FACULTY
OF ECONOMIC AND ADMINISTRATIVE SCIENCES
DEPARTMENT
OF MANAGEMENT
MAN 306 MANAGERIAL ACCOUNTING
MIDTERM
EXAM II
Instructor: Ali COSKUN May
18, 2005
QUESTION 1. (15 points)
Mice
Computer Company collected the following information on the cost of producing 1,500
monitors:
Direct materials
$ 66 per unit
Direct labor
15 per unit
Variable overhead
.
18 per unit
Fixed overhead(Purchasing,
receiving, etc.) 27 per unit
Fixed overhead depreciation
.. 55 per unit
National
Corporation has offered to sell Mice Computer the monitors for $120 each. The facilities remain idle so fixed costs
for depreciation cannot be eliminated if the units purchased. But other fixed
costs (purchasing, receiving, etc.) can be eliminated.
Should
Mice Computer make or buy the parts?
QUESTION 2.
(15 points)
Ralph
Company is considering replacing a machine that is presently used in the
production of its product. The following data are available:
Old Machine Replacement Machine
Original Cost $
45,000 $ 25,000
Useful life in years 9 4
Current age in years 5 0
Book value
$ 15,000 -
Disposal value (current)
$ 10,000 -
Disposal value in 4 years 0 0
Cash operating costs
$ 9,000 $ 5,000
What
is the difference in cost between keeping the old machine and replacing it? What
do you suggest to manager of Ralph Company, keep or replace?
QUESTION 3.
(30 points)
Coffey
Company reported the following information about the production and sales of
its only product during its first month of operations:
Sales ($105 per unit) $147,000
Direct materials used 70,000
Direct labor 40,000
Variable factory overhead 30,000
Fixed factory overhead 17,500
Variable selling and administrative expenses 10,000
Fixed selling and administrative
expenses 15,000
Ending inventories:
Direct materials -0-
WIP
-0-
Finished goods 350
units
What
would be the followings?
a. The
contribution margin under variable costing
b. The
operating income (loss) under variable costing
c. The
gross profit under absorption costing
d. The
operating income (loss) under absorption costing
QUESTION
4.
Mickey
Corporation manufactures fishing poles that have a price of $21.00. It has
costs of $16.32. A competitor is introducing a new fishing pole that will sell
for $18.00. Management believes it must lower the price to $18.00 in order to
compete in the highly cost-conscious fishing pole market. Marketing believes
that the new price will maintain the current sales level. Mickey Corporation's
sales are currently 200,000 poles per year.
a.
What is the target cost for the new price if target profit is 20 percent of
sales?
b.
What is the target selling price if costs cannot be reduced and target profit
is changed to 15 percent of sales?
c.
What is the change in operating income for the year if $18.00 is the new price
and costs remain the same?
d.
What is the target cost per unit if the selling price is reduced to $18.00 and
the company wants to maintain its same income level?
QUESTION
5.
Kapa's Jewelers manufactured 2,000 rings during March
with a total overhead budget of $49,600. The information missing from the variance
analysis report is lettered in the following set of data:
Variable
overhead:
Standard cost per ring: 0.4 labor hour at $8
per hour
Actual costs: $8,400 for 752 hours
Flexible budget: a
Total flexible-budget variance: b
Variable overhead spending variance: c
Variable overhead efficiency variance: d
Fixed
overhead:
Budgeted costs: e
Actual costs: f
Flexible-budget variance: $2,000 favorable
Compute
the missing elements in the report represented by the lettered items.