ACCT 210 Exam 3 Review Day Hand Out - F23

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Feb 20, 2024

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ACCT 210 FALL 2023 Exam 3 In-Class Review Day Hand-Out: Chapters 9, 10, 11 & 12 Chapter 9 – Budgetary Planning 1) Paige Company estimates that unit sales will be 11,100 in quarter 1, 12,300 in quarter 2, 14,500 in quarter 3, and 18,700 in quarter 4. Management desires to have an ending finished goods inventory equal to 22% of the next quarter’s expected unit sales. Prepare a production budget by quarters for the first 2 quarters of 2021. 2) Maverick Company has 3,828 pounds of raw materials in its December 31, 2020, ending inventory. Required production for January and February of 2021 are 4,350 and 5,800 units, respectively. 4 pounds of raw materials are needed for each unit, and the estimated cost per pound is $9. Management desires an ending inventory equal to 22% of next month’s materials requirements. Prepare the direct materials budget for January.

3) Kaspar Industries expects credit sales for January, February, and March to be $204,700, $266,800, and $315,200, respectively. It is expected that 75% of the sales will be collected in the month of sale, and 25% will be collected in the following month. Compute cash collections from customers for March. What is the A/R balance at the end of March? 4) Batista Company management wants to maintain a minimum monthly cash balance of $20,900. At the beginning of April, the cash balance is $21,900, expected cash receipts for April are $244,200, and cash disbursements are expected to be $254,800. How much cash, if any, must be borrowed to maintain the desired minimum monthly balance? Chapter 10 – Budgetary Control and Responsibility Accounting 1) Martinez, Inc.'s static budget at 5,000 units of production includes $15,000 for direct labor, $5,000 for utilities (variable), and total fixed costs of $36,000. Actual production and sales for the year was 8,000 units, with an actual cost of $67,500. What is the difference between actual and budgeted costs?

2) What are the three types of responsibility centers and how are they each evaluated? 3) Data for the Deluxe Division of Park Industries which is operated as an investment center follows: Sales $6,000,000 Contribution Margin $800,000 Controllable Fixed Costs $440,000 Return on Investment 12% Calculate controllable margin and average operating assets. (Hint: Use the formula for calculating ROI % to help you solve for Average Operating Assets). 4) Banner Company had the following operating data for the current year: sales, $500,000; contribution margin, $100,000; total fixed costs (controllable), $60,000; and average total operating assets, $200,000. If management is able to improve sales by $100,000 and hold its fixed costs constant, what would Banner’s ROI be for the year? a) 20% b) 30% c) 12% d) 50%

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Chapter 11 – Standard Costs and Balanced Scorecard: 1) Johnson Co. had employees work 4,000 hours during a year in which they produced 2,000 units of finished product. Johnson’s total direct labor cost for the year was $58,000. The company’s standard labor cost per unit is $35 (2.5 hours x $14.00). Calculate the total labor variance as well as the labor price and labor quantity variances. 2) In producing product AA, 6,300 pounds of direct materials were used at a cost of $1.10 per pound. The standard was 6,000 pounds at $1.00 per pound. The direct materials quantity variance is a) $600 unfavorable b) $330 unfavorable c) $630 unfavorable d) $300 unfavorable 3) Jones Manufacturing incurred fixed overhead costs of $8,000 and variable overhead costs of $4,600 to produce 1,000 gallons of liquid fertilizer. It takes 2 hours of direct labor to produce 1 gallon of fertilizer. The standard hours allowed to produce 1,000 gallons of fertilizer is 2,000 hours. Predetermined overhead rate is $5/direct labor hour. What is the total overhead variance? a) $10,600U b) $5,400U c) $2,600U d) $2,000U

Chapter 12 – Planning for Capital Investments: 1) Brady Corp. is considering the purchase of a piece of equipment that costs $20,000. Projected net annual cash flows over the project’s life are: Year Net Annual Cash Flow 1 $ 3,000 2 7,000 3 15,000 4 9,000 Calculate the cash payback period. 2) Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $6,000 each year. The cash payback period on this investment is a. 20 years. b. 10 years. c. 8 years. d. 4 years. 3) Palo Alto Corporation is considering an investment of $90,000 in a new delivery truck. Because of the increased capacity, fuel economy and reduced maintenance costs, it is expected to generate annual cost savings of $16,850 every year for 9 years. Additionally, when the truck is sold at the end of its useful life of 9 years, it can be sold for $14,322. Assuming the company’s required rate of return is 12%, what is the net present value of the investment?

4) Simon Company is considering investing in new equipment that would cost $120,000. Due to the increased efficiency and reduced maintenance costs of the new equipment, the company believes that they will generate net annual cash flows of $23,750 for the equipment’s 7-year useful life. Calculate the project’s internal rate of return.

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