ACCT 434 Week 4 – Midterm

ACCT 434 Week 4 – Midterm

1. Question:(TCO1) ABC systems create

2. Question:(TCO 1) Merriamn Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Account inquiry hours $400,000 10,000 hours

Account billing lines $280,000 4,000,000 lines

Account verification accounts $150,000 40,000 accounts

Correspondence letters $ 50,000 4,000 letters

Total costs $880,000

The above activities are used by Department A and B as follows:

Department A Department B

Account inquiry hours 2,000 hours 4,000 hours

Account billing lines 400,000 lines 200,000 lines

Account verification accounts 10,000 accounts 8,000 accounts

Correspondence letters 1,000 letters 1,600 letters

3. Question: (TCO 2) A master budget

4 .Question: (TCO 2) Dalyrymple Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $80,000. The budgeted number of nozzles to be inserted is 40,000. What is the budgeted indirect cost allocation rate for this activity?

5. Question: (TCO 3) Which cost estimation method analyzes accounts in the subsidiary ledger as variable, fixed, or mixed using qualitative methods?

6. Question: (TCO 4) In evaluating different alternatives, it is useful to concentrate on

7. Question: (TCO 5) The theory of constraints is used for cost analysis when

8. Question: (TCO 5) Schmidt Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:

Direct materials $45,000

Direct labor 65,000

Variable factory overhead 30,000

Fixed factory overhead 70,000

Total costs $210,000

Of the fixed factory overhead costs, $30,000 is avoidable.

Phil Company has offered to sell 10,000 units of the same part to Schmidt Corporation for $18 per unit. Assuming there is no other use for the facilities, Schmidt should

9. Question: (TCO 3) The cost function y = 100 + 10X

10. Question: (TCO 4) Sunk costs

1.Question: (TCO 1) For each of the following drivers identify an appropriate activity.

a. # of machines

b. # of setups

c. # of inspections

d. # of orders

e. # of runs

f. # of bins or aisles

g. # of engineers

2. Question: (TCO 2) Favata Company has the following information:

Month Budgeted Sales

June $60,000

July 51,000

August 40,000

September 70,000

October 72,000

In addition, the cost of goods sold rate is 70% and the desired inventory level is 30% of next month’s cost of sales.

Prepare a purchases budget for July through September.

3. Question: (TCO 3) Patrick Ross, the president of Ross’s Wild Game Company, has asked for information about the cost behavior of manufacturing overhead costs. Specifically, he wants to know how much overhead cost is fixed and how much is variable. The following data are the only records available:

Month Machine-hours Overhead Costs

February 1,700 $20,500

March 2,800 22,250

April 1,000 19,950

May 2,500 21,500

June 3,500 23,950

Using the high-low method, determine the overhead cost equation. Use machine-hours as your cost driver.

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 $0.60

Direct manufacturing labor 3.00

Variable manufacturing overhead 1.20

Fixed manufacturing overhead 1.60

Total $6.40

Mike 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 if Kirkland accepts 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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