ACCT 346 DeVry Week 6 Quiz 2 Different Sets

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ACCT 346 DeVry Week 6 Quiz (2 Different Sets)


ACCT 346 DeVry Week 6 Quiz (Version 1)

  1. (TCO 7)Elliot’s Escargots sells commercial and home snail extraction tools and serving pieces. Currently, the snail extraction line of products takes up approximately 50 percent of the company’s retail floor space. The CEO of Elliot’s wants to decide if the company should continue offering snail extraction tools or focus only on serving pieces. If the snail extraction tools are dropped, salaries and other direct fixed costs can be avoided and serving piece sales would increase by 13 percent. Allocated fixed costs are assigned based on relative sales.

Snail Extraction       Serving

Tools                 Pieces                Total

Sales                                                   $1,200,000            $800,000         $2,000,000

Less cost of goods sold                      700,000              500,000           1,200,000

Contribution margin                            500,000              300,000              800,000

Less direct fixed costs:

Salaries                                               175,000              175,000              350,000

Other                                                    60,000                60,000              120,000

Less allocated fixed costs:

Rent                                                    14,118                  9,882                24,000

Insurance                                            3,529                  2,471                  6,000

Cleaning                                              4,117                  2,883                  7,000

Executive salary                                 76,470                53,530              130,000

Other                                                   7,058                  4,942                12,000

Total costs                                           340,292              308,708              649,000

Net income                                         $159,708              ($ 8,708)          $151,000


  1. (TCO 4)Paschal’s Parasailing Enterprises has estimated that fixed costs per month are $115,600 and variable cost per dollar of sales is $0.38.

(a) What is the break-even point per month in sales?

(b) What level of sales is needed for a monthly profit of $67,000?

(c) For the month of August, Paschal’s anticipates sales of $585,000. What is the expected level of profit?

  1. (TCO 6)Princess Cruise Lines has the following service departments; concierge, valet, and maintenance.  Expense for these departments are allocated to Mediterranean and Trans-Atlantic cruises.  Expenses for the departments are totaled (both variable and fixed components are combined) and as follows:

Concierge         $2,500,000

Valet                 $1,750,000

Maintenance      $4,250,000

The sea miles logged are 6,000,000 for the Mediterranean and 18,000,000 for the Trans-


Based upon the sea miles logged, allocate the service department costs.

  1. (TCO 9)Thurman Munster, the owner of Adams Family RVs, is considering the addition of a service center his lot.  The building and equipment are estimated to cost $1,100,000 and both the building and equipment will be depreciated over 10 years using the straight-line method. The building and equipment have zero estimated residual value at the end of 10 years. Munster’s required rate of return for this project is 12 percent. Net income related to each year of the investment is as follows:

Revenue                                             $450,000


Material cost                                       $ 60,000

Labor                                                   100,000

Depreciation                                        110,000

Other                                                   10,000             280,000

Income before taxes                           170,000

Taxes at 40%                                      68,000

Net income                                         $102,000

(a) Determine the net present value of the investment in the service center. Should Munster invest in the service center?

(b) Calculate the internal rate of return of the investment to the nearest ½ percent.

(c) Calculate the payback period of the investment.

(d) Calculate the accounting rate of return.


  1. (TCO 5)The following information relates to Vice Versa Ventures for calendar year 20XX, the company’s first year of operations:

Units produced                                                                        20,000

Units sold                                                                               17,000

Selling price per unit                                                                    $35

Direct material per unit                                                                  $5

Direct labor per unit                                                                      $5

Variable manufacturing overhead per unit                                        $2

Variable selling cost per unit                                                         $3

Annual fixed manufacturing overhead                                    $160,000

Annual fixed selling and administrative expense                      $80,000

(a) Prepare an income statement using full costing.

(b) Prepare an income statement using variable costing.


  1. (TCO 8)Leekee Shipyards has a new barnacle removing product for ocean going vessels. The company invests $1,200,000 in operating assets and plans to produce and sell 400,000 units per year.  Leekee wants to make a return on investment of 20% each year.  Leekee needs to know what price to charge for this product.

Use the absorption costing approach to determine the markup necessary to make the desired return on investment based on the following information:

Per Unit                                                                                               Total

Direct Materials                                                                       $ 2.00

Direct Labor                                                                                        $ 1.50

Variable Manufacturing Overhead                                                     $ 1.00

Fixed Manufacturing Overhead                                                         $ 100,000

Variable Selling and Administrative Expense                                     $ 0.10

Fixed Selling and Administrative Expense                                         $ 100,000


ACCT 346 DeVry Week 6 Quiz (Version 2)

Question 1. Question : Which of the following costs is not relevant in decision making?

Sunk cost

Incremental cost

Opportunity cost

Differential cost

Question 2. Question : Which of the following does not take the time value of money into account?

Internal rate of return

Net present value

Payback period

None of the above

Question 3. Question : Which of the following is not a capital budgeting decision?

Purchasing new equipment

Replacing old equipment

Producing a film project

Planning for retirement

Question 4. Question : Which of the following is an example of a sunk cost?

Direct materials

Variable overhead

Equipment depreciation

Future cost

Question 5. Question : A revenue that differs between alternatives is called a(n):

Incremental revenue.

Irrelevant revenue.

Joint revenue.

Opportunity revenue.

Question 6. Question : Capital expenditure decisions

are also called capital budgeting decisions.

involve the acquisition of long-lived assets.

have a major, long-term effect on a firm’s operations.

All of the above are correct

Question 7. Question : The rate of return that equates the present value of future cash flows to the investment outlay is the

hurdle rate.

internal rate of return.

payback return.

accounting rate of return.

Question 8. Question : Which of the following is never considered in incremental analysis?

Incremental revenue

Sunk costs

Incremental profit

Differential costs

Question 9. Question : Which of the following is often not a differential cost?

Direct labor

Direct material

Variable manufacturing overhead

Fixed manufacturing overhead

Question 10. Question : The required rate of return used to calculate an investment’s net present value is related to the firm’s

contribution margin.

cost of capital.

depreciation methods.

fixed costs.