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Acct 505 Final Exam Answers

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ACCT 505 Final Exam Answers
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1. (TCO C) Silver City, Inc., has collected the following operating information below for its current month’s activity. Using this information, prepare a flexible budget analysis to determine how well Silver City performed in terms of cost control.
Actual Costs Incurred
Static Budget
Activity level (in units)
5,250
5,178
Variable Costs:
Indirect materials
$24,182
$23,476
Utilities
$22,356
$22,674
Fixed Costs:
Administration
$63,450
$65,500
Rent
$65,317
$63,904
2. (TCO D) Globe Co. manufactures automatic door openers. The company uses 15,000 electronic hinges per year as a component in the assembly of the openers. You have been engaged by Globe to assist with an evaluation of whether the company should continue producing the hinges or purchase them from an outside vendor.
The Accounting Department provided the following detail regarding the annual cost to produce electronic hinges:
Direct materials
$54,000
Direct labor
60,000
Variable manufacturing overhead
36,000
Fixed manufacturing overhead
90,000
Total costs
$240,000
The Procurement Department provided the following supplier pricing:
Supplier A price per hinge
$11.00
Supplier B price per hinge
$10.75
Supplier C price per hinge
$10.50
The supplier pricing was obtained in response to a formal request for proposal (RFP). Procurement has determined these suppliers meet Globe’s technical specifications and quality requirements.
If Globe stops producing the part internally, 10% of the fixed manufacturing overhead would be eliminated.
Required: Prepare a make-or-buy analysis showing the annual advantage or disadvantage (in dollars) of accepting an outside supplier’s offer. Should the company buy the parts? If so, from which supplier?
3. (TCO E) Mesa Company produces a single product. Operating data for the company and its absorption costing...

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