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ACCT 505 ACCT505 Managerial Accounting Week 6 Quiz Answers


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ACCT 505 Managerial Accounting Week 6 Quiz Answers

    1. (TCO E) Installing wheels on automobiles is a (n)
  • (TCO G) Given the following data, what is the return on investment (ROI)?
  • Sales
  • $125,000
  • Net operating income
  • $20,000
  • Contribution margin
  • $30,000
  • Average operating assets
  • $100,000
  • Stockholder's equity
  • $150,000
    1. (TCO H) For which of the following decisions are sunk costs relevant?
  • (TCO H) Data for December concerning Ash Corporation's two major business segments-Fibers and Feedstocks-appear below.
  • Sales revenues, Fibers
  • $950,000
  • Sales revenues, Feedstocks
  • $900,000
  • Variable expenses, Fibers
  • $525,000
  • Variable expenses, Feedstocks
  • $424,000
  • Traceable fixed expenses, Fibers
  • $148,000
  • Traceable fixed expenses, Feedstocks
  • $156,000

  • Common fixed expenses totaled $292,000 and were allocated as follows: $155,000 to the Fibers business segment and $137,000 to the Feedstocks business segment.


    Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.
  • (TCO G) Ash Wares is a division of a major corporation. The following data are for the latest year of operations.
  • Sales
  • $38,000,000
  • Net Operating Income
  • $2,800,000
  • Average Operating Assets
  • $15,000,000
  • The company's minimum required rate of return
  • 20%

  • Required:
    i. What is the division's margin?
    ii. What is the division's turnover?
    iii. What is the division's ROI?
    iv. What is the division's residual income?
  • (TCO H) Tilland Corporation is considering dropping product P33U. Data from the company's accounting system appear below.
  • Sales
  • $390,000
  • Variable Expenses
  • $172,000
  • Fixed Manufacturing Expenses
  • $218,000
  • Fixed Selling and Administrative Expenses
  • $94,000

    All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $35,000 of the fixed manufacturing expenses and $20,000 of the fixed selling and administrative expenses are avoidable if product P33U is discontinued.

    i. According to the company's accounting system, what is the net operating income earned by product P33U? Show your work!
    ii. What would be the effect on the company's overall net operating income of dropping product P33U? Should the product be dropped? Show your work!
  • (TCO H) James Company makes 30,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows
  • Direct Materials
  • $14.00
  • Direct Labor
  • $20.50
  • Variable Manufacturing Overhead
  • $7.50
  • Fixed Manufacturing Overhead
  • $15.75
  • Unit Product Cost
  • $57.75

  • An outside supplier has offered to sell the company all of the parts needed for $50.00 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $90,000 per year.

    If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $5.75 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.


    i. How much of the unit product cost of $57.75 is relevant in the decision of whether to make or buy the part?
    ii. Should James Company make or buy the part? (Provide numerical support for your answer)
  • (TCO H) Biello Company manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 20,000 medals each month; current monthly production is 19,000 medals. The company normally charges $60 per medal. Cost data for the current level of production are shown below.
  • Variable Costs
    Direct Materials
  • $484,500
    Direct Labor
  • $142,500
    Selling and Administrative 
  • $135,038
    Fixed Costs
  • $185,275
    Selling and Administrative 
  • $44,888

  • The company has just received a special one-time order for 700 medals at $40 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.


    Should the company accept this special order? Provide numerical support for your decision.

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