Managerial Accounting

| February 12, 2016

Managerial Accounting

1. (TCO 4) Assumptions underlying cost-volume-profit analysis include all of the following, except: (Points : 5)
all costs can be divided into fixed and variable elements.
total costs are constant over the relevant range.
the sales mix of products will not change.
a change in volume is the only factor that affects costs.
Question 2.2. (TCO 6) A basic assumption of activity-based costing (ABC) is that: (Points : 5)
All manufacturing costs vary directly with units of production.
Products or services require the performance of activities, and activities consume resources.
Only costs that respond to unit-level drivers are product costs.
Only variable costs are included in activity-cost pools.
Question 3.3. (TCO 2) In a traditional job order cost system, the consumption of indirect materials in a production department increases: (Points : 5)
work in process.
actual factory overhead.
factory overhead applied.
Question 4.4. (TCO5) Cost drivers are: (Points : 5)
activities that cause costs to increase as the activity increases.
accounting measurements used to evaluate whether or not performance is proceeding according to plan.
a mechanical basis used to assign activities.
Costs linked to two or more other costs.
Question 5.5. (TCO 8) Clay Co. has considerable excess manufacturing capacity. A special job order’s cost sheet includes the following applied manufacturing overhead costs:
Fixed costs: 21,000
Variable costs: 33,000
The fixed costs include a normal $3,700 allocation for in-house design costs, although no in-house design will be done. Instead, the job will require the use of external designers costing $7,750. What is the total amount to be included in the calculation to determine the minimum acceptable price for the job? (Points : 5)
6- TCO 1) How do managerial and financial accounting differ in terms of the amount of detail presented and nonmonetary and monetary information? (Points : 25)
7. TCO 2) Wolf Co. estimates
that its employees will work 400,000 direct labor hours during the coming year. Total overhead costs are estimated to be $9,600,000 and direct labor costs are estimated to be $12,500,000. Direct Labor hours are actually 450,000.

If Wolf Co. allocates overhead based on direct labor HOURS, what is the predetermined overhead rate?

1. TCO 3) The Mixing Department is the third department in the MZS Inc. factory. During January, there were 4,000 units of beginning inventory in the Mixing Department, and 90,000 units were transferred in from the prior process. There were 8,000 units in ending inventory. The transferred-in cost in the beginning inventory was $170,000 and there was $600,000 in transferred-in cost during the month.

What is the cost per equivalent unit for transferred-in cost?

2. TCO 4) Assume that we are manufacturing a product and assume that the sales price per unit is $80, the variable cost is $20 per unit, and the fixed cost is $90,000; a) how many units would we need to sell to break even? b) How many units would we need to sell to earn a profit of $120,000? c) How many units do we need to sell to double that profit to $240,000? D) Why didn’t the number of units double from Part B to Part C?

3. TCO 5) Sivan Co. manufactures and sells one product. For the year, they started with no opening inventory; produced 100,000 units, but only sold 70,000 units. The selling price per each unit is $60.

The variable costs per unit were:
Direct materials…………………….7
Direct Labor ………………………..6
Variable manufacturing overhead ….5
Variable selling and administrative…6
Fixed costs per year:
Fixed manufacturing Overhead …………….$700,000
Fixed Selling and Administrative expenses.. $300,000

(a) Prepare the Income Statement using Absorption Costing.
(b) Prepare the Income Statement using Variable Costing.
4. (TCO 6) At Long Co. the total electricity cost is comprised of a basic fixed cost and above that there is a variable expense component for the electricity. Using estimated machine hours in the facility:

Machine hours Total Cost
50,000 $102,000
60,000 $122,000

Show your calculations and answer both of the following:

a) estimated variable cost per machine hour for electricity
b) estimated total fixed cost for electricity.

Hint: Do you recall how to use the High-Low Method?
5- (TCO 7) North Company internally produces a small part that it uses in the production of its Product “H”. The company’s unit product cost for the part, based on a production level of 100,000 parts per year, is as follows:

…………………………………………………Per part …………Total
Direct Materials………………………….. $7.00…………$700,000
Direct Labor …………………………………6.00…………$600,000
Variable Manufacturing Overhead……2.00…………$200,000

The company also incurs the following fixed costs annually:
Fixed Manufacturing Overhead (Traceable or Avoidable) is $400,000 TOTAL, equal to $4 per unit.
Fixed Manufacturing Overhead (Common—not traceable to any specific product in the factory, and these costs will remain even if no units are locally manufactured); these common fixed manufacturing overhead costs are allocated to the product line at $5 per unit or $500,000 TOTAL.

Unit Product Cost for each unit:
$24.00 per unit (comprised of the following costs)…
$7 + $6 + $2 = Variable Cost of $15 per unit PLUS $4 + $5 = Fixed Cost of $9 per unit

Now here’s the deal: An outside supplier has offered to sell these parts to North Company for only $21.25 per part, so it appears to the president of North Company that this could possibly save $2.75 per unit.

In North Company’s current operation, 100 percent (ALL) of the traceable or avoidable fixed manufacturing overhead costs are comprised of supervisor salaries and other costs that can be ELIMINATED if the parts are purchased from the outside supplier. However, the decision to buy the parts from the outside supplier would have NO effect on the common fixed costs of the company, and the space being used to produce the parts would otherwise be idle. Ignore the impact of income taxes in your calculation.

How much would the company’s annual profits increase or decrease if it decides to purchase the parts from the outside supplier rather than making them inside the company? Please be sure to show your calculations supporting your answer.
(Points : 25)
6. (TCO 9) Harry Corp buys equipment for $222,474 that will last for 10 years. The equipment will generate net cash flows of $41,000 per year and will have no salvage value at the end of its life. Ignore taxes. Use a 12% required rate of return.

(a) What is the Net Present Value (NPV) of this investment?
(b) What is the Internal Rate of Return (IRR) of this investment?
(c) What is the payback period?
7. (TCO 10) Tanya Corp. sells its products on both credit and cash basis. Monthly sales are sold 20% for cash, 80% for credit. Credit sales are collected 65% in the month of sale and 35% the following month. Sales for the first quarter are budgeted as follows: January, $250,000; February, $360,000; March, $300,000.

Compute total cash collections budgeted for February.

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