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# Devry ACCT 349 Week 4 Midterm Exam Answers

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## Devry ACCT 349 Week 4 Midterm Exam Answers

1.(TCO 5) Jordan Fracus, Inc. evaluates manufacturing overhead in its factory by using variance analysis. The following information applies to the month of June.

Actual Budgeted
Number of frames manufactured 19,000 20,000
Variable overhead costs \$4,100 \$2 per direct labor hr.
Direct labor hours 2,100 hrs. 0.1 hr. per frame
What is the fixed overhead spending variance? (Points : 11)
\$1,000 favorable
\$1,000 unfavorable
\$2,000 favorable
\$2,000 unfavorable

Question 2.2. (TCO 5) In an activity-based costing system, what should be used to assign a department’s manufacturing overhead costs to products produced in varying lot sizes?(Points : 11)

A single cause-and-effect relationship
Multiple cause-and-effect relationships
Relative net sales value of the products
A product’s ability to bear cost allocations

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Question 3.3. (TCO 1) Daisy Bakes Order Co. applied the high-low method of cost estimation to customer order data for the first 4 months of the year. What is the estimated variable order-filling cost component per order?

Month Number of Orders Costs
January 1,200 \$3,120
February 1,300 \$3,185
March 1,800 \$4,320
April 1,700 \$3,895
(Points : 11)
\$2.00
\$2.42
\$2.48
\$2.50

Question 4.4. (TCO 1) Serendipity Co. uses regression analysis to develop a model for prediction overhead costs. Two different cost drivers (machine hours and direct materials weight) are under consideration as the independent variable. Relevant data were run on a computer using one of the standard regression programs, with the following results.

Machine hours Coefficient
Y intercept 2,500
B 5.0
r-squared = .70
Direct materials weight
Y intercept 4,600
B 2.6
r-squared = .50
Which regression equation should be used?
(Points : 11)
y = 2.500 + 5.0x
y = 2500 + 3.5x
y = 4,600 + 2.6x
y = 4,600 + 1.3x

Question 5.5. (TCO 2) Relevant or differential cost analysis (Points : 11)
takes all variable and fixed costs into account to analyze decision alternatives.
considers only variable costs as they change with each decision alternative.
considers the change in reported net income for each alternative to arrive at the optimum decision for the company.
considers all variable and fixed costs as they change with each decision alternative.

Question 6.6. (TCO 2) McConnell is a manufacturer of industrial components. One of its products that is used as a subcomponent in auto manufacturing is JC-46. This product has the following financial structure per unit.

Selling price \$150
Direct materials 20
Direct labor 15
Shipping and handling 3
Total costs \$ 90
McConnell has received a special, one-time order for 1,000 JC-46 parts. Assume that McConnell is operating at full capacity, and that the contribution of the output would be displaced by the special order is \$10,000. The minimum price that is acceptable for this one-time special order must be greater than
(Points : 11)
\$60.
\$70.
\$87.
\$100.

Question 7.7. (TCO 5) Janice Foeld Company manufactures part Z for use in its production cycle. The costs per unit for 10,000 units of part Z are as follows.

Direct materials \$3
Direct labor 15
TOTAL \$32
Baloney Company has offered to sell Janice Foeld 10,000 units of part Z for \$30 per unit. If Janice Foeld accepts Baloney’s offer, the released facilities can be used to save \$45,000 in relevant costs in the manufacture of part A. In addition, \$5 per unit of the fixed overhead applied to part Z would be totally eliminated.
The total relevant costs to buy part Z are
(Points : 11)
\$320,000.
\$300,000.
\$290,000.
\$255,000.

Question 8.8. (TCO 2) Bieber Company has excess capacity on two machines, 24 hours on Machine 105 and 16 hours on Machine 107. To use this excess capacity, the company has two products, known as Product D and Product F, that must use both machines in manufacturing. Both have excess product demand, and the company can sell as many units as it can manufacture. The company’s objective is to maximize profits.
Product D has an incremental profit of \$6 per unit, and each unit utilizes 2 hours of time on Machine 105 and then 2 hours of time on Machine 107. Product F has an incremental profit of \$7 per unit, and each unit utilizes 3 hours of time on Machine 105 and then 1 hour of time on machine 107. Let D be the number of units for Product D, F be the number of units for product F, and P be the company’s profit.
The equations 2D + 3F < 24, D > 0, and F > 0 are (Points : 11)

objective functions.
inequalities.
deterministic functions.
constraints.

Question 9.9. (TCO 4) Using the balanced scorecard approach, an organization evaluates managerial performance based on (Points : 11)

a single ultimate measure of operating results, such as residual income.
multiple financial and nonfinancial measures.
multiple nonfinancial measures only.
multiple financial measures only.

Question 10.10. (TCO 6) The market share variance equals (Points : 11)

actual units x (budgeted weighted-average unit contribution margin for planned mix – budgeted weighted-average UCM for actual mix).
(actual units – master budget units) x budgeted weighted-average UCM for the planned mix.
budgeted market share percentage x (actual market size in units – budgeted market size in units) x budgeted weighted-average UCM.
(actual market share percentage – budgeted market share percentage) x actual market size in units x budgeted weighted-average UCM.

Question 11.11. (TCO 6) The following are relevant data for calculating sales variances for Lumber Co., which sells its sole product in two countries.

John Quincy Total
Budgeted selling price per unit \$6.00 \$10.00 NA
Budgeted variable cost per unit 3.00 7.50 NA
Budgeted contribution margin per unit \$3.00 \$ 2.50 NA
Budgeted unit sales 300 200 500
Budgeted mix percentage 60% 40% 100%
Actual units sold 260 260 520
Actual selling price per unit \$6.00 \$9.50 NA
The sales mix variance for John and Quincy is
(Points : 11)
\$156 U.
\$26 U.
\$56 F.
\$150 F.

Question 12.12. (TCO 4) Nonfinancial performance measures are important to engineering and operations managers in assessing the quality levels of their products. Which of the following indicators can be used to measure product quality?

I. Returns and allowances
II. Number and types of customer complaints
III. Production cycle time (Points : 11)
I and II only
I and III only
II and III only
I, II, and III

Question 13.13. (TCO 6) Which of the following statements regarding the difference between a flexible budget and a static budget is true? (Points : 11)

A flexible budget primarily is prepared for planning purposes, whereas a static budget is prepared for performance evaluation.
A flexible budget provides cost allowances for different levels of activity, whereas a static budget provides costs for one level of activity.
A flexible budget includes only variable costs, whereas a static budget includes only fixed costs.
Variances will always be larger with a flexible budget than with a static budget.

Question 14.14. (TCO 5) Yourtube Company uses a standard cost system and prepared the following budget at normal capacity for the month of January.

Direct labor hours 24,000
Total factory overhead per DLH \$6.50
Actual data for January were as follows:
Direct labor hours worked 22,000
Standard DLH allowed for the capacity attained 21,000
Using the two-way analysis of overhead variances, what is the budget (controllable) variance for January?
(Points : 11)
\$3,000
\$13,500 unfavorable
\$9,000 favorable
\$10,500 unfavorable

Question 15.15. (TCO 1) Which of the following may be scheduled in production planning by the use of learning curves? (Points : 11)

Purchase of materials
Subassembly production
Delivery dates of finished products
All of the answers are correct.

1. (TCO 3) What are life cycle budgeting and life-cycle costing, and when should companies use these techniques? (Points : 15)

2. (TCO 2) Explain the opportunity-cost concept and why it is relevant in decision making. (Points : 35)

3. (TCO 1) Outline the six steps involved in estimating a cost function using quantitative analysis. (Points : 35)