ACCT 505 Final Exam (Package)

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1Version

1. (TCO A) Wages paid to the factory maintenance supervisor are considered an example
of: (Points : 5)
2. (TCO A) Rent on a manufacturing plant is an element of: (Points : 5)
3. (TCO B) Evergreen Corp. has provided the following data: (Points : 5)
4. (TCO B) Garth Company sells a single product. If the selling price per unit and the
variable expense per unit both increase by 10% and fixed expenses do not change, then:
(Points : 5)
5. (TCO E) Rebel Company manufactures a single product and has the following cost
structure: Variable costs per unit:. (Points : 5)
6. (TCO F) Vagon Corporation has provided data concerning the company's Manufacturing
Overhead account for the month of September. Prior to the closing of the overapplied or
underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing
Overhead account was $76,000 and the total of the credits to the account was $86,000.
Which of the following statements is true? (Points : 5)
7. (TCO G) The net present value (NPV) method of investment project analysis assumes
that the project's cash flows are reinvested at the: (Points : 5)

8. (TCO G) Logan Company is considering two projects, A and B. The following

information has been gathered on these projects:.Based on this information, which
of the following statements is (are) true? I. Project A has the highest ranking according to
the profitability index criterion. II. Project B has the highest ranking according to the net
present value criterion. (Points : 5) 9. (TCO B) Variable expenses for Alpha Company are
40% of sales. What are sales at the break-even point, assuming that fixed expenses total
$150,000 per year: (Points : 5)
9. (TCO F) Elliott Company uses a predetermined overhead rate based on machine-hours to
apply manufacturing overhead to jobs. The company manufactures tools to customer
specifications. The following data pertain to Job 1501:.? (Points : 5)
10. (2.1) (TCO C) The following overhead data are for a department of a large company.
11. (2.2) (TCO D) Mr. Earl Pearl, Accountant for Margie Knall, Inc. has prepared the
following product-line income data:.
12. (2.3) (TCO E) Duif Company's absorption costing income statement for the last year of
operations is presented below:.
13. (2.4) (TCO A) The following data (in thousands of dollars) have been taken from the
accounting records of Karmana Corporation for the just completed year.
14. (3.1) (TCO F) Maverick Corporation uses the weighted-average method in its process
costing system. Data concerning the first processing department for the most recent
month are listed below: Work in process, beginning:.
15. (3.2) (TCO F) Cavalerio Corporation uses the weighted-average method in its process
costing system. This month, the beginning inventory in the first processing department
consisted of 700 units. The costs and percentage completion of these units in beginning
inventory were:
16. (3.3) (TCO G) (Ignore income taxes in this problem.) Five years ago, the City of
Paranoya spent $30,000 to purchase a computerized radar system called W.A.S.T.E.
(Watching Aliens Sent To Earth). Recently, a sales rep from W.A.S.T.E. Radar Company
told the city manager about a new and improved radar system that can be purchased for
$50,000. The rep also told the manager that the company would give the city $10,000 in
trade on the old system. The new system will last 10 years. The old system will also last
that long but only if a $4,000 upgrade is done in 5 years. The manager assembled the
following information to use in the decision regarding which system is more desirable.

Version 2
1. A good example of a common cost which normally could not be assigned to products on
a segmented income statement except on an arbitrary basis would be:

2. Turnover is computed by dividing average operating assets into:

3. A segment of a business responsible for both revenues and expenses would be called:
4. All other things being equal, if a division's traceable fixed expenses increase:
5. In computing the margin in a ROI analysis, which of the following is used?
6. Net operating income is defined as:
7. Suppose a manager is to be measured by residual income. Which of the following will
not result in an increase in the residual income figure for this manager, assuming other
factors remain constant?
8. During April, Division D of Carney Company had a segment margin ratio of 15%, a
variable expense ratio of 60% of sales, and traceable fixed expenses of $15,000. Division
D's sales were closest to:
9. Cable Company had the following results for the year just ended:
10. The segment margin ratio in Store J was:
11. Company A's residual income is:
12. Company A's return on investment (ROI) is:
13. If South wants a residual income of $50,000 and the minimum required rate of return is
10%, the annual turnover will have to be:
14. How much is the return on the investment?
15. Consider a decision facing a firm of either accepting or rejecting a special offer for one of
its products. A cost that is not relevant is:
16. A study has been conducted to determine if Product A should be dropped. Sales of the
product total $200,000 per year; variable expenses total $140,000 per year. Fixed
expenses charged to the product total $90,000 per year. The company estimates that
$40,000 of these fixed expenses will continue even if the product is dropped. These data
indicate that if Product A is dropped, the company's overall net operating income would:
17. Manor Company plans to discontinue a department that has a contribution margin of
$24,000 and $48,000 in fixed costs. Of the fixed costs, $21,000 cannot be avoided. The
effect of this discontinuance on Manor's overall net operating income would be a(an):

18. Manor Company plans to discontinue a department that has a contribution margin of
$25,000 and $50,000 in fixed costs. Of the fixed costs, $21,000 cannot be eliminated. The
effect on the profit of Manor Company of discontinuing this department would be:
19. Green Company produces 1,000 parts per year, which are used in the assembly of one of
its products. The unit product cost of these parts is:
20. Pitkin Company produces a part used in the manufacture of one of its products. The unit
product cost of the part is $33, computed as follows:
21. Cardinal Company needs 20,000 units of a certain part to use in one of its products. The
following information is available:
22. Products A, B, and C are produced from a single raw material input. The raw material
costs $90,000, from which 5,000 units of A, 10,000 units of B, and 15,000 units of C can
be produced each period. Product A can be sold at the split-off point for $2 per unit, or it
can be processed further at a cost of $12,500 and then sold for $5 per unit. Product A
should be:
23. The sunk cost in this situation is:
24. How much of the unit product cost of $59.90 is relevant in the decision of whether to
make or buy the part?
25. If direct labor-hours is the company's production constraint, then the three products
should be produced in the order:
26. If Austin chooses to produce 4,000 afghans each month, the change in the monthly net
operating income as compared to selling 4,000 spindles of yarn is:
27. What is the lowest price Austin should be willing to accept for one afghan as long as it
can sell spindles of yarn to the outside market for $12 each?
28. (Ignore income taxes in this problem.) How is depreciation handled by the following
capital budgeting techniques?
29. The payback method measures:
30. The evaluation of an investment having uneven cash flows using the payback method:
31. If the net present value of a project is zero based on a discount rate of sixteen percent,
then the time-adjusted rate of return:
32. (Ignore income taxes in this problem.) A company with $800,000 in operating assets is
considering the purchase of a machine that costs $75,000 and which is expected to reduce

operating costs by $20,000 each year. The payback period for this machine in years is
closest to:
33. (Ignore income taxes in this problem.) Denny Corporation is considering replacing a
technologically obsolete machine with a new state-of-the-art numerically controlled
machine. The new machine would cost $450,000 and would have a ten-year useful life.
Unfortunately, the new machine would have no salvage value. The new machine would
cost $20,000 per year to operate and maintain, but would save $100,000 per year in labor
and other costs. The old machine can be sold now for scrap for $50,000. The simple rate
of return on the new machine is closest to:
34. Perkins Company is considering several investment proposals, as shown below:
35. (Ignore income taxes in this problem.) The following data pertain to an investment
proposal:
36. (Ignore income taxes in this problem.) Sam Weller is thinking of investing $70,000 to
start a bookstore. Sam plans to withdraw $15,000 from the business at the end of each
year for the next five years. At the end of the fifth year, Sam plans to sell the business for
$110,000 cash. At a 12% discount rate, what is the net present value of the investment?
37. The immediate cash outflow required for this project would be:
38. The present value of all future operating cash inflows is closest to:
39. The present value of the net cash flows (all cash inflows less all cash outflows) occurring
during year 4 is:
40. The present value of the net cash flows (all cash inflows less all cash outflows) occurring
during year 6 is closest to:

Version 3
1. Problem:..........................
2. The gross margin of Evans Retail Stores, Inc. for the first quarter is:.........
3. The contribution margin of Evans Retail Stores, Inc. for the first quarter is:.......
4. The contribution margin of Evans Retail Stores, Inc. for the first quarter is:.......
5. The total contribution margin decreases if sales volume remains the same and:.......
6. A company has provided the following data:......

7. Wallace, Inc., prepared the following budgeted data based on a sales forecast of
$6,000,000: ..........
8. The variable expense per unit is: ...........
9. The break-even point in sales dollars is: .............
10. An allocated portion of fixed manufacturing overhead is included in product costs under:
11. Absorption Variable ............
12. What is the unit product cost for the month under variable costing?
13. What is the unit product cost for the month under absorption costing?
14. What is the net income for the month under variable costing?
15. What is the net income for the month under absorption costing?
16. Orion Corporation is preparing a cash budget for the six months beginning January 1.
Shown below are the company's expected collection pattern and the budgeted sales for
the period. ......
17. Avril Company makes collections on sales according to the following schedule:........
18. A labor efficiency variance resulting from the use of poor quality materials should be
charged to:
19. An unfavorable labor efficiency variance indicates that:
20. A favorable labor rate variance indicates that
21. The materials price variance for January is:
22. The materials quantity variance for January is:
23. The labor rate variance for January is:
24. The labor efficiency variance for January is:
25. How much is the residual income?
26. How much is the return on the investment?
27. One of the dangers of allocating common fixed costs to a product line is that such
allocations can make the line appear less profitable than it really is.

28. In responsibility accounting, each segment in an organization should be charged with the
costs for which it is responsible and over which it has control plus its share of common
organizational costs.
29. Some managers believe that residual income is superior to return on investment as a
means of measuring performance, since it encourages the manager to make investment
decisions that are more consistent with the interests of the company as a whole.
30. The performance of the manager of Division A is measured by residual income. Which of
the following would increase the manager's performance measure?
31. A segment of a business responsible for both revenues and expenses would be called:
32. The Northern Division of the Smith Company had average operating assets totaling
$150,000 last year. If the minimum required rate of return is 12%, and if last year's net
operating income at Northern was $20,000, then the residual income for Northern last
year was:
33. Company A's residual income is:
34. Gata Co. plans to discontinue a department that has a $48,000 contribution margin and
$96,000 of fixed costs. Of these fixed costs, $42,000 cannot be avoided. What would be
the effect of this discontinuance on Gata's overall net operating income?
35. Pitkin Company produces a part used in the manufacture of one of its products. The unit
product cost of the part is $33, computed as follows:
36. Some investment projects require that a company expand its working capital to service
the greater volume of business that will be generated. Under the net present value
method, the investment of working capital should be treated as:
37. Which of the following capital budgeting techniques consider(s) cash flow over the entire
life of the project?
38. The net present value of the project is closest to:
39. The payback period for the investment would be:
40. The net present value of this investment would be:
41. The Tse Manufacturing Company uses a job-order costing system and applies overhead
to jobs using a predetermined overhead rate. The company closes any balance in the
Manufacturing Overhead account to Cost of Goods Sold. During the year the company's
Finished Goods inventory account was debited for $125,000 and credited for $110,000.
The ending balance in the Finished Goods inventory account was $28,000. At the end of

the year, manufacturing overhead was overapplied by $4,500. The balance in the Finished
Goods inventory account at the beginning of the year was:
42. Matthias Corporation has provided data concerning the company's Manufacturing
Overhead account for the month of May. Prior to the closing of the overapplied or
underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing
Overhead account was $53,000 and the total of the credits to the account was $69,000.
Which of the following statements is true?