25. All of the following qualitative considerations may impact upon capital investments analysis except:
a. time value of money
b. employee morale
c. the impact on product quality
d. manufacturing flexibility
26. All of the following are factors that may complicate capital investment analysis except:
a. the leasing alternative
b. changes in price levels
c. sunk cost
d. the federal income tax
27. The Nite Lite Factory produces two products – small lamps and desk lamps. It has two separate departments – finishing and production. The overhead budget for the finishing department is $550,000, using 500,000 direct labor hours. The overhead budget for the production department is $400,000 using 80,000 direct labor hours. If the budget estimates that a desk lamp will require 1 hours of finishing and 2 hours of production, how much factory overhead will be allocated to each unit of desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours?
a. $11.10
b. $4.91
c. $5.00
d. $10.00
28. Using a plant-wide factory overhead rate distorts product costs when:
a. products require different ratios of allocation-base usage in each production department
b. significant differences exist in the factory overhead rates used across different production departments
c. both A and B exist
d. either A or B exist
29. Which of the following is characteristic of a traditional cost system?
a. Many work in process account transactions
b. Reliance on financial performance measures
c. Many process control points
d. All of the above
30. The local college is aggressively working in reducing the time that a student needs to enroll for each semester. All except one of the following changes is helping in their efforts.
a. Counselors are specializing in common degree plans.
b. One application is good at the Community college and at the transferring University.
c. A one stop area includes registration, admissions, advising, and ID’s. Each working closely with each other.
d. Reduce the number of degrees being offered.
Problems:
31. Diamond Company produces a chair that requires 5 yds. of material per unit. The standard price of one yard of material is $7.50. During the month, 8,500 chairs were manufactured, using 40,000 yards at a cost of $7.60. Determine the (a) price variance, (b) quantity variance, and (c) cost variance (6 points).
32. Some items are omitted from each of the following condensed divisional income statements of Willis Inc (8 points):
Division L Division M Division N
Sales $ (1) $320,000 $580,000
Cost of goods sold 480,000 120,000 $ (5)
Gross profit $220,000 $ (3) $180,000
Operating expenses 95,000 160,000 $ (6)
Income from operations $ (2) $ (4) $ 75,000
(a) Determine the amount of the missing items, identifying them by number.
(b) Based on income from operations, which division is the most profitable?
33. Delicious Cake Factory normally sells their specialty cake for $22. An offer to buy 100 cakes for $18 per cake was made by an organization hosting a national event in the city. The variable cost per cake is $12. A special decoration per cake will add another $1 to the cost. Determine the differential income or loss per cake from selling the cakes (10 points).
34.
Year 6% 10% 12%
1 .943 .909 .893
2 1.833 1.736 1.690
3 2.673 2.487 2.402
4 3.465 3.170 3.037
5 4.212 3.791 3.605
6 4.917 4.355 4.111
7 5.582 4.868 4.564
8 6.210 5.335 4.968
9 6.802 5.759 5.328
10 7.360 6.145 5.650
A project is estimated to cost $273,840 and provide annual cash flows of $60,000 for seven years. Determine the internal rate of return for this project, using the above table (6 points).
35. Nite Lite Factory produces two similar products – small lamps and desk lamps. The total plant budget is $800,000 with 640,000 estimated direct labor hours. It is further estimated that small lamp production will have 375,000 direct labor hours and desk lamp production will require 265,000 direct labor hours (10 points).
(a) Determine the single plant factory overhead rate based on direct labor hours.
(b) How much is the factory overhead cost per unit if each small lamp uses 3 hours per unit?
(c) How much is the factory overhead cost per unit if each desk lamp uses 2.5 hours per unit?
(d) How much total factory overhead will be allocated to the small lamp production if 130,000 units are produced during the period?
(e) How much total factory overhead will be allocated to the desk lamp production if 104,000 are produced during the period?
