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Accounting & MIS 3300
Exam III
Autumn 2012
Instructions:
1.
Read each question carefully and answer fully. Ignore income taxes.
2.
Problems not supported by relevant and readable computations are
subject to point loss. Where appropriate, terms like “unfavorable,”
“favorable,” “better off,” “worse off,” etc. must be included with number
answers. Dollar amounts should include a dollar sign; unit amount
should include an indication of the unit.
3.
Budget your time carefully. It is generally better to finish half of each
problem than to complete all of half the problems. Students who
continue to work on exams after instructed to stop will receive a zero
on this exam.
4.
It is the student's responsibility to verify that all the listed problems
and pages are contained is this booklet. Unanswered questions
receive zero points regardless of reason.
Approximate
Points
Approximate
Time
Problem
Pages
I
2
25
10 – 14 minutes
II
3
25
10 – 14 minutes
III
4
24
10 – 13 minutes
IV
5
26
10 – 14 minutes
100
40 – 55 minutes
Total
Page 2 of 5
PROBLEM I
The Antler Company has two support departments (Cleaning and Maintenance) and two
production areas (Assembly and Finishing). The following is known:
Actual Costs
$
Services Furnished by
Cleaning (Sq. footage)
Maintenance (labor hrs.)
Support Departments
Cleaning
Maintenance
27,000 $
96,000
1,000
1,200
Operating Departments
Assembly
Finishing
$
- $
3,000
600
5,000
3,000
Total
-
10,000
1,500
$
123,000
19,000
6,300
Part A. Allocate the costs under the step-down method that produces an answer closest to
the reciprocal method.
Part B. Allocate the costs under the reciprocal method.
Page 3 of 5
PROBLEM II
Burns sells one product at the same price per unit. In 20x1, the results were:
Sales Units
Sales
CGS
Gross Margin
Operating Expenses
Operating Income
45,000
$ 2,970,000
2,565,000
405,000
500,000
$
(95,000)
Burns believes that about 60% of Cost of Goods Sold and 100% of Operating Expenses are
fixed. Burns expects the results will be the same in 20x2 unless a special order is accepted.
Each part is unique, built upon the above data. All special order offers are “take it or leave
it.”
Part A. Assume a special order for 10,000 units at $45 each is received. Burns has capacity
of 64,000 units. How much better or worse off will they be if they accept?
Part B. Assume a special order for 10,000 units at $45 each is received. Burns has capacity
of 50,000 units. How much better or worse off will they be if they accept?
Part C. Burns is considering issuing 10,000 coupons that allow the holder to buy one unit
at $58. Burns has capacity of 70,000 units. Burns is concerned that some of the units sold
as part of the promotion may replace units they would have sold at the regular price. What
is the maximum percentage of the coupons exercised that can come from those who would
have bought at the regular price without making Burns worse off?
Part D. Burns is considering a special order for 10,000 units when they have capacity of
50,000. Because the customer is in Portugal, Burns would have to pay $45,000 to obtain a
one-year export license. What is the minimum Burns is willing to accept from this
customer?
Page 4 of 5
PROBLEM III
Part A.
Required: For each of the following cases, place your answer in the box and provide
supporting calculations.
You have an opportunity to interview with two companies, one in Chicago and one in
Phoenix. The airfare to Chicago is $350 and $600 to Phoenix. However, you have combined
the trip into one with airfare of $800. You need to allocate the $800 between cities.
Indentify four ways to do so and do the allocation:
Method of Allocation:
Allocated to Chicago
Allocated to Phoenix
Part B.
Required: Compute the optimum production quantity of each product and place your
answer in the box and provide supporting calculations.
You can produce any combination of three items. However, each uses a $5 computer chip
that is in short supply: you can only obtain 100,000. The table below lists the products, the
maximum the market will purchase, the number of chips needed, the selling price per unit
of final product, and the variable costs to produce that product (but it does not include the
cost of the chips used).
Product
QRS
TUV
WXY
Maximum Chips
Sales
Needed
20,000
5
10,000
6
5,000
7
Sales
Price
$50
$60
$70
What should be the production of each to maximize profits?
Product
Production
QRS
TUV
WXY
Variable
Costs
$13
$10
$17
Page 5 of 5
PROBLEM IV
The Baxter Company produces three products, Abc, Def, and GHI, through a joint process
costing $72,000. Baxter uses the net realizable value method. Abc is processed
further into ABC. Def is processed further into DEF. Abc and Def cannot be sold until
further processing. During the first year of operations, the following took place:
Kilos
Product Produced
ABC
800
DEF
400
GHI
2000
Sales Price
per Kilo
$
70
$
90
$
5
Separable
Kilos Sold
Costs
600 $ 12,000
300 $ 6,000
1600 $
-
Part A. Assume that GHI is treated as a byproduct (production method).
requested amounts below:
Product
Ending Inventory Balance
ABC
$
DEF
$
GHI
$
Fill in the
Part B. Assume that GHI is treated as a byproduct (sales method). Fill in the requested
amounts below:
Product
Ending Inventory Balance
ABC
$
DEF
$
GHI
$