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Accounting 526 Midterm
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Accounting 526 Midterm
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Accounting 526 MidtermWhich of the following would not require an adjustment to net income under the indirect
method? - ANS-Purchase of land
Visual Manufacturing produces two types of cameras: 35mm and digital. The cameras
are produced using one continuous process. Four activities involved in the production
have been identified as: machining, setups, receiving, and packing. Resource drivers
have been used to assign costs to each activity. The overhead activities, their costs,
and the other related data are as follows:
Product. Machine Hours Setups Receiving Orders Packing Orders
35mm 10,000 100. 200. 800
Digital 10,000 250 800 4,000
Costs $240,000 $160,000 $32,000 $96,000
Calculate an activity rate for packing based on packing orders. - ANS-$20 per packing
order
$96,,800 = $20.00 per packing order
Fame Company manufactures engines. Fame produces all the parts necessary for its
engines, except for one electronic component, which is purchased from two local
suppliers: Hydra International and Parable Company. Both suppliers are reliable and
rarely deliver late. Hydra sells the component for $12.00 per unit, while Parable sells the
same component for $10.00. Fame purchases 80% of its components from Parable
because of the lower price it offers. The total annual demand is 95,000 units.
I. Activity Data
Activity Cost
Inspecting components (sampling only) $ 210,000
Reworking products (due to failed component) $2,454,000
Warranty work (due to failed component) $1,923,000
II. Supplier Data
, Hydra. Parable
International. Company
Unit purchase price
$12.00. $10.00
Units purchased
19,000. 76,000
Sampling hours
60. 2,600
Rework hours
150. 3,800
Warranty hours
550. 7,000
Calculate the activit - ANS-$79 per hour
Activity rate for inspecting components based on sampling hours = Cost of inspecting
components / Sampling hours = $210,000 / (2,600 sampling hours + 60 sampling hours)
= $210,,660 sampling hours = $79 per sampling hour
Carlson Company uses a predetermined rate to apply overhead. At the beginning of the
year, Carlson estimated its overhead costs at $240,000, direct labor hours at 40,000,
and machine hours at 10,000. Actual overhead costs incurred were $249,280, actual
direct labor hours were 41,000, and actual machine hours were 11,000.
If the predetermined overhead rate is based on machine hours, what will be the total
amount applied to the overhead account for the year for Carlson? - ANS-$246,000
$240,,000 = $24/ machine hour
$24×11,000 machine hours= $264,000
Which of the following is included in operating activities? - ANS-An increase in accounts
receivable
If beginning work-in-process inventory is $120,000, ending work-in-process inventory is
$160,000, cost of goods manufactured is $400,000 and direct materials used are
$100,000, what are the conversion costs? - ANS-$340,000
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