ACCT 3200 COST ACCOUNTING - Baruch College, CUNY. Sample Final Exam

Sample Final Exam ACC 32001. The following data refers to the Daniels division of Tippett Inc. Daniels sells variable-speed drills. The standard drill sells for $ 40, and Daniels plans sales of 30,0 00 units in 2005. Tippett treats Daniels as an investment center with total attributable investment of $ 800,000. Daniels' annual fixed costs are $ 200,000. Variable cost per standard drill is $ 24. The firm's required rate of return on investment is 15%. The manager is evaluated based on Residual Income. 1.1 What is the planned Return on Investment in 2005? 1.2 A one-time external special order is received to buy from Daniel, 10,000 units of the standard drill at $30 each. If the order is accepted, Daniels will have to incur additional annual fixed costs of $30,000. Based on the effect on Residual Income for the first year, will the manager accept this order? 1.3Effect on RI for first yea Will accept: Yes or No 2. Cierra, Inc. manufactures computer chips. Currently, the costs per unit are as follows: direct materials $ 1.00 direct labor 10.00 variable manufacturing overhead 5.00 fixed manufacturing overhead 8.00 Total $ 24.00 Chips Corp., has contacted Cierra with an offer to sell to Cierra 10,000 of the chips for $22.00 per chip. If Cierra accepts the proposal, $50,000 of the fixed overhead will be eliminated. 2.1 Should Cierra make or buy the chips? Justify your answer with calculations.3. The Commando Motorcycle Company has decided to become decentralized and split its operations into two divisions, Motor and Assembly. Both divisions will be treated as investment centers. The selling price of the Motor division is $200. The Costs per Motor at this level of production are as follows: Cost per Motor Direct labor 50; Direct materials $30 Variable manufacturing overhead 20; Variable selling and administrative 5 Fixed manufacturing overhead 25; Fixed selling and administrative 10; 3.1 Assume that the Motor Division is currently operating at its maximum capacity of 30,000 motors per year. As defined by your textbook, what is the minimum transfer price in this situation? 3.2 Assume that the Motor Division is currently selling 10,000 motors out of a capacity of 30,000 motors per year. The Assembly division wants to buy 10,000 motors at a suitable transfer price. As defined by your textbook, what is the minimum transfer price for these additional motors? 3.3Assume that the Assembly Division has to pay an outside vendor $210 for the motor. The Assembly Division wants to obtain 10,000 motors from the Motor Division for free. Determine the incremental impact on Commando Motorcycle profits of this transaction if the division currently has no idle capacity.4. Variable Costing Succulent juice Company manufactures and sells premium tomato juice by the gallon. Succulent just finished its first year of operations. The following data relates to this first year of operations. Number of Gallons Produced 80,000 Number of Gallons sold 70,000 Sales Price $3.00/gallon Unit Product Cost (variable costing) $1.45/gallon Contribution Margin $84,000 Total Fixed Manufacturing Overhead $? Total fixed Selling & Administrative $ 25,000 Variable Sales and Administrative $ ? Inventory value under absorption costing $29,500 Prepare an Income statement for Succulent using the Absorption Costing Method. (Hints: How many units were in inventory? What was the cost per unit? Why is the CM only $84,000? ). 4.1 Sales 4.2 COGS 4.3 Gross Margin 4.4 Selling and Administrative Costs 4.5 Net Income 4.6 Explain in one or two sentences, the key difference between the net income under Absorption and the net income under Variable costing. Determine the variable costing net income. Do not prepare a variable costing income statement.5. Decision Analysis Karen Galactic, a sales representative for a large chemical company, gets paid a sales commission, that is, a percentage of her sales. However, she has decided to spend less time traveling. She is going to spend only 160 hours per month with her customers. To do this she will have to give up some of her clients. The following information is from her last full month’s sales activities.