Accounting for Managerial Decision Making and Control: ACCT 6202
Final Exam, Fall 2023
(Total time allowed is 4 hours)
Last Name:
First Name:
Question 1:
Lion Company has identified the following overhead costs and cost drivers for next
year:
Overhead
Item
Setup costs
Ordering costs
Maintenance
Power
Expected
Costs
$583,200
270,000
928,000
90,000
Cost Driver
Number of setups
Number of orders
Machine-hours
Kilowatt-hours
Maximum
Quantity
2,400
20,000
32,000
200,000
The following are two of the jobs completed during the year:
Direct materials
Direct labor
Units completed
Direct labor-hours
Number of setups
Number of orders
Machine-hours
Kilowatt-hours
Job 626
$9,000
$12,000
750
45
6
8
180
90
Job 627
$10,000
7,000
600
110
7
15
150
120
Determine the unit cost for each job using the four cost drivers. (Round
amounts to 2 decimal places.)
Question 2:
Liquid Company manufactures a single product that has a standard materials cost of $20
(2 units of raw materials at $10 per unit), standard direct labor cost of $18 (1 hour per
unit), and standard variable overhead cost of $8 (based on direct labor-hours). Fixed
overhead is budgeted at $34,000 per month.
The following data pertain to operations for May of this year:
Raw materials purchased
3,600 units costing $31,620
Raw materials used in production of 1,500 units of finished product
raw materials
Direct labor used
1,500 hours costing $30,000
Variable overhead costs incurred
$11,920
Fixed overhead costs incurred
$35,000
3,200 units of
Required:
a.
Compute the following variances (show calculations):
1.
Materials quantity variance
2.
Labor rate variance
3.
Labor efficiency variance
4.
Variable overhead spending variance
5.
Variable overhead efficiency variance
6.
Fixed overhead budget variance
b.
Give one possible explanation for each of the six variances computed in
requirement (a).
2
Question 3:
Alpine produces a single product. The company’s March 2018 income statement is as
follows:
Sales (600 x $60)
$36,000
Cost of goods sold
- 33,000
Gross profit $ 3,000
Selling and administrative
2,000
Net income $ 1,000
There were no beginning or ending inventories of work-in-process or finished goods.
Alpine's full manufacturing costs were as follows:
Direct materials (600 units x $10) $ 6,000
Direct labor (600 units x $16) 9,600
Variable manufacturing overhead (600 units x $9) 5,400
Fixed manufacturing overhead
12,000
Total $33,000
Average cost per unit $55
Selling and administrative expenses are all fixed. Alpine just received a special order
from a firm in Canada to purchase 450 units at $55 each. The order will not affect the
selling price to regular customers.
Required:
a.
Prepare a differential analysis of the relevant costs and revenues associated with
the decision to accept or reject the special order, assuming Regal has excess capacity.
b.
Determine the net advantage or disadvantage (profit increase or decrease) of
accepting the order, assuming Regal does not have excess capacity.
3
Question 4:
Blend corporation produces two types of blenders. The blenders are produces using a
special metal. Due to global supply chain problems, the supply of the metal is limited
and Blend is able to obtain only 20,000 pounds.
Deluxe
Basic
Unit selling price
$95
$75
Unit variable costs
57
45
$38
4
$30
2.5
Unit contribution margin
Number of pounds of metal per blender
1. Assume that there is no shortage in metal and ample demand. Which Blender
should Blend produce?
2. Assume that Blend must produce at least 2,000 of each model to remain
competitive. With the constraint of 20,000 pounds of metal, how many units of
each blender will blend produce?
3. How much will total contribution margin be when profit is maximized under the
constraint of 20,000 pounds and a 2,000 minimum production?
4
Question 5:
The EDM club of Dallas is considering having DJ Debit to perform on New Year’s Eve.
The DJ is paid $250,000 per event, plus travel of $40,000. The club two different types of
tickets, VIP (balcony) and regular tickets. The two types of customers differ on their
alcohol consumption as well. VIP customers tend to buy more expensive drinks and
bottle services. Generally, 20% of ticket sales are VIP tickets. The club capacity is 5,000
(20% VIP).
VIP
Regular
Alcohol Sales per
Unit
$150
60
Selling Price per Unit
$50
30
Variable cost per Unit
$ 60
20
EDM club of Dallas also pays $2,000,000 in local property taxes, fees and other fixed
expenses related to the property every year.
Required:
1. How many tickets does EDM club of Dallas need to sell to break even? At this
sales volume, how many VIP and how many regular tickets are sold?
2. Last year, EDM club of Dallas had DJ Credit, which is higher rated than DJ
Debit. There were 4,700 attendants (20% VIP). How would you assess the risk
that EDM club of Dallas is taking? (Hint: what is the margin of error?).
3. Last year, EDM club of Dallas had DJ Credit, which is higher rated that DJ Debit.
There were 4,700 attendants (20% VIP). If the club has the same number of
attendants for DJ Debit, how much will it profit from the event (tax = 20%)?
4. How many tickets does EDM club of Dallas need to sell to make $100,000 (tax =
20%)? At this sales volume, how many VIP and how many regular tickets are
sold?
5