MGMT 640 MGMT640 Final Exam Part 2 Answers (MD)
MGMT 640 Final Exam Part 2
- Maxx Inc. has provided the following data from its activity-based costing system:
- Sasha Company allocates the estimated $196,300 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows:
- Medusa Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory. Information about the departments is presented below:
- The Manassas Company has 55 obsolete keyboards that are carried in inventory at a cost of $9,600. If these keyboards are upgraded at a cost of $7,200, they could be sold for $18,300. Alternatively, the keyboards could be sold “as is” for $7,500. What is the net advantage or disadvantage of re-working the keyboards?
- Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:
- Baller Financial is a banking services company that offers many different types of checking accounts. The bank has recently adopted an activity-based costing system to assign costs to their various types of checking accounts. The following data relate to the money market checking accounts, one of the popular checking accounts, and the ABC cost pools: Annual number of accounts = 52,000 accounts Checking account cost pools:
- Sosa Company has $39 per unit in variable costs and $1,900,000 per year in fixed costs. Demand is estimated to be 138,000 units annually. What is the price if a markup of 35% on total cost is used to determine the price?
- Bob's Company sells one product with a variable cost of $5 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various prices, what price should be charged in order to maximize profits?
- A retailer purchased some trendy clothes that have gone out of style and must be marked down to 30% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation?
- Carlton Products Company has analyzed the indirect costs associated with servicing its various customers in order to assess customer profitability. Results appear below:
- Costa Company has a capacity of 40,000 units per year and is currently selling 35,000 for $400 each. Barton Company has approached Costa about buying 2,000 units for only $300 each. The units would be packaged in bulk, saving Costa $20 per unit when compared to the normal packaging cost. Normally, Costa has a variable cost of $280 per unit. The annual fixed cost of $2,000,000 would be unaffected by the special order. What would be the impact on profits if Costa were to accept this special order?
- A company has $7.40 per unit in variable costs and $5.00 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.44, what price should be charged if 68,000 units are expected to be sold?
- Customer profitability analysis might result in:
- The Estrada Company uses cost-plus pricing with a 0.42 mark-up. The company is currently selling 100,000 units. Each unit has a variable cost of $3.20. In addition, the company incurs $193,400 in fixed costs annually. If demand falls
to 84,000 units and the company wants to continue to earn a 0.42 return, what price should the company charge?
- A new product is being designed by an engineering team at Golem Security. Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a target costing methodology. An analysis of similar products on the market suggests a price of $126.00 per unit. The company requires a profit of 0.17 of selling price. How much is the target cost per unit?
- A company using activity based pricing marks up the direct cost of goods by 0.27 plus charges customers for indirect costs based on the activities utilized by the customer. Indirect costs are charged as follows: $6.20 per order placed; $3.20 per separate item ordered; $27.20 per return. A customer places 10 orders with a total direct cost of $2,900, orders 298 separate items, and makes 7 returns. What will the customer be charged?
- A law firm uses activity-based pricing. The company’s activity pools are as follows:
- The Break-Even point is the
- Which of the following is not part of the Process of Cost Allocation
- Opportunity costs are:
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