ACCT 212 connect exam 4 complete solutions correct answers key

Liberty University ACCT 212 connect exam 4 complete solutions correct answers key

A cost pool is a collection of costs that are related to the same or similar activity.

True

False

Which of the following are advantages of using the plantwide overhead rate method?

The use of cost pools is considerably more accurate than other overhead allocations.

The necessary information is readily available.

It is more accurate than traditional overhead allocations.

Each department has its own overhead rate and its own allocation base.

It takes into account that when products differ in batch size and complexity, they usually consume different amounts of overhead resources.

Manufacturing costs other than direct materials and direct labor, and are not readily traceable to specific units or batches of production are called:

Administrative expenses.

Nonmanufacturing costs.

Prime costs.

Factory overhead.

Preproduction costs.

Product costs are capitalized as inventory on the balance sheet and period costs are expenses on the income statement.

True

False

Factory overhead is often collected and summarized in a subsidiary factory overhead ledger.

True

False

Period costs for a manufacturing company, such as selling and administrative expenses, are recorded directly to Work In Process Inventory when they are incurred.

True

False

Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations for June. The journal entry to record June production activities for direct material usage is:

Direct materials used

$87,000

Direct labor used

160,000

Predetermined overhead rate (based on direct labor)

155%

Goods transferred to finished goods

432,000

Cost of goods sold

444,000

Credit sales

810,000

Debit Raw Materials Inventory $87,000; credit Accounts Payable $87,000.

Debit Raw Materials Inventory $87,000; credit Finished Goods Inventory $87,000.

Debit Cost of Goods Sold $87,000; credit Finished Goods Inventory $87,000.

Debit Work in Process Inventory $87,000; credit Raw Materials Inventory $87,000.

Debit Work in Process Inventory $87,000; credit Cost of Goods Sold $87,000.

During January, the production department of a process operations system completed and transferred to finished goods a total of 78,000 units. At the end of January, 9,000 additional units were in process in the production department and were 65% complete with respect to labor. The beginning inventory included labor cost of $37,100 and the production department incurred direct labor cost of $294,300 during January. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

$6.34.

$3.77.

$3.51.

$4.25.

$3.95.

Fuschia Company's contribution margin per unit is $12. Total fixed costs are $84,000. What is Fuschia's break-even point in units?

7,000.

26,520.

57,600.

5,760.

70,000.

Forrester Company is considering buying new equipment that would increase monthly fixed costs from $120,000 to $150,000 and would decrease the current variable costs of $70 by $10 per unit. The selling price of $100 is not expected to change. Forrester's current break-even sales are $400,000 and current break-even units are 4,000. If Forrester purchases this new equipment, the revised contribution margin ratio would be:

30%.

60%.

40%.

10%.

70%.

Variable costing separates the variable costs from fixed costs and therefore makes it easier to identify and assign control over costs.

True

False

Absorption costing results in expensing of fixed manufacturing overhead based on the number of units produced, rather than units sold.

True

False

Grason Corporation is preparing a budgeted balance sheet for 2015. The retained earnings balance at December 31, 2014 was $533,500. The 2015 budgeted income statement shows expected net income of $112,000. The company expects to declare dividends during 2015 amounting to $40,000. The expected balance in retained earnings on the 2015 budgeted balance sheet is:

$533,500.

$605,500.

$645,500.

$493,500.

$685,500.

Schrank Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be purchased in September?

14,000.

20,000.

22,000.

24,000.

28,000.

When recording variances in a standard cost system:

Only unfavorable material variances are debited.

Only unfavorable material variances are credited.

Both unfavorable material and labor variances are credited.

All unfavorable variances are debited.

All unfavorable variances are credited.

A company's flexible budget for the range of 35,000 units to 45,000 units of production showed variable overhead costs of $2 per unit and fixed overhead costs of $72,000. The company incurred total overhead costs of $148,800 while operating at a volume of 40,000 units. The total controllable cost variance is:

$6,800 favorable.

$6,800 unfavorable.

$3,200 favorable.

$3,200 unfavorable.

$10,000 favorable.

Granfield Company has a piece of manufacturing equipment with a book value of $35,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $21,100. Granfield can purchase a new machine for $111,000 and receive $21,100 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $18,100 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:

$17,500 increase

$72,400 decrease

$14,400 decrease

$48,850 increase

$17,500 decrease

Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.10 per unit. Bluebird currently produces and sells 75,000 units at $7.10 each. This level represents 80% of its capacity. Production costs for these units are $3.65 per unit, which includes $2.30 variable cost and $1.35 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:

$46,500 increase.

$12,000 increase.

$34,500 increase.

$8,250 decrease.

$34,500 decrease.

Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $5,000. The division sales for the year were $1,052,000 and the variable costs were $862,000. The fixed costs of the division were $195,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:

$58,500 decrease

$131,500 decrease

$55,300 decrease

$190,000 increase

$190,000 decrease

Markson Company had the following results of operations for the past year:

Sales (8,000 units at $20)

$160,000

Variable manufacturing costs

$86,000

Fixed manufacturing costs

15,000

Variable selling and administrative expenses

12,000

Fixed selling and administrative expenses

  20,000

(133,000)

Operating income

   $27,000

A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $14 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $1,600 for the purchase of special tools. If Markson accepts this additional business, its profits will:

Increase by $3,500.

Decrease by $5,650.

Decrease by $1,600.

Increase by $1,900.

Decrease by $5,100.

Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $3,000. The division sales for the year were $1,050,000 and the variable costs were $860,000. The fixed costs of the division were $193,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:

$57,900 decrease

$132,100 decrease

$54,900 decrease

$190,000 increase

$190,000 decrease

Assume markup percentage equals desired profit divided by total costs. What is the correct calculation to determine the dollar amount of the markup per unit?

Total cost times markup percentage.

Total cost per unit times markup percentage per unit.

Total cost per unit divided by markup percentage per unit.

Markup percentage per unit divided by total cost per unit.

Markup percentage divided by total cost.

An out-of-pocket cost requires a future outlay of cash and is relevant for current and future decision making.

True

False

A cost that requires a future outlay of cash, and is relevant for current and future decision making, is a(n):

Out-of-pocket cost.

Sunk cost.

Opportunity cost.

Operating cost.

Uncontrollable cost.

Costs already incurred in manufacturing the units of a product that do not meet quality standards are relevant costs in a scrap or rework decision.

True

False

A company is planning to purchase a machine that will cost $30,000, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the payback period for this machine?

   Sales

$120,000   

  Cost:

  Manufacturing

$53,000   

  Depreciation on machine

5,000   

  Selling and administrative expenses

40,000   

(98,000)  

  Income before taxes

$22,000   

  Income tax (35%)

(7,700)  

  Net income

$14,300   

4.20 years.

1.55 years.

2.10 years.

6.00 years.

3.45 year.

Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,900 and will produce cash flows as follows:

End of Year

Investment

A

B

1

$8,900

$0

2

8,900

0

3

8,900

26,700

 The present value factors of $1 each year at 15% are:

 1

0.8696

2

0.7561

3

0.6575

The present value of an annuity of $1 for 3 years at 15% is 2.2832

The net present value of Investment A is:

$17,555.

$(15,900).

$10,800.

$(20,321).

$4,420.

A company is considering the purchase of new equipment for $54,000. The projected annual net cash flows are $22,300. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 9% return on investment. The present value of an annuity of 1 for various periods follows:

Periods

Present value of an annuity of 1 at 9%

1

0.9174

2

1.7591

3

2.5313

What is the net present value of this machine assuming all cash flows occur at year-end?

$18,000

$3,300

$2,448

$21,300

$53,917

The break-even time (BET) method is a variation of the:

Payback method.

Internal rate of return method.

Accounting rate of return method.

Net present value method.

Present value method.

Capital budgeting is the process of analyzing:

Cash outflows only.

Short-term investments.

Long-term investments.

Investments with certain outcomes only.

Operating revenues.

Capital budgeting decisions are risky because all of the following are true except:

The outcome is uncertain.

Large amounts of money are usually involved.

The investment involves a long-term commitment.

The decision could be difficult or impossible to reverse.

They rarely produce net cash flows.

The calculation of annual net cash flow from a particular investment project should include all of the following except:

Income taxes.

Revenues generated by the investment.

Cost of products generated by the investment.

Depreciation expense.

General and administrative expenses.

The net cash flow of a particular investment project:

Does not take income taxes into consideration.

Equals the total of the inflows of the project.

Equals the total of the outflows of the project.

Does not include depreciation.

Is equal to operating income each period.

Capital budgeting is the process of analyzing:

Cash outflows only.

Short-term investments.

Long-term investments.

Investments with certain outcomes only.

Operating revenues.

A hurdle rate is the minimum acceptable rate of return for an investment.

True

False

Poe Company is considering the purchase of new equipment costing $80,000. The projected annual cash inflows are $30,200, to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Poe requires a 10% return on its investments. The present value of an annuity of 1 and present value of an annuity for different periods is presented below. Compute the net present value of the machine.

Periods

Present Value
of 1 at 10%

Present Value of an
Annuity of 1 at 10%

1

0.9091

0.9091

2

0.8264

1.7355

3

0.7513

2.4869

4

0.6830

3.1699

($15,731).

($4,896).

$15,731.

$4,896.

$32,334.

Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,000 and will produce cash flows as follows:

End of
Year

Investment

A

B

1

$8,000

$0

2

8,000

0

3

8,000

24,000

The present value factors of $1 each year at 15% are:

1

0.8696

2

0.7561

3

0.6575

The present value of an annuity of $1 for 3 years at 15% is 2.2832
The net present value of Investment A is:

$18,266.

($15,000).

$9,000.

($20,549).

$3,266.

Carmel Corporation is considering the purchase of a machine costing $36,000 with a 6-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment?

$6,000.

$7,000.

$18,000.

$21,000.

$36,000.

A report that accumulates the actual expenses that a manager is responsible for and their budgeted amounts is a:

Segmental accounting report.

Managerial cost report.

Controllable expense report.

Departmental accounting report.

Responsibility accounting performance report.

Responsibility accounting performance reports:

Become more detailed at higher levels of management.

Are usually summarized at higher levels of management.

Are equally detailed at all levels of management.

Are useful in any format.

Are irrelevant at the highest level of management.