Acct 2211 Exam 2 Computational Practice - Answers

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Columbus State Community College *

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2211

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Accounting

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Apr 3, 2024

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Acct 2211 Exam 2 Computational Study Guide 1) The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year: Budgeted costs of operating the materials laboratory for 100,000 to 200,000 technician hours per year: Fixed costs per year $7,800,000 Variable costs $66 per technician hour Budgeted long-run usage in hours per year: Large Plane Department 80,000 technician hours Small Plane Department 120,000 technician hours Budgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Large Plane Department was 60,000 technician hours and by the Small Plane Department was 80,000 technician hours. If a dual-rate cost-allocation method is used, what amount of materials laboratory costs will be budgeted for the Small Plane Department? A) $14,605,714 B) $9,737,143 C) $8,400,000 D) $12,600,000 Answer: D Explanation: D) Budgeted materials laboratory costs for Small Plane Department = [(120,000 / 200,000) × $7,800,000] + (120,000 × $66) = $12,600,000 2) Illumination Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year: Budgeted costs of operating the plant for 2,000 to 3,000 hours: Fixed operating costs per year $500,000 Variable operating costs $900 per hour Budgeted long-run usage per year: Flashlight Division 2,000 hours Night Light Division 1,000 hours Practical capacity 4,000 hours Assume that practical capacity is used to calculate the allocation rates. Actual usage for the year by the Flashlight Division was 1,500 hours and by the Night Light Division was 800 hours. If a single-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Flashlight Division? A) $2,050,000 B) $1,537,500 C) $1,987,500 D) $1,600,000 Answer: A Explanation: A) Flashlight Division cost = [(2,000 / 4,000) × $500,000] + (2,000 × $900) = $2,050,000

3 Red Rose Manufacturers Inc. is approached by a potential new customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The company has excess capacity. The following per unit data apply for sales to regular customers: Variable costs: Direct materials $160 Direct labor 90 Manufacturing support 115 Marketing costs 65 Fixed costs: Manufacturing support 135 Marketing costs 55 Total costs 620 Markup (40%) 248 Targeted selling price $868 What is the contribution margin per unit? A) $190 B) $248 C) $438 D) $620 Answer: C Explanation: C) Contribution margin per unit = $868 - ($160 + $90 + $115 + $65) = $438 4. Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit are as follows: Direct materials $51.00 Direct labor 35.00 Variable overhead 38.00 Fixed overhead 31.00 Total $155.00 Crayola Technologies Inc. has contacted Rubium with an offer to sell 10,000 of the subassemblies for $140.00 each. Rubium will eliminate $93,000 of fixed overhead if it accepts the proposal. Should Rubium make or buy the subassemblies? What is the difference between the two alternatives? A) buy; savings = $93,000 B) buy; savings = $107,000 C) make; savings = $67,000 D) make; savings = $243,000 Answer: C Explanation: C) Cost to buy: 10,000 × $140.00 = $1,400,000 Cost to make: [($51.00 + $35.00 + $38.00) × 10,000 + $93,000] = $1,333,000 Cost savings = $1,400,000 - $1,333,000 = $67,000; make the subassemblies 5) For 2020, Rest-Well Bedding uses machine-hours as the only overhead cost-allocation base. The direct cost rate is $3.00 per unit. The selling price of the product is $18.00. The estimated manufacturing overhead costs are $240,000 and estimated 40,000 machine hours. The actual manufacturing overhead costs are $300,000 and actual machine hours are 50,000.

Using job costing, the 2020 actual indirect-cost rate is: A) $6.00 per machine-hour B) $4.80 per machine-hour C) $7.50 per machine-hour D) $7.20 per machine-hour Answer: A Explanation: A) $300,000 / 50,000 mh = $6.00 6 Better Products Company manufactures insulation and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $19 per direct labor-hour. The following data are obtained from the accounting records for October 2020: Direct materials $410,000 Direct labor (3,400 hours @ $12/hour) 40,800 Indirect labor 21,000 Plant facility rent 51,000 Depreciation on plant machinery and equipment 42,000 Sales commissions 18,000 Administrative expenses 25,000 The actual amount of manufacturing overhead costs incurred in October 2020 totals: A) $262,400 B) $114,000 C) $157,000 D) $118,000 Answer: B Explanation: B) $21,000 + $51,000 + $42,000 = $114,000

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