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ACCT 505 Final Exam 100% Correct Answers 1. (TCO C) Silver City, Inc., has collected the following operating information below for its current month’s activity. Using this information, prepare a flexible budget analysis to determine how well Silver City performed in terms of cost control.
Actual Costs Incurred
Static Budget
Activity level (in units)
5,250
5,178
Variable Costs:
Indirect materials
$24,182
$23,476
Utilities
$22,356
$22,674
Fixed Costs:
Administration
$63,450
$65,500
Rent
$65,317
$63,904
2.
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In addition, what is the impact on the financial statements if the ending finished goods inventory is overstated or understated?
1. (TCO F) Farmington 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
Percentage complete for materials
80%
Percentage complete for conversion
15%
Units started into production during the month
6,000
Units transferred to the next department during the month
5,000
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
1,200
Percentage complete for materials
60%
Percentage complete for conversion
30%
Required: Calculate the equivalent units for materials (using the weighted-average method) for the month in the first processing department.
2.
(TCO G) – (Ignore income taxes in this problem.) Tennessee Co. is considering the production of an exterior paint that will require the purchase of new mixing machinery. The machinery will cost $700,000, is expected to have a useful life of 12 years, and is expected to have a salvage value of $100,000 at the end of 12 years. The machinery will also need a $40,000 overhaul at the
2. A top official of the government is presenting a case for the continued use of drone airplanes in military conflicts. The official states “Using drones during military surveillance missions is the right course of action because it saves soldiers’ lives.” What is the enthymeme in the official’s argument?
5. (TCOs 1, 2, 8, 9, and 10) One of your best individual clients is thinking about starting up a new business, and he is seeking your advice on which business form he should select. In particular, he’s trying to decide whether to operate the business as a partnership or a C corporation. Explain to him the significant tax and nontax issues that will arise from choosing each of these entities compared to the other, including how
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22. Mitch Company’s ending inventory is understated by $4,000. The effects of this error on the current year’s cost of goods sold and net income, respectively, are
Job J57 and Job K52 involve 15 acres of landscaped terrain which will require special-order sprinkler heads to meet the specifications of the project. Using a job cost system to produce these parts, the following events occurred during December 2012. Raw materials were requisitioned from the company’s inventory on December 2 for $5,061; on December 8 for $1,059; and on December 14 for $3,459. In each instance, twothirds (2/3) of these materials were for J57 and the rest for K52. Six time tickets were turned in for these two projects for a total amount of 18 hours of work. All the workers were paid $16.50 per hour. The time tickets were dated December 3, December 9, and December 15. On each of those days, 6 labor hours were spent on these jobs, two-thirds (2/3) for J57 and the rest for K52. The predetermined overhead rate is based on machine hours. The expected machine hour use for the year is 2,112 hours, and the anticipated overhead costs are $840,576 for the year. The machine were used by workers on projects K52 and J57 on December 3, 9, and 15. Six machine hours were used for project K52 (2 each day), and 8.5 machine hours were used for project J57 (2.5 the first day and 3 each of the other days). Both of these special orders were completed on December 15, producing 237 sprinkler heads for J57 and 142 sprinkler heads for K52. Additional job order
Natalie estimates that all of her baking equipment will have a useful life of 5 years or 60 months and no salvage value. (Assume Natalie decides to record a full month’s worth of depreciation, regardless of when the equipment was obtained by the business.)
Estimated machinery life: 3 years (after which there will be zero value for the equipment and no further cost savings)
Compute the equivalent units of production and the cost per equivalent units for materials and for conversion costs.
ML had developed a policy of selling manual machines and renting automatic machines. Manual machines did not cost much, did not require service, and could be modified to attach different fasteners inexpensively. Automatic machines were rented on an annual basis because they would have been more expensive to sell and it provided annual income to ML. However, about 700 of the rented machines were returned each year. During the time that machines were in inventory, ML would modify the machines to attach different fasteners. This was expensive with an average cost per modification of $2000. If all 700 machines were modified during a given year this would have cost $1.4 million per year. It was also industry practice to provide preventative maintenance and
Abby Conroy was tasked with calculating an effective quote for Breeland Ltd., she chose the activity based accounting costing system since it more accurately captures the related costs. A special order was placed by Breeland Ltd. with Ace Fertilizer Company. The did not plan to order more of this product in the future. Based on Ace’s policy, the special order included disposal costs for any used materials in the event no other orders existed for the unused materials at the time the Breeland contract was signed. Abby correctly calculated the total direct material and labor costs and accurately arrived at the indirect costs using the ABC method and used cost activity pools that make sense for the company and
5) A process system is used to find an average cost per unit by dividing the cost by the total number of units produced, those units of output being nearly identical. A job-order
We began with the process costing method, which was being used by Caprock’s accountant, Linda. The process costing method is common in industries that produce large amounts of similar or identical outputs. In the calculation of process costing,
A manufacturer of electric lawn mowers and electric hedge trimmers had the following results last year.
19. Holden Industries began July with a finished-goods inventory of $48,000. The finished-goods inventory at the end of July was $56,000 and the cost of goods sold during the month was $125,000. The cost of goods manufactured during July was: A. $104,000. B. $125,000. C. $117,000. D. $133,000. E. some other amount. 20. Carolina Plating Company reported a cost of goods manufactured of $520,000, with the firm's year-end balance sheet revealing work in process and finished goods of $70,000 and $134,000, respectively. If supplemental information
In a weighted average method the equivalent units of production for a department are the number of units transferred to the next department of finished goods plus the equivalent units in the department’s ending work in process inventory.