Accounting 203 final assignment
Use the following to answer questions 1-4:
Ewing
Corporation's controller has developed the cost and usage data listed below in
preparation of standard unit cost information for the coming year.
Direct
materials quantity standard 3 pounds per product
Direct labor
time standard 5 hours per product
Direct
materials price standard $10 per pound
Direct labor
rate standard $ 9 per hour
Standard
variable overhead rate $ 5 per labor hour
Standard
fixed overhead rate $10 per labor hour
1. The
standard unit cost for direct materials is
A) $50. B) $10. C) $30. D) $27.
2. The
standard unit cost for direct labor is
A) $45. B) $27. C) $135. D) $9.
3. The
standard unit cost for overhead is
A) $15. B) $25. C) $75. D) $50.
4. The total
standard unit cost is
A) $105. B) $150. C) $260. D) $34.
5. Lucas
Company has set standards for the manufacturing of clay pots to be 2 pounds of
direct materials, per pot, at a cost of $3 per pound. During the current
period, 600 pounds of direct materials were purchased for $1962. All of the
direct materials were used to manufacture 295 pots. Lucas's direct materials
price variance was
A) $192 (F).
B) $162 (U).
C) $192 (U).
D) zero.
6. The
direct materials standards for the main product of Duchess Company are 8 grams
of direct materials per product at a cost of $3 per gram. During April, 974
grams of direct materials were used to produce 120 products at a direct
materials cost of $2,900. The direct materials quantity variance for April was
A) $72 (U). B) $92 (U). C) $42 (U). D) $112 (F).
A) $72 (U). B) $92 (U). C) $42 (U). D) $112 (F).
7. Using the
labor time standard of 0.5 labor hour per unit and a labor cost standard of $10
per labor hour for a 10 pound bag of chocolate and the following actual cost
and usage data, compute the direct labor rate variance.
Direct labor
hours used 4,950 hours
Total cost
of direct labor $53,460
Number of
good units produced 9,000 units
A) $4,500
(F) B) $4,500
(U) C) $3,960
(U) D) $3,960
(F)
8. Using the
labor time standard of 0.5 labor hour per unit and a labor cost standard of $10
per labor hour for a 10 pound bag of chocolate and the following actual cost
and usage data, compute the direct labor variance.
Direct labor hours used 4,950 hours
Direct labor hours used 4,950 hours
Total cost
of direct labor $53,460 Number of good units produced 9,000 units
A) $3,960
(U) B) $8,460
(F) C) $3,960
(F) D) $8,460
(U)
9. Harrison,
Inc., has computed direct labor standards for the manufacture of its product to
be 4 hours of labor per product at a cost of $15 per hour. During March,
Harrison produced 45 products in 190 hours and incurred direct labor costs of
$2,720. Harrison's direct labor efficiency variance was
A) $20 (U). B) $130 (U). C) $150 (U). D) $130 (F).
A) $20 (U). B) $130 (U). C) $150 (U). D) $130 (F).
10.
Underfoot Products uses standard costing. The following information about
overhead was generated during May:
Standard
variable overhead rate $2 per machine hour
Standard
fixed overhead rate $1 per machine hour
Actual
variable overhead costs $399,000
Actual fixed
overhead costs $175,000
Budgeted
fixed overhead costs $190,000
Standard
machine hours per unit produced 10
Good units
produced 18,000
Actual
machine hours 200,000
Compute the
variable overhead spending variance.
A) $21,000
(F) B) $1,000
(U) C) $1,000
(F) D) $31,000
(F)
11.
Underfoot Products uses standard costing. The following information about
overhead was generated during May:
Standard
variable overhead rate $2 per machine hour
Standard
fixed overhead rate $1 per machine hour
Actual
variable overhead costs $390,000
Actual fixed
overhead costs $175,000
Budgeted
fixed overhead costs $190,000
Standard
machine hours per unit produced 10
Good units
produced 18,000
Actual
machine hours 190000
Compute the
variable overhead efficiency variance.
A) $40000
(U) B) $40000
(F) C) $30000
(F) D) $20000
(U)
12.
Underfoot Products uses standard costing. The following information about
overhead was generated during May:
Standard
variable overhead rate $2 per machine hour
Standard
fixed overhead rate $1 per machine hour
Actual
variable overhead costs $390,000
Actual fixed
overhead costs $175,000
Budgeted
fixed overhead costs $190,000
Standard
machine hours per unit produced 10
Good units
produced 18,000
Actual
machine hours 200,000
Compute the
fixed overhead budget variance.
A) $5,000
(U) B) $5,000
(F) C) $15,000
(F) D) $10,000
(F)
13.
Underfoot Products uses standard costing. The following information about
overhead was generated during May:
Standard
variable overhead rate $2 per machine hour
Standard fixed
overhead rate $1 per machine hour
Actual
variable overhead costs $390,000
Actual fixed
overhead costs $175,000
Budgeted
fixed overhead costs $190,000
Standard
machine hours per unit produced 10
Good units
produced 18,000
Actual
machine hours 200,000
Compute the
fixed overhead volume variance.
A) $5,000
(U) B) $10,000
(F) C) $10,000
(U) D) $15,000
(F)
14. Point
Company uses the standard costing method. The company's main product is a
fine-quality audio speaker that normally takes 0.25 hour to produce. Normal
annual capacity is 3,000 direct labor hours, and budgeted fixed overhead costs
for the year were $6,750. During the year, the company produced and sold 8,000
units. Actual fixed overhead costs were $4,800. Compute the fixed overhead budget
variance.
A) $300 (F) B) $300 (U) C) $1,950 (U) D) $1,950 (F)
A) $300 (F) B) $300 (U) C) $1,950 (U) D) $1,950 (F)
15. Point
Company uses the standard costing method. The company's main product is a
fine-quality audio speaker that normally takes 0.25 hour to produce. Normal
annual capacity is 3,000 direct labor hours, and budgeted fixed overhead costs
for the year were $6,750. During the year, the company produced and sold 8,000
units. Actual fixed overhead costs were $4,800. Compute the fixed overhead
volume variance.
A) $300 (U) B) $300 (F) C) $1,950 (U) D) $2,250 (U)
A) $300 (U) B) $300 (F) C) $1,950 (U) D) $2,250 (U)
16. The
purpose of incremental analysis is to find the alternative
A) with the
fewest relevant costs.
B) that
brings in the most revenue.
C) that
contributes the most to profits.
D) with the
lowest fixed costs.
Use the
following to answer question 17:
Taylor
manufactures 12,000 units of a part used in its production to manufacture
guitars. The annual production activities related to this part are as follows:
Direct
materials, $24,000
Direct
labor, $66,000
Variable
overhead, $54,000
Fixed
overhead, $84,000
Best
Guitars, Inc., has offered to sell 12,000 units of the same part to Taylor for
$22 per unit. If Taylor were to accept the offer, some of the facilities
presently used to manufacture the part could be rented to a third party at an
annual rental of $18,000. Moreover, $5 per unit of the fixed overhead applied
to the part would be totally eliminated.
17. What
should Taylor's decision be, and what is the total cost savings that would
result?
A) Make,
$43,800 B) Buy,
$43,800 C) Make,
$64,000 D) Buy,
$61,800
Use the
following to answer question 18:
The Norran
Company needs 15,000 units of a certain part to use in its production cycle. If
Norran buys the part from Waterloo Company instead of making it, Norran could
not use the released facilities in another activity; thus, all of the fixed
overhead applied will continue regardless of what decision is made. Accounting
records provide the following data:
Cost to
Norran to make the part:
Direct
materials, $3
Direct
labor, $12
Variable
overhead, $13
Fixed
overhead applied, $8
Cost to buy
the part from the Waterloo Company, $27
18. What
should Norran's decision be, and what is the total cost savings that would
result?
A) Buy,
$90,000 B) Buy,
$15,000 C) Make,
$90,000 D) Make,
$15,000
19. Products
Uno, Dos, Tres, and Quatro have contribution margins of $2, $3, $4, and $5,
respectively, and require 1.5, 2, 2.5, and 3 machine hours per unit,
respectively. Assuming that all units produced could be sold and that total
machine hours per month are limited, on which product should the company concentrate
its efforts?
A) Uno B) Quatro C) Dos D) Tres
20.
Candidates for outsourcing would include
A) custodial
services. B) payroll
processing. C) information
management. D) all of
these.
21. The
normal selling price of our product is $42 per unit. The costs of production
are direct materials, $8; direct labor, $6; variable overhead, $7; and fixed
overhead, $4 (based on normal capacity). The company has received a special
order for 11,700 units at a unit sales price of $23. There is ample unused
capacity to fill the order and $1 per unit will be incurred for additional
freight costs. If the order is accepted, operating income will
A) increase
by $11,700. B) decrease
by $35,100. C) decrease
by $23,400. D) increase
by $23,400.
Use the
following to answer question 22:
Anderson Co.
makes and uses 5,000 components each year in its manufacturing operations. An
outside supplier has offered to supply the components to Anderson at $66 per
unit. Anderson's production costs are as follows:
Direct
materials $ 8
Direct labor
32
Variable
overhead 12
Fixed
overhead (based on normal capacity) 34
If Anderson
accepts the order, $8 of fixed overhead per unit will be eliminated.
22. If the
offer is accepted, operating income will
A) increase
by $100,000. B) decrease
by $70,000. C) decrease
by $30,000. D) increase
by $60,000.
23. A
company is considering a project with annual after-tax cash flows of $3,900.00
per year for six years. The company's cost of capital is 14 percent. Present
and future value factors for a 14 percent interest rate for six years are as
follows:
Future value
of $1 2.195
Present
value of $1 0.456
Future value
of a series of equal payments 8.536
Present
value of a series of equal payments 3.889
Using the
net present value method, what is the maximum amount that the company should
invest?
A) $1778.40 B) $33,290.40 C) $8,560.50 D) $15,167.10
A) $1778.40 B) $33,290.40 C) $8,560.50 D) $15,167.10
24. Omaha,
Inc., is expected to have the following cash revenues and expenses (other than
depreciation) in 20x7:
Sales
$88,000 Depreciation expense $ 5,000
Selling,
general, and Income tax expense 3,000
administrative
expenses Cost of goods sold 45,000
(excluding
depreciation) 10,000
Omaha's
estimated 20x7 net cash flows are
A) $25,000. B) $27,000. C) $20,000. D) $30,000.
Use the
following to answer questions 25-26:
Chicago Co.
is interested in purchasing a machine that would improve its operational
efficiency. The cost is $200,000 with an estimated residual value of $20,000
and a useful life of eight years. Cash inflows are expected to increase by
$40,000 a year. The company's minimum rate of return is 10 percent. The present
value of $1 for eight years at 10 percent is 0.467, and the present value of an
annuity of $1 at 10 percent and eight years is 5.335.
25. The net
present value of the project is
A) $74,520. B) $120,100.
C) $93,400. D) $22,740.
26. The
project earns a rate of return of
A) Unable to
determine from the data given B) less than
10 percent. C) greater
than 10 percent. D) 10
percent.
Use the
following to answer questions 27-28:
Memphis Co.
is going to purchase a machine for $83,200 that will increase cash flows by
$40,000 in the first year, $30,000 the second year, and $25,000 the third year.
The machine will have no residual value. The minimum rate of return is 10
percent. The present value factors for the three years are 0.909, 0.826, and
0.751, respectively.
27. The
machine's net present value is
A) $21,800. B) ($4,286).
C) $79,915. D) ($3,285).
28. The
machine's actual rate of return is
A) Unable to
determine from the data given B) less than
10 percent. C) greater
than 10 percent. D) 10
percent.
29. Boston
Corp. is evaluating three projects. Each project will return a total of
$600,000 to the company in cash flows over a three-year period. The cash flows
for the three projects are as follows:
Year 1 Year 2 Year 3 Total
Year 1 Year 2 Year 3 Total
Project A
$300,000 $200,000 $100,000 $600,000
Project B
200,000 200,000 200,000 600,000
Project C
100,000 200,000 300,000 600,000
Which
project represents the best investment for Boston?
A) Project A B) Project B C) Project C D) All
projects are equally good investments.
Use the
following to answer questions 30-31:
Seattle,
Inc., is contemplating a project that costs $180,000. Expectations are that
annual cash revenues will be $70,000 and annual expenses (including
depreciation) will total $30,000. The project has a six-year useful life and a
residual value of $30,000.
30. The
accounting rate of return for the project is
A) 66.7
percent. B) 38.1
percent. C) 53.3
percent. D) 22.2
percent.
31. The
project's payback period is
A) 2.31
years. B) 2.57
years. C) 2.14
years. D) 2.77 years.
Use the
following to answer questions 32-34:
The state of
Illinois has passed a law requiring that every automobile be inspected at least
once a year for pollution control. Anfang Enterprises is considering entering
into this type of business. After extensive studies, Joseph Anfang has
developed the following set of projected annual data on which to make his
decision:
Direct service labor $333,000.00
Direct service labor $333,000.00
Variable
service overhead costs 270,000.00
Fixed
service overhead costs 280,000.00
Marketing
expenses 120,000.00
General and
administrative expenses 170,000.00
Minimum
profit 90,000.00
Cost of
assets employed 500,000.00
Anfang
believes that his company will inspect 100,000 automobiles per year. The
company earns an average of 18.75 percent return on its assets.
32. The
price to be charged for inspecting each automobile using the return on assets
pricing method would be calculated as follows:
A)
($883,000.00 ÷ 100,000) + {($883,000.00 ÷ 100,000) × [($90,000 + $290,000) ÷
$883,000.00]}
B) ($1,173,000.00
÷ 100,000) + [($1,173,000.00 ÷ 100,000) × ($90,000 ÷ $1,173,000.00)]
C)
($1,173,000.00 ÷ 100,000) + [($500,000 ÷ 100,000) × 0.1875]
D) None of
these
33. The
price to be charged for inspecting each automobile using the time and materials
pricing method would be calculated as follows:
A)
($883,000.00 ÷ 100,000) + {($883,000.00 ÷ 100,000) × [($90,000 + $290,000) ÷
$883,000.00]}
B)
($1,173,000.00 ÷ 100,000) + [($1,173,000.00 ÷ 100,000) × ($90,000 ÷
$1,173,000.00)]
C)
($1,173,000.00 ÷ 100,000) + [($500,000 ÷ 100,000) × 0.1875]
D) None of
these
34. The
price to be charged for inspecting each automobile using the gross margin
pricing method would be calculated as follows:
A)
($1,173,000.00 ÷ 100,000) + [($1,173,000.00 ÷ 100,000) × ($90,000 ÷
$1,173,000.00)]
B)
($1,173,000.00 ÷ 100,000) + [($500,000 ÷ 100,000) × 0.1875]
C)
($883,000.00 ÷ 100,000) + {($883,000.00 ÷ 100,000) × [($90,000 + $290,000) ÷
$883,000.00]}
D) None of
these
35. The
pricing method that establishes selling prices based on a stipulated rate above
total production costs is
A) return on
assets pricing. B) target
cost pricing. C) gross
margin pricing. D) time and
materials pricing.
36. The
pricing method that is used primarily by service businesses is
A) return on
assets pricing. B) gross
margin pricing. C) target
cost pricing. D) time and
materials pricing.
37. The
pricing method that establishes selling prices based on a specified rate of
return on the assets employed in the operation is
A) target
cost pricing. B) return on
assets pricing. C) time and
materials pricing. D) gross
margin pricing.
38. Which of
the following is not a cost-based pricing method?
A) Target
costing B) Time and
materials pricing C) Return on
assets pricing D) Gross
margin pricing
39. Market
research shows potential customers will buy a particular product at a selling
price of $3,700. If the desired profit is 28 percent of target cost, the
company should make the product if the cost does not exceed
A) $3,700. B) $1,036. C) $2,664. D) $2,891.
A) $3,700. B) $1,036. C) $2,664. D) $2,891.
40. Which of
the following is not one of the three commonly used methods for determining
transfer prices?
A) Dictated B)
Negotiated C) Cost-plus
D)
Market-based
Please see the attachment for solution
File name: acc203 final ass-40q.doc File type: doc PRICE: $30
