Applied Managerial Accounting
Final Exam (Worth 100 Points) Name: ____________________________________
1. Eastchester Products (20 Points) Please use the “present value tables starting on page 500 in your textbook. (Show all your computations.)
Eastchester Products is considering a project that requires an initial investment of $400,000 and will generate the following cash inflows for the next 4 years:
|Year||Cash Inflow at End of Year|
Refer to Eastchester Products. Ignoring tax effects, calculate the net present value of this project if Eastchester’s cost of capital is 20 percent. Should the project be accepted or rejected?
Refer to Eastchester Products. Ignoring tax effects, calculate the net present value of this project if Eastchester’s cost of capital is 12 percent?
2. Please write a paragraph or two to answer the four questions listed below (5 Points Per Question, 20 Points Total)
a. How is the budget used for performance evaluation?
b. Describe a comprehensive master budget.
c. Explain the difference between a flexible budget and master budget.
d. Compare the four types of responsibility centers.
3. Materials and labor variances.The Chocolate Factory presents the following data for September:
|Standards per Batch||Actual Total
|Materials||1 Pound at $3.50 per Pound||59,000 Pounds|
|Labor.||1.5 Hours at $4.00 per Hour||82,000 Hours|
|Batches Produced||58,000 Batches|
During the month, the firm purchased 59,000 pounds of materials for $216,500. Wages earned were $330,000.
1. Compute the direct material and direct labor price and efficiency variances.
2. Based on the information for the company, write a short report explaining the cause of the variances that you computed.
4. Estimating flexible selling expense budget and computing sales volume variance. Miami Products estimates that it will incur the following selling expenses next period: (30 Points)
|Salaries (fixed)||$ 20,000|
|Commissions (0.05 of sales revenue)||17,875|
|Travel (0.03 of sales revenue)||10,725|
|Sales Office Costs ($4,000 plus $0.05 per unit sold)||7,250|
|Shipping Costs ($0.10 per unit sold).||6,500|
|Total Selling Expenses||$112,350|
a.Derive the cost equation for selling expenses. (Hint: y= a+ bx+ cy.)
b.Assume that Miami sells 50,000 units during the period. Budgeted sales totaled 65,000 units at a budgeted sales price of $5.50 per unit. Prepare a variance report to show the difference between the master budget and the flexible budget.
5 Multiple Choice Questions (Worth 2 points each.)
Peters Retail, Inc.
Peters Retail, Inc. utilizes 8,000 square feet of floor space in departments A, B, and C. Rental of $30,000 is incurred annually for this space. Department A occupied 1,000 square feet, Department B occupied 3,000 square feet, and Department C occupied 4,000 square feet.
1. Refer to Peters Retail, Inc. How much of the rent expense is allocated to Department A?
2. Refer to Peters Retail, Inc. How much of the rent expense is allocated to Department B?
3. Refer to Peters Retail, Inc. How much of the rent expense is allocated to Department C?
The Framing Division had the following data:
|Year||Division Revenue||Profit Margin||Division Investment|
4. Refer to the Framing Division. What is the return on investment for Year 2008?
5. Refer to the Framing Division. What is the return on investment for Year 2009?