ACCT1B final exam 2015

| November 9, 2018

NO LATE EXAMS WILL BE ACCEPTED, NO EXCEPTIONSUse your own words; do not copy definitions from the text.An answer that appears to be a repeat of an answer guide will be graded zero.You must show your work to receive full credit on all problemsExams will be graded within two weeks of the deadlineThe answer key will not be made available, contact me for additional assistance on problems after the exam has been graded.Problems – Total 140 points1. (25 points) Place and “X” in the column that corresponds to the cost classification for each of the following scenarios. Some items may fit in more than one column.Avoidable CostUnavoidable CostSunk CostCommon Fixed CostOriginal cost of factory machineryDirect materialDepreciation on home office furnitureSalary of employees who will be fired if product is outsourcedCost of item previously made in factory, but now purchased from supplierDepreciation on factory equipmentSalary of supervisor who will be moved to another production line if product is eliminatedCost of nonrefundable airline ticket purchased last weekCost of delivery of products to customersDirect labor2. (25 points)Pro-forma financial statements are prepared using the information developed in the budget process. These statements reflect the results of operations and the financial position of the organization as if all actions planned in the budget had occurred. Many of the master budget components provide direct input to the pro-forma financial statements.Required:For each of the following components of the financial statements, indicate which pro-forma financial statement will show the item (Income Statement or Balance Sheet) and the budget within the master budget the item originated. Number 1 provides an example.Financial Statement ComponentPro-forma Financial StatementBudget Where Items Originated1.RevenueIncome StatementSales Budget2.Selling expense3.Accumulated depreciation4.Bad debt expense5.Short- or long-term debt6.Cost of goods sold7.Accrued expenses8.Accounts payable9.Interest expense10.Raw materials inventory11.Accounts receivable3. (20 Points) Gooding Custom Design generated $320,000 in operating income on sales revenue of $2,500,000. The company had $3,000,000 in assets on January 1 and $3,250,000 in assets on December 31.Requireda. Calculate Gooding’s margin.b. Calculate Gooding’s asset turnover.c. Calculate Gooding’s return on investment.4. (30 points) Paris Manufacturing Company Inc. uses 400 units of Part #4317 each year in the manufacture of one of its products. The company currently produces the part internally, but an outside supplier has offered to provide the part at a price of $20 per part. If Paris chooses to purchase the part from the outside supplier, one third of it’s the fixed manufacturing overhead will be eliminated. The company’s standard unit cost of producing the part is listed below.Direct material$8Direct labor$6Variable manufacturing overhead$5Fixed manufacturing overhead $9Total unit cost$28 Required: Ignoring qualitative factors, should Paris continue to make the parts internally or purchase them from the outside supplier? Why? Write a few sentences to respond on why Paris should make the parts internally or purchase them based on your calculations.5. (30 points) Brian Lochte operates a popular water park. Projections for the current year are as follows: Sales revenue $8,000,000 Operating income $700,000 Average total assets $4,000,000The camp’s weighted-average cost of capital is 10%, and Brian requires that all new investments generate a return on investment of at least 13%.At last week’s board meeting, Brian told the board that he had up to $50,000 to invest in new facilities at the Park and asked them to recommend some projects. Today the board’s president presented Brian with the following list of three potential investments to improve the camp facilities. Wading Pool Diving Pool Hot TubIncremental operating income $ 3,250 $ 4,800 $ 2,700Average total assets 25,000 45,000 16,000Required:a. Calculate the residual income and economic value added for each of the three projects.b. Which of the three projects do you recommend Brian undertake? Why, write a brief statement to explain the resulting calculations.6. (30 points) Mantle, Inc. produces two types of wooden mallets, Ash and Oak, in its Miami factory. Data relating to the mallets are given below:AshOakUnit selling price$30$28Variable manufacturing costs$11$12Variable selling costs$1$1Minutes required per unit2015Demand per period1,2001,600A total of 600 hours are available in the Miami facility.Required:a. How many hours will be required to satisfy the demand for both products?b. How much of each product should be produced to maximize Mantle’s operating income.7. (80 points)Comprehensive Cash Budget Sedona Gear Company a rapidly growing distributor of camping equipment, is formulating its plants for the coming year. Cody Mosbay, the firm’s marketing director, has completed the following sales forecast. Month Sales Month Sales January $ 900,000 July $1,900,000February $1,000,000 August $1,900,000March $ 900,000 September $1,600,000April $1,200,000 October $1,600,000May $1,500,000 November $1,800,000June $1,900,000 December $2,000,000Patti Bodkin, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. She has gathered the following information.· All sales are made on credit· Sedona’s excellent record in accounts receivable collection is expected to continue, with 65 percent of billings collected in the month after sale and the remaining 35 percent collected in the second month after the sale.· Cost of goods sold, Sedona’s largest expense, is estimated to equal 45 percent of sales dollars. Seventy percent of inventory is purchased one month prior to sale and 30 percent during the month of sale. For example, in April, 30 percent of April cost of goods sold is purchased and 70 percent of May cost of goods sold is purchased. (see next page)· All purchases are made on account. Historically, 70 percent of accounts payable have been paid during the month of purchase, and the remaining 30 percent in the month following purchase.Required:a. Prepare the cash receipts budget for the second quarter.b. Prepare the purchases budget for the second quarter.c. Prepare the cash payments budget for the second quarter.

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