DeVry ACCT 434 Week 4 Midterm

| October 22, 2018

1.Question :(TCO 1) Which of the following is a sign that an ABC system may be useful?Student Answer:Operations staff agrees with accountants about the costs of manufacturing and marketing products and services.There are small amounts of indirect costs.Products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity.Products a company is less suited to produce and sell show small profits.Question 2.Question :(TCO 1) Merriamn Company provides the following ABC costing information:ActivitiesTotal CostsActivity-cost driversAccount inquiry hours$400,00010,000 hoursAccount billing lines$280,0004,000,000 linesAccount verification accounts$150,00040,000 accountsCorrespondence letters$ 50,0004,000 lettersTotal costs$880,000The above activities are used by Department A and B as follows:Department ADepartment BAccount inquiry hours2,000 hours4,000 hoursAccount billing lines400,000 lines200,000 linesAccount verification accounts10,000 accounts8,000 accountsCorrespondence letters1,000 letters1,600 lettersHow much of the inquiry cost will be assigned to Department A?Student Answer:$80,000$400,000$160,000None of the aboveQuestion 3.Question :(TCO 2) Budgeting provides all of the following EXCEPTQuestion 4.Question :(TCO 2) White planned to use $82 of material per unit but actually used $80 of material per unit, and planned to make 1,200 units but actually made 1,000 units. The flexible-budget variance isQuestion 5.Question :(TCO 3) Which of the following does NOT represent a cause-and-effect relationship?Student Answer:It makes sense that if a complex product has a large number of parts, it will take longer to assemble than a simple product with fewer parts.Material costs increase as the number of units produced increases.A company is charged 40 cents for each brochure printed and mailed.Utility costs increase at the same time that insurance costs increase.Question 6.Question :(TCO 4) Relevant costs in a make-or-buy decision of a part includeStudent Answer:setup overhead for the manufacture of the product using the outsourced part.currently used manufacturing capacity that has alternative uses.annual plant insurance that will remain the same.corporate office costs that will be allocated differently.Question 7.Question :(TCO 5) The theory of constraints is used for cost analysis whenQuestion 8.Question :(TCO 5) Jensen Company has relevant costs of $80 per unit to manufacture Part A. A current supplier offers to make Part A for $70 per unit. If capacity is constrained, the opportunity cost of buying Part A from the supplier isComments:Question 9.Question :(TCO 3)For January, the cost components of a picture frame include $0.35 for the glass, $0.65 for the wooden frame, and $0.80 for assembly. The assembly desk and tools cost $400. A total of 1,000 frames is expected to be produced in the coming year. What cost function best represents these costs?Question 10.Question :(TCO 4)Sunk costs1.Question :(TCO 1) For each of the following activities, identify an appropriate activity-cost driver.a. machine maintenanceb. machine setupc. quality controld. material orderinge. production schedulingf. warehouse expenseg. engineering designQuestion 2.Question :(TCO 2) Lubriderm Corporation has the following budgeted sales for the next six-month periodMonth Unit SalesJune 90,000July 120,000August 210,000September 150,000October 180,000November 120,000There were 30,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month.Five pounds of materials are required for each unit produced. Each pound of material costs $8. Inventory levels for materials are equal to 30% of the needs for the next month. Materials inventory on June 1 was 15,000 pounds.Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month.Question 3.Question :(TCO 3) The Wildcat Company has provided the following information:Units of Output30,000 Units42,000 UnitsDirect materials $180,000 $252,000Workers’ wages 1,080,000 1,512,000Supervisors’ salaries 312,000 312,000Equipment depreciation 151,200 151,200Maintenance 81,600 110,400Utilities384,000 528,000Total $2,188,800 $2,865,600Using the high-low method and the information provided above, identify the linear cost function equation.Question 4.Question :(TCO 5) Kirkland Company manufactures a part for use in its production of hats. When 10,000 items are produced, the costs per unit are:Direct materials $0.60Direct manufacturing labor 3.00Variable manufacturing overhead 1.20Fixed manufacturing overhead 1.60Total$6.40Mike Company has offered to sell to Kirkland Company 10,000 units of the part for $6.00 per unit. The plant facilities could be used to manufacture another item at a savings of $9,000 ifKirklandaccepts the offer. In addition, $1.00 per unit of fixed manufacturing overhead on the original item would be eliminated.a. What is the relevant per unit cost for the original part?b. Which alternative is best for Kirkland Company By how much?

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