Devry ACCT 505 Week 8 Final Exam

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Devry ACCT 505 Week 8 Final Exam

Question 1 10 pts

(TCO E) Installing the company’s logo on each motorcycle during the manufacturing process is a(n)

  • batch-level activity.
  • product-level activity.
  • unit-level activity.
  • organization sustaining activity

Question 2 10 pts

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

Sales $180,000
Net operating income $54,000
Contribution margin $30,000
Average operating assets $300,000
Stockholder’s equity $400,000

  • 27.0%
  • 55.5%
  • 18.0%
  • 16.7%

(TCO C) Alpha Corporation produces and sells a single product. Data concerning that product appear below.

Selling price per unit $75.00
Variable expense per unit $32.35
Fixed expense per month $639,750


1) Determine the monthly break-even in both units AND sales dollars.
2) What is the required unit sales to reach a target profit of $255,900? Show your work!

Question 4 25 pts

(TCO B) Bravo 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.

Required: Calculate for the first processing department the cost per equivalent units for direct materials ONLY. Round to the nearest cent and show your work!

Work in process, beginning: 

  • Units in beginning work in process inventory 200
  • Materials costs $6,900
  • Conversion costs $2,500
  • Percent complete for materials 85%
  • Percent complete for conversion 25%
  • Units started into production during the month 6,100
  • 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

Ending work in process:

  •   Units in ending work-in-process inventory 700
  •   Percentage complete for materials 80%
  •   Percentage complete for conversion 40%

Equivalent units for Materials

  • Transferred to finished goods 5,600
  • Ending Units(700 x 80%) 560
  • Total 6160

Question 11 25 pts

(TCO B) India 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 37,000
  • Estimated variable manufacturing overhead $7.77 per machine hour
  • Estimated total fixed manufacturing overhead $888,000
  • The actual machine hours for the year turned out to be 35,000.
  • The actual manufacturing overhead for the year was $1,200,000.


1) Compute the company’s predetermined overhead rate.
2) What the amount of overhead applied for the year?
3) Was the manufacturing overhead over- or under-applied for the year and by how much?

Question 5 30 pts

(TCO D) Charlie Company’s absorption (full) costing income statement for the last year of operations is presented below.

Sales $70,000

Less cost of goods sold:

  • Beginning inventory 0
  • Add cost of goods manufactured 48,000
  • Goods available for sale 48,000
  • Less ending inventory 6,000
  • Cost of goods sold 42,000
  • Gross margin 28,000
  • Less selling and admin. Expenses 25,000
  • Net operating income $3,000
  • Data on units produced and sold for the year are given below.
  • Units in beginning inventory 0
  • Units produced 8,000
  • Units sold 7,000

Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totaled $16,000 for the year. The fixed manufacturing overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold.

1) Prepare a new income statement for the year using variable costing.
2) Explain briefly why absorption (full) costing net operating income is greater than variable costing net operating income when production is greater than sales.



Question 6 30 pts

(TCO I) (Ignore income taxes in this problem.) Delta 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 $600,000, 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 $50,000 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 $120,000 per year for each of the 10 years. Delta’s discount rate is 16%.

1) What is the net present value (NPV) of this investment opportunity? Show your work!
2) Based on your answer to (1) above, briefly explain whether Delta should purchase the new mixing machinery.

Question 7 (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Echo Corporation for the last fiscal year.

  • Sales $2,400
  • Raw materials inventory, beginning $40
  • Raw materials inventory, ending $50
  • Purchases of raw materials $170
  • Direct labor $150
  • Manufacturing overhead $250
  • Administrative expenses $100
  • Selling expenses $140
  • Work-in-process inventory, beginning $80
  • Work-in-process inventory, ending $50
  • Finished goods inventory, beginning $125
  • Finished goods inventory, ending $60


1) Use the 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.

2) Briefly explain the flow of inventory cost through the financial statements from the time of purchase to the time of sales. When is the inventory cost regarded as an asset and as an expense?

Question 8 25 pts

(TCO F) Fox Corporation is preparing its cash budget for November. The budgeted beginning cash balance is $64,000. Budgeted cash receipts total $117,000 and budgeted cash disbursements total $95,000. The desired ending cash balance is $100,000. The company can borrow up to $125,000 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.

Question 9 25 pts

(TCO F) The following overhead data are for a department of Golf Company.

Actual Costs Incurred Static Budget
Activity level (in units) 500 450

Variable costs:  

Indirect materials
$5,950, $5,382
$1,112, $1,008

Fixed costs:

$2,770, $2,800
$5,120, $5,100

Required: Construct a flexible budget performance report that would be useful in assessing how well costs were controlled in this department. Show your work!

Question 10 25 pts

(TCO H) Hotel 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 Hotel 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 show your work!