900 5000 Assuming that total fixed expenses will be 150000 and the sales mix remains constant the breakeven point would be closest to A 276008 B 235292 C 294545 D 141278 12 Legal Company which has only one product has provided the following data concerning its most recent month of operations Selling price 120 Units in 39 39 39 inventory 100 Units produced 3900 Units sold 3600 Units in ending inventory 400 Variable costs per unit Direct materials 31 Direct labor 54 Variable iug overhead 5 Variable selling and administrative 8 Fixed costs Fixed 3 iug overhead 54600 Fixed selling and administrative 21600 The company produces the same number of units every month although the sales in units vary from month to month The company39s 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 13 The Milham Company has two divisions East and West The divisions have the following revenues and expenses East West Sales 720000 350000 Variable costs 370000 240000 Traceable xed costs Allocated common corporate costs Net operating income loss 130000 80000 120000 50000 100000 20000 Management at Milham is pondering the elimination of the West Division since it has shown an operating loss for the past several years If the West Division were eliminated its traceable fixed costs could be avoided Total common corporate costs would be unaffected by this decision Given these data the elimination of the West Division would result in an overall company net operating income of A 100000 B 80000 C 120000 D 50000 14 RoCo has a margin for 2009 of 50 and its ROI is 10 Sales for the year are 200000 ts fixed costs are 50000 The firm has a minimum return of 5 on its investments What is the residual income of the investment 15 A company s margin is 20 Its Turnover is 50 Operating income is 50000 What is the firms ROI The Rialto Company39s income statement for May is given below Total DivisionL DivisionM 300000 165000 135000 153000 99000 54000 147000 66000 81000 Traceable xed expenses 97000 45000 52000 Segment margin 50000 21000 29000 Common xed expenses 25000 Net operating income 25000 16 If sales for Division L increase 30000 with a 9000 increase in the Division39s traceable fixed expenses the overall company net operating income should A decrease by 4000 B increase by 21000 C increase by 3000 D increase by 5700 17 A proposal has been made that will lower variable costs in Division M to 37 of sales The reduction can be accomplished only if Division M39s traceable fixed costs are allowed to increase 12000 If this proposal is implemented and if sales remain constant overall company net operating income should A increase by 12000 B increase by 16050 C decrease by 7950 D decrease by 12000 18 RoCo incurred the following costs last year DM 50000 DL 20000 Overhead 130000 SampA Expense 36000 RoCo produced and sold 10000 units at a price of 31 each What is the prime cost per unit 19 Madeline Corp has historically used a traditional cost system that allocates all overhead to products based on machine hours The company is considering using an ABC cost system that divides all of its activities into two activities machining and inspecting Est activity activity rate Machining 50000 machine hours 8 per hour Inspecting 3000 inspections 40 per inspection If Job 812 requires 15 machine hours and 2 inspections would it have been undercosted or overcosted using the traditional system and by how much 20 Hatteberg prepared the following projected income statement for next month on 50000 units sold Sales 750000 Variable Costs 500 000 M 250000 Fixed Cost 190 000 Net Income 60000 Hatterberg is contemplating decreasing its selling price per unit by 20 increasing its advertising budget by 60000 and reducing its variable cost by 1 per unit If those changes are implemented how many units does Hatteberg need to sell to earn target profit of 80000 21 RoCo Produced 8500 units in July and sold 8300 of them Net income using absorption costing will be A greater than the net income by using variable costing b less than the net income using variable costing c the same as the net income using variable costing d not enough information is given since we don t know fixed cost per unit 22 The controller of Kleyman CO estimates the amount of materials handling overhead cost that should be allocated to the company s two products using this data Wall mirrors Fancy mirrors Total expected units produced 4000 3000 Total expected material moves 500 400 Expected direct labor hours per unit 7 6 The total materials handling for the year is expected to be 2840040 If the materials handling cost is allocated on the basis of direct labor hours how much of the total materials handling cost should be allocated to wall mirrors 23 As volume increases fixed manufacturing overhead per unit a increases b decreases c stays the same d not enough information given 24 The Oxford Co provided the following data for 2008 assume no beginning or end inventory Break Even in sales dollars 140000 Direct Labor 60000 Direct Materials 44000 Sales 200000 Variable Overhead 10000 Gross Margin 50000 Contribution Margin 60000 What is the amount of FIXED selling and administrative expense 25 Willy s Wheelbarrows uses absorption costing and currently produces 1000 wheelbarrows per month The following is the per unit data of the wheelbarrows Direct Materials Direct Labor 5 Variable OH 10 Fixed OH 40 Total Man Cost 85 The plant wants to expand production to 1500 wheelbarrows What is the total cost of producing 1500 wheelbarrows 26 RoCo only produces one product It has the following cost Direct Materials 50000 Direct Labor 100000 Variable Overhead 25000 Fixed Overhead 10000 Selling Expense 5000 Administrative Expense 2000 What is the company s conversion cost for the year 27 In March Clinton Co purchased materials costing 14000 and incurred direct labor cost of 20000 Overhead totaled 36000 for the month Information on inventories is as follows March 1 March 31 Materials 8600 2300 Work In Process 1700 9000 Finished Goods 7000 6500 What was the cost of goods sold for March 28 Luisa Co has the following overhead costs for the builing for tanning appointments Month Tanning Appointments Total Cost January 700 1758 February 2000 2140 March 3100 2790 April 2500 2400 May 1500 1800 June 2300 2275 July 2150 2200 August 3000 2640 Using high low method what is the fixed cost per month to two decimal places 29 Prime costs are made up of what costs 30 Head first company plans to sell 5000 bicycle helmets at 70 each Unit variable cost is 49 Total fixed cost for the year is 29000 Operating income at 5000 units sold is 75000 Headfirst plans on increasing sales by 15 next year What is the expected operating income for the following year 49 Wenig Inc has some material that originally cost 73500 The material has a scrap value of 45600 as is but if reworked at a cost of 6600 it could be sold for 58100 What would be the incremental effect on the company39s overall profit of reworking and selling the material rather than selling it as is as scrap A 22000 B 67600 C 51500 D 5900 The Milham Company has two divisions East and West The divisions have the following revenues and expenses East West Sales 720000 350000 Variable costs 370000 240000 Traceable xed costs 130000 80000 Allocated common corporate costs 120000 50000 Net operating income loss 100000 20000 Management at Milham is pondering the elimination of the West Division since it has shown an operating loss for the past several years If the West Division were eliminated its traceable fixed costs could be avoided Total common corporate costs would be unaffected by this decision Given these data the elimination of the West Division would result in an overall company net operating income of A 100000 B 80000 C 120000 D 50000 Use the following to answer question 51 The Talbot Company makes wheels that it uses in the production of bicycles Talbot39s costs to produce 100000 wheels annually are Direct materials 30000 Direct labor 50000 20000 Fixed overhead 70000 An outside supplier has offered to sell Talbot similar wheels for 125 per wheel If the wheels are purchased from the outside supplier 15000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for 45000 per year 51 If Talbot chooses to buy the wheel from the outside supplier then the change in annual net operating income due to accepting the offer is a A 35000 increase B 10000 decrease C 45000 increase D 70000 increase Use the following to answer question 52 The following are the Jensen Company39s unit costs of making and selling an item at a volume of 1000 units per month which represents the company39s capacity Manufacturing Direct materials 100 Direct labor 200 Variable overhead 050 Fixed overhead 040 Selllng and Admlnlstratlve Var1ab1e 200 leed 080 Present sales amount to 700 units per month An order has been received from a customer in a foreign market for 100 units The order would not affect current sales Jensen39s total fixed costs both manufacturing and selling and administrative are constant within the relevant range between 700 units and 1000 units The variable selling and administrative expenses would have to be incurred on this special order as well as for all other sales 52 How much will the company39s profits be increased or decreased if it prices the 100 units at 7 each A 30l B 150 C 0 D 310 Use the following to answer question 53 The Madison Company produces three products with the following costs and selling prices Product A B C Selling price per unit 15 20 20 Variable cost per unit 8 10 12 Direct labor hours per unit 1 15 2 Machine hours per unit 35 2 25 53 If Madison has a limit of 15000 machine hours but no limit on direct labor hours then the three products should be produced in the order A A B c B B c A C A c B D CAB OWWDUU Answers 1 Yes increase by 180 2a 28 2b 5500 S WNF P P NN mm 2 N I No decrease by 7500 Increase by 525 2250 No income will be 1500 lower 150 225000 135 294545 90104 50000 50000 10 C C 7 Undercosted by 44 110000 A 17287 Decreases 6000 107500 135000 77200 8 1457 29Direct Labor and Direct Materials 30 90750 Final Exam ACC 222 552013 75100 PM Chapter 2 Variable Costs varies with changes in the level of activity o ex cost of goods sold direct materials direct labor variable elements of manufacturing overhead indirect materials supplies power and variable elements of selling and administration commissions shipping costs o based on the activity base 9 whatever drives cost Fixed Costs a cost that remains constant regardless of changes in level of activity o ex straight line depreciation insurance property taxes rent supervisory salaries administrative salaries and advertising Mixed Costs contains both variable and fixed cost elements 0 yabX o y total mixed cost 0 a total fixed cost 0 b variable cost per unit of activity 0 X level of activity HighLow Method used to analyze mixed costs with equation variable cost cost high activity cost low activity high activity level low activity level change in cost change in activity xed cost total cost variable cost element Chapter 3 Predetermined Overhead Rates o allocationbase a measure such as direct laborhours or machine hours that are used to assign overhead costs to products and services POR estimated total MOH cost estimated total amount of the allocation base appy overhead costs POR x amount of the allocation base incurred byjob DLH Sales Cost of Goods Sold beg finished goods cost of goods manufactured end finished goods Gross Margin Selling and Administration Expenses GM Expenses NOI OverUnder Applied OH appliedlt actual appliedgt actual under applied over applied Chapter 5 Profit Sales Variable Expenses Fixed Expenses CM ratio Contribution Margin Sales o BE point in ixed Expenses CM Ratio o Target Profit units Tarqet Profit Fixed Expenses Unit CM o Target Profit Tarqet Profit Fixed Expenses CM Ratio Chapter 6 Variable Income Statement Sales Variable Expenses Variable Costs of Goods Sold Variable Selling and Administrative Expense Total Variable Expenses Contribution Margin Sales TotaVariabeExpenses Fixed Expenses Fixed MOH Fixed Selling and Administrative Expense Total Fixed Expenses Net Operating Income CM Total Fixed Expenses Absorption Income Statement Sales Cost of Goods Sold Gross Margin Selling and Administrative Expenses Net Operating Income Reconciliation of Variable Costing with Absorption Costing Income o units produced units sold 9 no change in inventories 0 absorption NOI variable NOI o units produced gt units sold 9 inventories increase 0 absorption N01 gt variable NOI o units produced lt units sold 9 inventories decrease 0 absorption NOI lt variable NOI Chapter 7 o allocate to activity cost pools 0 ex 25 x 500000 125000 o calculate activity rates I Activity Cost Pools I Total Cost I Total Activity I Activity Rate ex Order size 380000 20000 MHs 19 per MH Activity Cost Pool Activity Rate Activity ABC Cost ex Order size 19 per MH 17500 MH 332500 Management Reports Sales Costs Direct Materials Direct Labor Shipping Order Size Total Cost Product Margin Sales Total Costs Chapter 8 Sales BudgetCash Collections Merchandising Purchases Budget Budgeted cost of goods sold Add desired ending merchandise inventory Total Needs Less beginning merchandise inventory Required Purchases Chapter 9 Flexible Budget Actual client visits q Revenue 180q Expenses Total Expenses Net Operating Income Revenue amp Spending Variances o Revenue favorable if Actual gt Flexible o Expenses favorable if Flexible gt Actual o NOI favorable if Actual gt Flexible Chapter 10 1 2 3 SQxSP AQxSP AQxAP Quantity Variance Price Variance 2 l 3 2 Spending Variance 3 1 Chapter 11 R01 Net Operating Incom Margin x Turnover Average Operating Assets margin NOI Sales turnover Sales Avg Operating Assets Residual Income NOI Avg Oper Assets x Min required rate of return N EW MATERIAL Chapter 6 new traceable fixed cost fixed cost that is incurred from a specific segment commonfixedcost fixed cost that supports the operations of more than one segment not traceable to any specific segment segmentmargin subtract the traceable fixed cost from the segment s contribution margin Segmented Income Statement Sales Variable Expenses Contribution Margin Traceable Fixed Cost Segment Margin Common Fixed Cost Net Operating Income Segment Margin Common Fixed Cost Chapter 12 avoidable costs a cost that can be eliminated by choosing one alternative over another relevant costs sunk cost a cost that has already been incurred and cannot be avoided regardless irrelevant future cost irrelevant t6de 552013 75100 PM 552013 75100 PM


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