@ 4 — MILESTONE 4: Milestone
UNIT X
Page 1 of 4 Sophia Managerial Accounting Milestone 4 Sophia Managerial Accounting Milestone 4.pdf
pA TP
21 questions were answered correctly.
2 questions were answered incorrectly.
Brattleboro Barrel Company is considering purchasing a new semi-truck for its operations. The initial cost of the
truck is $196,000 with a salvage value of $25,000, and the truck has an annual depreciation of $21,370.
What would the average rate of return of the truck be, assuming a 30% tax rate and with an average annual net
cash flow of $38,000 before tax?
Salvage Value $25,000
Average Annual Net Cash Flow (before tax) L Xelolo]
Average Annual Depreciation $21,370
Tax Rate
87%
RATIONALE
Average investment = (Initial Cost $196,000 + Salvage Value $25,000) / 2. ($196,000 + $25,000) / 2 = $110,500
Average annual income after taxes = (Average annual net cash flow $38,000 — Average annual depreciation
X (1- 30%) = $11,641
X (1 — tax rate 30%) = ($38,000 - $21,370)
$21,370)
Average Rate of Return = (Average annual income after taxes $11,641 + Average Investment $110,500. $11,641 +
$110,500 = 10.5%
(o] \[ed=20 ]
> Average
Rate of Return
‘Report an issue with this question
[ B
[Sile IS A S Clf oJiI{=E N o] foTe [Nlel=t-R Ko FAa W {=Talel B {{ MM N o TN o 15 A g leTa
Y da M 2 [e IS YA E Lo SN SIS O J0 1Ol o= To [N o) i {f [ST I =1 Te IS 44
standard hours to make each bag of fries is 0.1 hours and its standard labor rate is $13.50 per hour. It took Big Sky
6,500 hours to make these bags of fries at a labor cost of $89,375.
L E T RVE R G I T @] oTTo
e [Ta [ AVE TA E T Tl =W T O N ER1 & £ o = | (SR T @V I3 | =\ eI =1 o1 (Y4
$1,625 Unfavorable
$3,725 Favorable
o $2,700 Unfavorable
o o
RATIONALE
hour (Standard Rate). 6,300 X $13.50 = $85,050.
Step 3: Calculate Labor Spending Variance = $89,375 (Actual Labor Cost) — $85,050 (Standard Labor Cost).
$87,750 — $85,050 = $2,700.
> Standard Costing and Variances
‘Reportan issue with this question
[ )
he Tooele Tea Company is thinking about creating a new canned energy drink. Tooele is going to spend $50,000
on research and development, in quarter one of this year, to develop the new drink product.
This is an example of which type of cost?
o o Sunkeest
Irrelevant Cost
DI EIVARNCle Nl &
[J
Opportunity Cost
> DifferAnalysi
ent s ial
Concepts
‘Report an issue with this question
[ O
he Edmond Education company has a decentralized structure that includes three segments, Textbooks, Software
ELCRIGCe RIBEICR (oMt s WY =Te s (=T a I M ENe[\VZTa NIaRip TR = o] [SHoT=I[o1WYA
B e, ]
Indirect Fixed Costs $245,000 $185,000 $250,000
[ofe)
TN TR o T R (s TER o1 &= MY pTeTV[ Te l =fo Ty g TeT g To l =Ye [WTet: 1iTeT s W= 1104 g F Y4B g TRTe) ANVE TRET =Yoo
o I=To L ) AR LT TR STV ES [ [ Y
Edmond should eliminate the software division. They are currently
losing $185,000 by keeping it
Edmond should not eliminate the software division. If it does, it will
lose $60,000
a
Edmond should eliminate the software division. They are currently
losing $60,000 by keeping it
a
Edmond should not eliminate the software division. If it does, it will
© O lose $125,000
RATIONALE
Since indirect fixed costs are allocated on an arbitrary basis and remain the same whether the software division
Edmond would lose the $125,000 income generated by the hardware division
[efe)\[e(=
23
> Segment Analysis
Report an issue with this question
[ )
NIVTe\VAN (o (SN @I (@) i (00100 VA OF: [y Lo\ YA @LeTnaTo
10\ VAN s E e [UI=K
i o] a = o Yo TU ) = WU o Ty Ao} M a ST ol oY T Fo T (VAR Y o MY s TSN | SR i LWy e T o Te [Tt}
LOEIR i WY s ToN R Ta el Fo 1 fe [-Wol MR- To i\ i [SE (oW [N R s Te) A to o T=Ya=T : ol ololna
o] [ s da [ We o el A a [N Ul A= [g Te R (o I<)
organization to ensure business success
The manager Mary calls is in charge of which of the following:
Executive Summaries
Organizational Structure
S
[\ EIaETe
[T l=Ta il o}YA eIV
o) i[o]y]
a
@ @ Responsibility Cente
RATIONALE
A responsibility center is a unit within an organization that is headed by a manager who is responsible for its
activities.
(olo]\lei=0
2 Responsibility Accounting
LRI RESTER
RUTEYCWG
VR
[ B
Murrells Inlet’s desired profit is a 60% return on investment of their $750,000 of total assets. They estimate they
will sell 3,000 hammocks
At what amount should Murrells Inlet price its hammocks, if they are using the Product Cost Method of pricing?
RATIONALE
Total Direct Materials $250,000 + Total Direct Labor $75,000 + Total
Manufacturing Overhead $49,000. $250,000 + $75,000 + $49,000
Step 2: Compute Product Cost per hammock = Total Product Cost $374,000 / Budgeted Sales Units 3,000
hammocks. $374,,000 = $124.67
Step 3: Calculate Desired Profit = Desired Return on Investment Percentage 60% x Total Assets $750,000. 60% x
$750,000 = $450,000
CONCEPT
2 Setting Product Prices
"Report an issue with this question
Heo
Lei eInc.
Lihu
lease out the old machine for $200,000. Costs of leasing the machine are Estimated Repair Expense of $67,000,
Estimated Insurance Expense of $43,000, and Estimated Property Tax Expense of $7,800. The salvage value of the
machinery after the lease will be $0.00. Lihue can sell the machine for $94,000 minus a commission of 7%
Should Lihue lease or sell this machine, and why?
ihue should lease the machine. They would incur a loss of $111,220
ihue should lease the machine. They would incur a loss of $82,280
ihue should sell the machine. They would earn an additional profi
of $6,580 by selling.
Lihue should sell the machine. They would earn an additional profi
@ © of $5,220 byselling.
RATIONALE
easing $200,000. $94,000 — $200,000 = ($106,000)
Step 2: Determine Costs of Leasing Machine = Estimated Repair Expense $67,000 + Estimated Insurance
($106,000) — Differential Costs of Selling Machine ($111,220). ($106,000) — ($111,220) = $5,220
> Equipment Decisions
Report an issue with this question
Sophia Managerial Accounting Milestone 4
D Page 1 of 4 Sophia Managerial Accounting Milestone 4.pdf
UNIT X
Page 1 of 4 Sophia Managerial Accounting Milestone 4 Sophia Managerial Accounting Milestone 4.pdf
pA TP
21 questions were answered correctly.
2 questions were answered incorrectly.
Brattleboro Barrel Company is considering purchasing a new semi-truck for its operations. The initial cost of the
truck is $196,000 with a salvage value of $25,000, and the truck has an annual depreciation of $21,370.
What would the average rate of return of the truck be, assuming a 30% tax rate and with an average annual net
cash flow of $38,000 before tax?
Salvage Value $25,000
Average Annual Net Cash Flow (before tax) L Xelolo]
Average Annual Depreciation $21,370
Tax Rate
87%
RATIONALE
Average investment = (Initial Cost $196,000 + Salvage Value $25,000) / 2. ($196,000 + $25,000) / 2 = $110,500
Average annual income after taxes = (Average annual net cash flow $38,000 — Average annual depreciation
X (1- 30%) = $11,641
X (1 — tax rate 30%) = ($38,000 - $21,370)
$21,370)
Average Rate of Return = (Average annual income after taxes $11,641 + Average Investment $110,500. $11,641 +
$110,500 = 10.5%
(o] \[ed=20 ]
> Average
Rate of Return
‘Report an issue with this question
[ B
[Sile IS A S Clf oJiI{=E N o] foTe [Nlel=t-R Ko FAa W {=Talel B {{ MM N o TN o 15 A g leTa
Y da M 2 [e IS YA E Lo SN SIS O J0 1Ol o= To [N o) i {f [ST I =1 Te IS 44
standard hours to make each bag of fries is 0.1 hours and its standard labor rate is $13.50 per hour. It took Big Sky
6,500 hours to make these bags of fries at a labor cost of $89,375.
L E T RVE R G I T @] oTTo
e [Ta [ AVE TA E T Tl =W T O N ER1 & £ o = | (SR T @V I3 | =\ eI =1 o1 (Y4
$1,625 Unfavorable
$3,725 Favorable
o $2,700 Unfavorable
o o
RATIONALE
hour (Standard Rate). 6,300 X $13.50 = $85,050.
Step 3: Calculate Labor Spending Variance = $89,375 (Actual Labor Cost) — $85,050 (Standard Labor Cost).
$87,750 — $85,050 = $2,700.
> Standard Costing and Variances
‘Reportan issue with this question
[ )
he Tooele Tea Company is thinking about creating a new canned energy drink. Tooele is going to spend $50,000
on research and development, in quarter one of this year, to develop the new drink product.
This is an example of which type of cost?
o o Sunkeest
Irrelevant Cost
DI EIVARNCle Nl &
[J
Opportunity Cost
> DifferAnalysi
ent s ial
Concepts
‘Report an issue with this question
[ O
he Edmond Education company has a decentralized structure that includes three segments, Textbooks, Software
ELCRIGCe RIBEICR (oMt s WY =Te s (=T a I M ENe[\VZTa NIaRip TR = o] [SHoT=I[o1WYA
B e, ]
Indirect Fixed Costs $245,000 $185,000 $250,000
[ofe)
TN TR o T R (s TER o1 &= MY pTeTV[ Te l =fo Ty g TeT g To l =Ye [WTet: 1iTeT s W= 1104 g F Y4B g TRTe) ANVE TRET =Yoo
o I=To L ) AR LT TR STV ES [ [ Y
Edmond should eliminate the software division. They are currently
losing $185,000 by keeping it
Edmond should not eliminate the software division. If it does, it will
lose $60,000
a
Edmond should eliminate the software division. They are currently
losing $60,000 by keeping it
a
Edmond should not eliminate the software division. If it does, it will
© O lose $125,000
RATIONALE
Since indirect fixed costs are allocated on an arbitrary basis and remain the same whether the software division
Edmond would lose the $125,000 income generated by the hardware division
[efe)\[e(=
23
> Segment Analysis
Report an issue with this question
[ )
NIVTe\VAN (o (SN @I (@) i (00100 VA OF: [y Lo\ YA @LeTnaTo
10\ VAN s E e [UI=K
i o] a = o Yo TU ) = WU o Ty Ao} M a ST ol oY T Fo T (VAR Y o MY s TSN | SR i LWy e T o Te [Tt}
LOEIR i WY s ToN R Ta el Fo 1 fe [-Wol MR- To i\ i [SE (oW [N R s Te) A to o T=Ya=T : ol ololna
o] [ s da [ We o el A a [N Ul A= [g Te R (o I<)
organization to ensure business success
The manager Mary calls is in charge of which of the following:
Executive Summaries
Organizational Structure
S
[\ EIaETe
[T l=Ta il o}YA eIV
o) i[o]y]
a
@ @ Responsibility Cente
RATIONALE
A responsibility center is a unit within an organization that is headed by a manager who is responsible for its
activities.
(olo]\lei=0
2 Responsibility Accounting
LRI RESTER
RUTEYCWG
VR
[ B
Murrells Inlet’s desired profit is a 60% return on investment of their $750,000 of total assets. They estimate they
will sell 3,000 hammocks
At what amount should Murrells Inlet price its hammocks, if they are using the Product Cost Method of pricing?
RATIONALE
Total Direct Materials $250,000 + Total Direct Labor $75,000 + Total
Manufacturing Overhead $49,000. $250,000 + $75,000 + $49,000
Step 2: Compute Product Cost per hammock = Total Product Cost $374,000 / Budgeted Sales Units 3,000
hammocks. $374,,000 = $124.67
Step 3: Calculate Desired Profit = Desired Return on Investment Percentage 60% x Total Assets $750,000. 60% x
$750,000 = $450,000
CONCEPT
2 Setting Product Prices
"Report an issue with this question
Heo
Lei eInc.
Lihu
lease out the old machine for $200,000. Costs of leasing the machine are Estimated Repair Expense of $67,000,
Estimated Insurance Expense of $43,000, and Estimated Property Tax Expense of $7,800. The salvage value of the
machinery after the lease will be $0.00. Lihue can sell the machine for $94,000 minus a commission of 7%
Should Lihue lease or sell this machine, and why?
ihue should lease the machine. They would incur a loss of $111,220
ihue should lease the machine. They would incur a loss of $82,280
ihue should sell the machine. They would earn an additional profi
of $6,580 by selling.
Lihue should sell the machine. They would earn an additional profi
@ © of $5,220 byselling.
RATIONALE
easing $200,000. $94,000 — $200,000 = ($106,000)
Step 2: Determine Costs of Leasing Machine = Estimated Repair Expense $67,000 + Estimated Insurance
($106,000) — Differential Costs of Selling Machine ($111,220). ($106,000) — ($111,220) = $5,220
> Equipment Decisions
Report an issue with this question
Sophia Managerial Accounting Milestone 4
D Page 1 of 4 Sophia Managerial Accounting Milestone 4.pdf
