Last Name
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First Name
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1. Read each question carefully and answer fully. Some problems have limited or no partial credit.
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.
Problem Pages
Approximate
Points
Approximate
Time
I
II
III
IV
2
3
4
5
24
16
10
26
9 – 13 minutes
7 – 9 minutes
5 – 6 minutes
10 – 14 minutes
V
Total
6 24
100
9 – 13 minutes
40 – 55 minutes

P ROBLEM I
The Anderson Company uses a standard costing system and applies overhead based on direct-labor hours. During the current year, they set a denominator level of activity at
20,000 units. Actual production was 19,000 units. Here are their standards and actual results:
Standards:
Direct Material 3 lbs @ $8 per lb
Direct Labor
Variable Overhed
4 hrs @
4 hrs @
$12 per hr
$7 per hr
Fixed Overhead
Actual:
4 hrs @ $9 per hr
Dir. Mat. Purchased 60,000 lbs for $500,000
Dir. Mat. Used 56,000 lbs
Direct Labor 79,000 hrs for $930,000
Variable Overhed $540,000
Fixed Overhead $700,000
REQUIRED: Provide the variances requested below in the appropriate box:
Direct Materials Price
Direct Materials Efficiency
Direct Labor Price
Direct Labor Efficiency
Variable Overhead Spending
Variable Overhead Efficiency
Fixed Overhead Spending
Fixed Overhead Production Volume

P ROBLEM II
Below are the Baxter Company’s results for 20x1:
Product X Product Y
Sales (3,000 units X; 5,000 units Y) $ 28,800 $ 34,500
Total
$ 63,300
Variable Costs $ (21,600) $ (21,500) $ (43,100)
Fixed Costs $ (55,440)
Net Income $ (35,240)
Required: For each of the following cases, place your answer in the box and provide support calculations.
Part A. Assume that the 20x1 sales mix holds for 20x2. How many units of Product X and of Product Y must be sold to earn a profit of $18,000 after income taxes at 40% rate?
X Y
Part B. Assume that in 20x2, 25% of Baxter’s sales in dollars will come from Product X.
What dollars sales of Product X and of Product Y must be sold to breakeven?
X Y

P ROBLEM III
The Carter Company produces a single product. The following is known:
Percentage of
WIP, beginning
Wip, end
Physical Completion
Units Materials Conversion
0
200 100% 40%
Transferred Out 1,000
There were no spoiled units. They spent $153,600 on materials and $289,440 on conversion this period.
REQUIRED: Compute the cost of goods transferred out of finishing using weighted average.
Answer $

P ROBLEM IV
The Dart Company is considering an investment in a new machine. The machine will cost
$100,000 and will increase operating income before taxes by $32,000 per year for four years.
The machine will have a salvage value of $12,000 at the end of its four-year life. It will also require a working capital investment of $10,000.
Part A. REQUIRED: Compute the net present value of this project at 10%, ignoring taxes.
Part B. REQUIRED: Compute the after-tax net present value of this project at 10%. The tax rate is 30% and the firm will use zero salvage for tax depreciation purposes.

P ROBLEM V
Part A. The Ford Company has $400,000 in debt and $300,000 in equity. They pay a before-tax rate of 12% on debt and 16% on equity. Their tax rate is 40%.
REQUIRED: Compute weighted-average cost of capital.
Weighted-Average Cost of Capital %
Part B. The Frank Company has net operating income of $112,000 and has $525,000 in average assets. Sales were $3,500,000. Ignore income taxes.
REQUIRED: Compute Return on Investment (ROI):
ROI %
Part C. The Farnsworth Company desires a minimum return of 12%. It has a project that will require an investment of $430,000 and will earn $57,000. Sales will be $2,300,000.
Ignore income taxes.
REQUIRED: Compute Residual Income (RI):
Residual Income $

3
4
1
2
5
10%
0.909
0.826
0.751
0.683
0.621
3
4
1
2
5
10%
0.909
1.736
2.487
3.170
3.791