Last Name
|_|_|_|_|_|_|_|_|_|_|_|_|
First Name
|_|_|_|_|_|_|_|_|_|_|_|_|
Accounting & MIS 3300
Exam III
Spring 2014
Instructions:
1.
Read each question carefully and answer fully. Ignore income tax
unless instructed to consider it. Variances are isolated at earliest
possible point.
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 start
early or continue to work on exams after instructed to stop will receive
penalties as outlined in the syllabus.
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
24
10 – 13 minutes
II
3
25
10 – 14 minutes
III
4
24
10 – 13 minutes
IV
5
27
10 – 15 minutes
100
40 – 55 minutes
Total
Page 2 of 5
PROBLEM I
The Asare 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
45,000 $
78,000
500
600
Operating Departments
Assembly
Finishing
$
- $
2,000
900
4,000
5,000
Total
-
10,000
2,000
$
123,000
16,500
8,500
Part A. Allocate the costs under the step-down method allocating Maintenance first.
Part B. Allocate the costs under the reciprocal method.
Page 3 of 5
PROBLEM II
Crane sells one product at the same price per unit. In 20x1, the results were:
Sales Units
Sales
CGS
Gross Margin
Operating Expenses
Operating Income
58,000
$ 2,146,000
1,624,000
522,000
400,000
$
122,000
Crane believes that about 45% of Cost of Goods Sold and 100% of Operating Expenses are
fixed. Crane expects the results will be the same in 20x2 unless a special order is accepted.
A special order for 4,000 units at $26 each is received and is “take it or leave it.” The
special order will require Crane to spend $1.50 extra in packaging costs for the premium
package requested. Each part is independent.
Part A. Assume Crane has capacity of 65,000 units. How much better or worse off will they
be if they accept?
Part B. Assume Crane has capacity of 60,000 units. How much better or worse off will they
be if they accept?
Part C. Assume Crane has capacity of 65,000 units. However, Crane is concerned that if
they accept the special order, some regular customers will not purchase because of anger
over the reduced price in the special order. What is the largest number of regular unit
sales Crane can lose and still be willing to accept the special order?
Part D. Assume Crane has capacity of 60,000 units. However, if Crane accepts the special
order, they will have to incur a one-time shipping cost of $7,500. If Crane were to counteroffer on the special order, what is the minimum price per unit they could accept and still be
no worse off for taking the order?
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.
Ralph has been quoted a price of $2,500 to repair some storm damage to his house. His
neighbor Alice was quoted $4,000. Another firm has offered to do the work for $5,200.
Ralph and Alice accept the $5,200 offer. You need to allocate the $5,200 between the two.
Indentify four ways to do so and do the allocation:
Method of Allocation:
Allocated to Ralph
Allocated to Alice
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 subject to production constraints detailed
here. Each product uses direct labor hours (DLH) that cost $14 per hour. You have 59,000
DLH available each period. The table below lists the products, the maximum the market
will purchase each period, the number of DLH 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
DLH used).
Product
A3B1
C5D2
E4F4
Maximum
DLH
Sales
Needed
8,000
3
5,000
9
4,000
6
Sales
Price
$80
$180
$130
What should be the production of each to maximize profits?
Product
Production
A3B1
C5D2
E4F4
Variable
Costs
$30
$35
$25
Page 5 of 5
PROBLEM IV
The Zhang Company produces three products, T, Q, and R214, through a joint process
costing $54,000. Zhang uses the net realizable value method (except in Part C). T is
processed further into T105. Q is processed further into Q114. T and Q cannot be sold
until further processing. During the first year of operations, the following took place:
Liters
Product Produced
T105
750
Q114
500
R214
1000
Sales Price
per Liter
$
80
$
100
$
8
Separable
Liters Sold
Costs
750 $ 10,000
400 $ 15,000
600 $
-
Part A. Assume that R214 is treated as a byproduct (production method).
requested amounts below:
Product
Ending Inventory Balance
T105
$
Q114
$
R214
$
Fill in the
Part B. Assume that R214 is treated as a byproduct (sales method). Fill in the requested
amounts below:
Product
Ending Inventory Balance
T105
$
Q114
$
R214
$
Part C. Assume all products are joint products. Fill in the requested amounts assuming
the firm uses the constant-gross-margin-percentage method:
Product
Ending Inventory Balance
T105
$
Q114
$
R214
$