ACCT 505 WEEK 8: FINAL EXAM GUIDE

ACCT 505 WEEK 8: FINAL EXAM GUIDE 1. (TCO E) Complying with regulations is a(n) (Points : 5) batch-level activity. product-level activity. unit-level activity. organization sustaining activity. 2. (TCO G) Given the following data, what would ROI be? Sales $90,000 Net operating income $18,000 Contribution margin $40,000 Average operating assets $100,000 Stockholder's equity $250,000 (Points : 5) 7.2% 20.0% 18.0% 44.4% Page 2 1. (TCO C) Madlem, Inc., produces and sells a single product whose selling price is $120.00 per unit and whose variable expense is $46.20 per unit. The company's fixed expense is $405,900 per month. Required: Determine the monthly breakeven in either unit or total dollar sales. Show your work! (Points : 25) Monthly Break Even Unit = Fixed Cost/(Sale Price - Variable Cost per unit) Monthly Break Even Unit = 405,900/(120-46.20) Monthly Break Even Unit = 5,500 Units Monthly Break Even in total dollar sales = Fixed Cost/contribution margin ratio Contribution margin ratio = (Sale Price - Variable Cost per unit)/Sale Contribution margin ratio = (120-46.20)/120 Contribution margin ratio =61.5% Monthly Break Even in total dollar sales = /61.5% Monthly Break Even in total dollar sales = 660,000 2. (TCO B) Loxham 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: Units in beginning work in process inventory 400 Materials costs $6,900 Conversion costs $2,500 Percent complete for materials 80% Percent complete for conversion 15% Units started into production during the month 6,000 Units transferred to the next department during the month 5,400 Materials costs added during the month $112,500 Conversion costs added during the month $210,300 Ending work in process: Units in ending work-in-process inventory 1,000 Percentage complete for materials 80% Percentage complete for conversion 30% Required: Calculate the equivalent units for conversion for the month in the first processing department. (Points : 25) Units in beginning work in process inventory = 400 x 20% = 80 Units completed & transferred to the next department = 5,400 Units in ending work in process inventory = 1,000 x 80% = 800 Total Equivalent units for materials for the month = 6,280 units Page 3 Question 1.1. (TCO D) Topple Company produces a single product. Operating data for the company and its absorption costing income statement for the last year are presented below. Units in beginning inventory 2,000 Units produced 9,000 Units sold 10,000 Sales $100,000 Less cost of goods sold: Beginning inventory 12,000 Add cost of goods manufactured 54,000 Goods available for sale 66,000 Less ending inventory 6,000 Cost of goods sold 60,000 Gross margin 40,000 Less selling and admin. expenses 28,000 Net operating income $12,000 Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totals $18,000 for the year. The fixed manufacturing overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold. Required: Prepare a new income statement for the year using variable costing. Comment on the differences between the absorption costing and the variable costing income statements. (Points : 30) Sales $100,000 Less : Variable Cost of Goods Sold Opening Inventory (2,000 X $4) $8,000 Cost of Goods Manufactured (9,000 X $4) $36,000 Goods Available For Sale $44,000 Less : Closing Inventory (1,000 X $4) $ 4,000 ($40,000) Contribution $60,000 Less : Variable Selling & Admin Cost (10,000 X $1) ($10,000)