DeVry ACCT 434 Midterm Exam (Updated)

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1. (TCO 1) ABC systems create (Points : 5)

one large cost pool .
homogenous activity-related cost pools.
activity-cost pools with a broad focus.
activity-cost pools containing many direct costs.
Question 2.2. (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 hours2,000 hours 4,000 hours
Account billing lines 400,000 lines 200,000 lines
Account verification accounts10,000 accounts
8,000 accounts
Correspondence letters
1,000 letters 1,600 letters
How much of account verification costs will be assigned to Department A? (Points : 5)
$14,000
$150,000
$10,000
$37,500
Question 3.3. (TCO 2) Examples of nonfinancial budgets include all of the following EXCEPT
(Points : 5)
cash collections from customers.
units sold.
units manufactured.
number of new products introduced.

Question 4.4. (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? (Points
: 5)
$.50
$1.00
$1.50
$2.00
Question 5.5. (TCO 3) The conference method estimates cost functions (Points : 5)
by mathematically analyzing the relationship between inputs and outputs in physical terms.
using quantitative methods that can be very time consuming and costly.
based on analysis and opinions gathered from various departments.
using time-and-motion studies.
Question 6.6. (TCO 4) Relevant costs of a make-or-buy decision include all of the following
EXCEPT (Points : 5)
fixed salaries that will not be incurred if the part is outsourced.
current direct material costs of the part.
special machinery for the part that has no resale value.
material-handling costs that can be eliminated.
Question 7.7. (TCO 5) One-time-only special orders should only be accepted if ________.
(Points : 5)
incremental revenues exceed incremental costs
differential revenues exceed variable costs
incremental revenues exceed fixed costs
total revenues exceed total costs
Question 8.8. (TCO 5) Konrades Engine Company manufactures part TE456 used in several of
its engine models. Monthly production costs for 1,000 units are as follows:
Direct materials
$40,000
Direct labor
10,000
Variable overhead costs
30,000
Fixed overhead costs
20,000
Total costs
$100,000
It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred
if the company purchases TE456 from the outside supplier. Konrades Engine Company has the
option of purchasing the part from an outside supplier at $85 per unit.
If Konrades Engine Company accepts the offer from the outside supplier, the monthly avoidable
costs (costs that will no longer be incurred) total (Points : 5)
$82,000
$98,000
$50,000
$100,000

Question 9.9. (TCO 3) The cost function y = 100 + 10X (Points : 5)

has a slope coefficient of 100.
is a nonlinear.
has an intercept of 100.
represents a fixed cost.
Question 10.10. (TCO 4) Sunk costs (Points : 5)
are future costs.
are past costs.
have future implications

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

# of machines
# of setups
# of inspections
# of orders
# of runs
# of bins or aisles
# of engineers
(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
months cost of sales.
Prepare a purchases budget for July through September. (Points : 30)

(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.
What is the relevant per unit cost for the original part
Which alternative is best for Kirkland Company? By how much?

(TCO 3) The Wildcat Company has provided the following information:

Units of Output
30,000 Units 42,000 Units
Direct materials
$180,000
$252,000
Workers wages
1,080,000
1,512,000
Supervisors salaries 312,000
312,000
Equipment depreciation
151,200
151,200
Maintenance 81,600 110,400
Utilities
384,000
528,000
Total $2,188,800
$2,865,600
Using the high-low method and the information provided above, identify the linear cost function
equation. (Points : 30)

DeVry ACCT 324 Midterm Exam (Updated)

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