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201510 ACC315-O Cost Accounting

Test Chapters 8, 10, 11, 12

Question 1 correct 10 out of 10 points

Carolina Coffee produces coffee beans by the bundle. Carolina is in the process of
implementing a cost forecasting system using the high-low method. The variable-cost per
bundle is $2 and the high and low costs used were $80,000 for 30,000 bundles and $40,000
for 10,000 bundles. What is the value of the fixed cost for the cost estimating equation?

Question 2 correct - 10 out of 10 points

Plottier Heating is attempting to estimate the production cost for heating ducts for the coming
year using the high-low method. The cost driver is number of labor-hours. Plottier determines
that the high and low costs are $25,830 and $18,414, respectively, and the values for the cost
driver are 3,495 and 1,958 hours, respectively. What is the varialbe cost per hour?

Question 3 8 out of 10 points

Bilal Inventory Controls produces a single product, which takes 8 lbs of direct materials per
unit produced. We are currently at the end of the first quarter of the year and there are 50,000
lbs of material on hand. The company's policy is to maintain an end-of-quarter inventory of
materials equal to 25% of the following quarter's material requirements for production. How
many units of product were produced in the first quarter of the year? Under the assmption
that production will increase by 10% in the second quarter, what are the direct materials
reequirements (in lbs) for planned production in the second quarter?

Question 4 correct - 10 out of 10 points

Moriah's Food Company is preparing monthly cash budgets for the fourth quarter of 2014.
Monthly sales revenue in the quarter is estimated as follows: October, $30,000; November,
$24,000 and December, $20,000. All sales are made on open credit with 70% collected in the
month of sale and 30% collected in the following month. What is the estimated total cash

collected in November? December?

Question 5 8 out of 10 points

The Barbeque Pit has box dinners that it sells on basketball game days at the local park. Each
box lunch sells for $6, which includes $2.50 variable costs and $2.50 fixed costs, plus a $1
markup. What is the lowest price The Pit can sell its box dinner so that they will still make a
profit?

Question 6 correct 10 out of 10 points

Blanton's Soul Food has a hot lunch special each weekday and Sunday afternoon. Food and
other variable costs for the lunch are $3.50, and the daily fixed costs are $1,000. Blanton's has
an average of 500 customers per day. What is the lowest price Blanton should charge for a
special group of 200 that wants to come on Saturday for a family reunion. What should be the
lowest price Blanton charges on a normal weekly basis?

Question 7 5 out of 10 points

Baristore is working at full production capacity producing 20,000 units of a product.

Manufacturing costs per unit for the product are:
Direct materials
Direct labor

$9
8

Manufacutring overhead

10

Total manufacturing cost per unit

$27

The unit manufacturing overhead is based on a $4 variable cost per unit and $120,000 fixed
costs. The nonmanufacturing costs, all variable, are $8 per unit, and the sales price is $45 per
unit. Paul Sporting Company (PSC) has asked Baristore to produce 5,000 units of a
modification of the new product. This modification would require the same manufacturing
processes. PSC has offered to share the nonmanufacturing costs equally with Baristore.
Baristore would sell the modified proct to PSC for $35 per unit. Should Baristore produce the
special order for PSC? Why or why not?

Question 8 correct 10 out of 10 points

Given the following attributes of an investment project with a five-year life, and an after-tax
discount rate of 12%, calculate the net present value (NPV) and the payback period of the
project: investment outlay, year 0, $5,000; after-tax cash inflows, year 1, $800; year 2, $900;
year 3, $1,500; year 4, $1,800; and year 5, $3,200.

Question 9 5 out of 10 points

Pique Corporation wants to purchase a new machine for $300,000. Management predicts that
the machine can produce sales of $200,000 each year for the next 5 years. Expenses are
expected to include direct materials, direct labor, and factory overhead (excluding
depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no
residual value for all depreciable assets. Pique's combined income tax rate is 40%.
Management requires a minimum after-tax rate of return of 10% on all investments. What is
the net after-tax cash inflow in Year 1 from the investment?

Question 10 5 out of 10 points

Quip Corporation wants to purchase a new machine for $300,000. Management predicts that

the machine will produce sales of $200,000 each year for the next 5 years. Expenses are
expected to include direct materials, direct labor, and factory overhead (excluding
depreciation) totaling $80,000 per year. The firm uses the straight-line depreciation and
expects the machine to have a residual value of $50,000. Quip's combined income tax rate, t,
is 40%. What is the net after-tax cash inflow in Year 1 from the proposed investment?