acct 6273 final exam 100 points, total. for partial credit, formulas

ACCT 6273
Final Exam
100 points, total.
For partial credit, formulas and work, appropriately labeled, must be shown. There is no partial credit for multiple choice or true/false questions.

1.    Lincoln Company manufactures and sells small electric heaters for homes and offices.  The company’s income statement for the FY2014 is given below:

    Total    Per unit
Sales (30,000 units)    $1,800,000    $60
Less variable expenses    1,440,000    48
Contribution margin    360,000    $12
Less fixed expenses    264,000
Net income    $   96,000

a.    Compute the company’s break-even point in units. [8 points]
   
   
   
   
   
   
   
   
   
   
        Answer____________________
b.    If Lincoln Company increases its price to $100, do you expect the breakeven point in units to be more or less than the number you calculated in question 1a above? Why?

Circle (or highlight) one [1 point]:    More than question 1a        Less than question 1a   

Explain why, but do not use calculations.  [3 points]

   
   
   
   
c.    Confirm your answer to question 1a above by preparing a contribution margin income statement.  [4 points]

d.    Assume that next year management wants the company to earn a minimum profit of $162,000.  How many units  be sold to meet this target profit figure? [3 points]
   
   
   
   
   
   
   
   
   
   
   
    Answer: ____________________
   
   
 
The following information pertains to the next three questions 2-4.
Fifer Company produces two types of entry doors: the Hollow Core and the Solid Door models. The Company has used direct labor dollars to allocate the overhead cost of $47,450,000.

The company’s CFO, Brian Smythe, has offered the following information regarding the two products:
    Hollow Core    Solid Door
Sales in units    400,000    50,000
       
Sales price per unit    $475.00    $650.00
Direct materials per unit    55.00    130.00
Direct labor cost per unit    75.00    50.00
       
The company has hired you as an outside consultant to review the cost system and make recommendations.  You decide that an Activity Based Cost system should be considered and compile the following information based on conversations with the production manager:

Activity    Cost Driver    Cost
Order Taking    Number of orders    $     500,000
Setups    Number of setups    5,000,000
Machine cost    Number of machine hours    41,950,000
       
The number of transactions for each cost driver is as follows:
Cost Driver    Total    Hollow    Solid
Number of orders    500    100    400
Number of setups    2,500    2,000    500
Number of machine hours    600,000    300,000    300,000

 
2. Compute the product cost per door (i.e., per unit) using the traditional allocation system based on direct labor dollars [8 points]

                Hollow Core                Solid Door

Product Cost per door        ____________            ____________
3.  Compute the product cost per door (per unit) using activity based costing for each product.     [10 points]

                Hollow Core                Solid Door

Product Cost per door        ____________            ____________
4.  How should Mr. Smythe explain the reasons for any differences observed in your analysis above?     [4 points]
 
5.    Barker Company produces a single product.  The standard direct costs for the product are as follows:
    Direct materials (4 [email protected] $5/yd.)    $20
    Direct labor (1.5 [email protected] $10/hr.)    $15

During a recent period the company produced 1,200 units of product.  Various costs associated with the production of these units are given below:
    Direct materials purchased (5,000 yds.)    $24,500
    Direct materials used in production    4,700 yds.
    Direct labor cost incurred (1,900 hours)    $18,297

a.    The materials price variance for the period is: [4 points]

Answer: _______________
b.    The materials quantity (or usage) variance for the period is: [4 points]

Answer: ______________
c.    The labor rate variance for the period is: [4 points]

Answer: ______________
d.    The labor efficiency variance for the period is: [4 points]

Answer: ______________
6.    Youngstown Company provides the following standard cost data:

Direct Material (3 gallons @ $5 per gallon)    $15.00
Direct Labor (2 hours @ $12 per hour)    $24.00

During the period, Youngstown Company produced and sold 24,000 units.  Following are the amounts of material and labor used to produce the 24,000 units, and their respective actual costs:

Direct Material:  73,100 gallons at $5.05 per gallon
Direct Labor:      48,000 hours at $12.08 per hour

Circle (or highlight) the correct answer.

a.    The Direct Material price variance was: [3 points]

A) F
B) U
C) 0

b.    The Direct Material usage variance was: [3 points]

A) F
B) U
C) 0

c.    The Direct Labor rate variance was: [3 points]

A) F
B) U
C) 0

d.    The Direct Labor efficiency variance was: [3 points]

A) F
B) U
C) 0
 
7.    Following is Perry Corporation’s original budget for 2013, and their actual results for 2013. [32 points]

        Original Budget
        (100,000 units)
Materials       
    Fabric    100,000 yds @ $5.40/yd    $540,000
    Steel tubing    25,000 lbs @ $12.10/lb    302,500
    Padding    50,000 lbs @ $.50/lb    25,000
Direct Labor       
    Machining    30,000 hrs @ $19/hr    570,000
    Assembly    10,000 hrs @ $11.80/hr    118,000
Overhead       
    Rent        100,000
    Property taxes        10,000
    Other Overhead
    (25% variable)        200,000
Total         $1,865,500

        Actual Results
        (120,000 units)
Materials       
    Fabric    125,000 yds @ $5.50/yd    $687,500
    Steel tubing    32,000 lbs @ $12.20/lb    390,400
    Padding    65,000lbs @ .49/lb    31,850
Direct Labor       
    Machining    35,000 hrs @ $18/hr    630,000
    Assembly    11,000 hrs @ $11.50/hr    126,500
Overhead       
    Rent        96,000
    Property taxes        10,000
    Other Overhead
        210,000
Total         $2,182,250

Using the format on the following page, prepare the flexible budget needed to evaluate Perry Corporation’s performance for 2013, and compute the Flex-Actual Variances.  Show your calculations.
Put your answers to Question 7 here:

    Calculations     Flexible Budget    Actual
(120,000 units)    Flex – Actual
Variances
               
Materials               
    Fabric   
        $687,500   
    Steel tubing   
        390,400   
    Padding   
        31,850   
Direct Labor               
    Machining   
        630,000   
    Assembly   
        126,500   
Overhead               
    Rent   
        96,000   
    Property taxes   
        10,000   
    Other Overhead
    (25% variable)            210,000   
Total       
    $2,182,250