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DeVry ACCT 505 Week 6 Quiz 2 Latest

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DeVry ACCT 505 Week 6 Quiz 2 Latest

DeVry ACCT 505 Week 6 Quiz 2 Latest

ACCT505

DeVry ACCT 505 Week 6 Quiz 2 Latest

DeVry ACCT 505 Week 6 Quiz 2 Latest

Page: 1

Question 1. Question: (TCO E) Setting up equipment is a (n)

  • Unit-level activity.
  • Product-level activity.
  • Batch-level activity.
  • Organization-sustaining activity.

Question 2. Question: (TCO G) Given the following data, what would ROI be?

Sales                                       $60,000

Net operating income             $12,000

Contribution margin                $20,000

Average operating assets       $50,000

Stockholder’s equity               $15,000

  • 10.0%
  • 20.0%
  • 16.5%
  • 24.0%

Question 3. Question: (TCO H) For which of the following decisions are sunk costs relevant?

  • The decision to keep an old machine or buy a new one.
  • The decision to sell a product at the split-off point or after further processing.
  • The decision to accept or reject a special order price.
  • Sunk costs are relevant for all of the decisions above.
  • Sunk costs are irrelevant for all of the decisions above.

Page: 2

Question 1. Question: (TCO H) Seabuck Corporation has two major business segments—Apparel and Accessories. Data concerning those segments for June appear below.

Sales revenues, Apparel                                             $800,000

Variable expenses, Apparel                                        $406,000

Traceable fixed expenses, Apparel                            $98,000

Sales revenues, Accessories                                     $820,000

Variable expenses, Accessories                                 $312,000

Traceable fixed expenses, Accessories                     $107,000

Common fixed expenses totaled $325,000 and were allocated as follows: $150,000 to the Apparel business segment and $175,000 to the Accessories business segment.

Required:

Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.

Question 2. Question: (TCO G) Weski Corporation had net operating income of $300,000 and average operating assets of $1,200,000. The company requires a return on investment of 18%.

Required:

i. Calculate the company’s current return on investment and residual income.

ii. The company is investigating an investment of $500,000 in a project that will generate annual net operating income of $105,000. What is the ROI of the project? What is the residual income of the project? Should the company invest in this project?

Question 3. Question: (TCO H) Tilland Corporation is considering dropping product P33U. Data from the company’s accounting system appear below.

Sales $390,000
Variable Expenses $172,000
Fixed Manufacturing Expenses $218,000
Fixed Selling and Administrative Expenses $94,000

All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that $35,000 of the fixed manufacturing expenses and $20,000 of the fixed selling and administrative expenses are avoidable if product P33U is discontinued.

Required:

i. According to the company’s accounting system, what is the net operating income earned by product P33U? Show your work!

ii. What would be the effect on the company’s overall net operating income of dropping product P33U? Should the product be dropped? Show your work!

Question 4. Question: (TCO H) James Company makes 30,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows

Direct Materials $14.00
Direct Labor $20.50
Variable Manufacturing Overhead $7.50
Fixed Manufacturing Overhead $15.75
Unit Product Cost $57.75

An outside supplier has offered to sell the company all of the parts needed for $50.00 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $90,000 per year.

If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $5.75 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company’s remaining products.

Required:

i. How much of the unit product cost of $57.75 is relevant in the decision of whether to make or buy the part?

ii. Should James Company make or buy the part? (Provide numerical support for your answer)

Question 5. Question: (TCO H) Palmer Company manufactures and sells trophies for winners of athletic and other events. Its manufacturing plant has the capacity to produce 22,000 trophies each month; current monthly production is 20,900 trophies. The company normally charges $62 per trophy. Cost data for the current level of production are shown below.

Variable Costs
Direct Materials $541,880
Direct Labor $193,800
Selling and Administrative $41,100
Fixed Costs
Manufacturing $250,000
Selling and Administrative $133,000

The company has just received a special one-time order for 800 trophies at $31 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.

Required:

Should the company accept this special order? Provide numerical support for your decision.

DeVry ACCT 505 Week 6 Quiz 2 Latest

DeVry ACCT 505 Week 6 Quiz 2 Latest

 

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