ACC 3200 Practice Problems for the Final Exam
1. The following data refers to the Daniels division of Tippett Inc. Daniels sells variable-
speed drills. The standard drill sells for $ 40, and Daniels plans sales of 30,000 units in
2005. Tippett treats Daniels as an investment center with total attributable investment of $
800,000. Daniels' annual fixed costs are $ 200,000. Variable cost per standard drill is $
24. The firm's required rate of return on investment is 15%. The manager is evaluated
based on Residual Income.
1.1 What is the planned Return on Investment in 2005? ____________________________
1.2 A one-time external special order is received to buy from Daniel, 10,000 units of the
standard drill at $30 each. If the order is accepted, Daniels will have to incur additional
annual fixed costs of $30,000. Based on the effect on Residual Income for the first year,
will the manager accept this order?
1.3 Effect on RI for first year _______________ Will accept: Yes or No
2. Cierra, Inc. manufactures computer chips. Currently, the costs per unit are as follows:
direct materials $ 1.00
direct labor 10.00
variable manufacturing overhead 5.00
fixed manufacturing overhead 8.00
Total $
24.00
Chips Corp., has contacted Cierra with an offer to sell to Cierra 10,000 of the chips for $22.00
per chip. If Cierra accepts the proposal, $50,000 of the fixed overhead will be eliminated.
Should Cierra make or buy the chips? Justify your answer with calculations.
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, 3. Succulent juice Company manufactures and sells premium tomato juice by the gallon.
Succulent just finished its first year of operations. The following data relates to this first year
of operations.
Number of Gallons Produced 80,000
Number of Gallons sold 70,000
Sales Price $3.00/gallon
Unit Product Cost (variable costing) $1.45/gallon
Contribution Margin $84,000
Total Fixed Manufacturing Overhead $?
Total fixed Selling & Administrative $ 25,000
Variable Sales and Administrative $?
Inventory value under absorption costing $29,500
3.1 Prepare an Income statement for Succulent using the Absorption Costing Method. (Hints:
How many units were in inventory? What was the cost per unit? Why is the CM only
$84,000? ).
Sales
COGS
Gross Margin
Selling and Administrative Costs
Net Income
3.2 Explain in one or two sentences, the key difference between the net income under
Absorption and the net income under Variable costing. Determine the variable costing net
income. Do not prepare a variable costing income statement.
This study source was downloaded by 100000850872992 from CourseHero.com on 04-03-2023 09:37:57 GMT -05:00
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1. The following data refers to the Daniels division of Tippett Inc. Daniels sells variable-
speed drills. The standard drill sells for $ 40, and Daniels plans sales of 30,000 units in
2005. Tippett treats Daniels as an investment center with total attributable investment of $
800,000. Daniels' annual fixed costs are $ 200,000. Variable cost per standard drill is $
24. The firm's required rate of return on investment is 15%. The manager is evaluated
based on Residual Income.
1.1 What is the planned Return on Investment in 2005? ____________________________
1.2 A one-time external special order is received to buy from Daniel, 10,000 units of the
standard drill at $30 each. If the order is accepted, Daniels will have to incur additional
annual fixed costs of $30,000. Based on the effect on Residual Income for the first year,
will the manager accept this order?
1.3 Effect on RI for first year _______________ Will accept: Yes or No
2. Cierra, Inc. manufactures computer chips. Currently, the costs per unit are as follows:
direct materials $ 1.00
direct labor 10.00
variable manufacturing overhead 5.00
fixed manufacturing overhead 8.00
Total $
24.00
Chips Corp., has contacted Cierra with an offer to sell to Cierra 10,000 of the chips for $22.00
per chip. If Cierra accepts the proposal, $50,000 of the fixed overhead will be eliminated.
Should Cierra make or buy the chips? Justify your answer with calculations.
This study source was downloaded by 100000850872992 from CourseHero.com on 04-03-2023 09:37:57 GMT -05:00
https://www.coursehero.com/file/10508219/Practice-Final-2-Q/
, 3. Succulent juice Company manufactures and sells premium tomato juice by the gallon.
Succulent just finished its first year of operations. The following data relates to this first year
of operations.
Number of Gallons Produced 80,000
Number of Gallons sold 70,000
Sales Price $3.00/gallon
Unit Product Cost (variable costing) $1.45/gallon
Contribution Margin $84,000
Total Fixed Manufacturing Overhead $?
Total fixed Selling & Administrative $ 25,000
Variable Sales and Administrative $?
Inventory value under absorption costing $29,500
3.1 Prepare an Income statement for Succulent using the Absorption Costing Method. (Hints:
How many units were in inventory? What was the cost per unit? Why is the CM only
$84,000? ).
Sales
COGS
Gross Margin
Selling and Administrative Costs
Net Income
3.2 Explain in one or two sentences, the key difference between the net income under
Absorption and the net income under Variable costing. Determine the variable costing net
income. Do not prepare a variable costing income statement.
This study source was downloaded by 100000850872992 from CourseHero.com on 04-03-2023 09:37:57 GMT -05:00
https://www.coursehero.com/file/10508219/Practice-Final-2-Q/
