Examination I

I will choose five of the undermentioned inquiries for the mid-term test. You should be able to reply all of them. You may work together in survey groups and analyze and reply the inquiries. Obviously. the test will be an single attempt.

1Accounting and Control

The accountant of a little private college is kicking about the sum of work she is required to make at the beginning of each month. The president of the university requires the accountant to subject a monthly study by the 5th twenty-four hours of the following month. The monthly study contains pages of fiscal informations from operations. The accountant was heard stating. “Why does the president need all this information? He likely doesn’t read half of the study. He’s an old English professor and likely doesn’t know the difference between a cost and a gross. ”


a. What is the likely function of the monthly study?
Autonomic nervous system: The monthly study is the study card for the University’s internal accounting system. these monthly studies are a formal portion of the University’s information system. that provides informations and cognition for determination devising ( pg. 2 of text ) . These studies are portion of a system of controls. these controls force the organisation to account for their monthly minutess and the president needs to cognize this so that he can support and accommodate the place of his company. These studies are utile to the president so that he can pull off the in-and-outflow of resources that keep the University’s board members and employees involvements aligned. For the president. the function of these monthly studies are to supply information for necessary planning and determination devising and to besides assist motivate and proctor people within the university ( pg. 3 of text ) .

B. What is the controller’s duty with regard to a president who doesn’t know much accounting? Ans: It is the controller’s duty to guarantee the President understands what the studies say/symbolize and based upon those consequences. make suggestions on determinations. Their duties involve guaranting the studies are accurate. run into accounting criterions by following accounting rules and processs. and holding a strong fiduciary apprehension of the concern so that the Numberss in his study state a narrative about the University’s place in the market and the current province of its operational drivers ( pg. 10 & A ; 11 of text ) .

2Cost. Volume. Net income Analysis

Leslie Mittelberg is sing the wholesaling of a leather pocketbook from Kenya. She must go to Kenya to look into on quality and transit. The trip will be $ 3000. The cost of the pocketbook is $ 10 and transporting to the United States can happen through the postal system for $ 2 per pocketbook or through a cargo company which will transport a container that can keep up to a 1000 pocketbook at a cost of $ 1000. The cargo company will bear down $ 1000 even if less than 1000 pocketbooks are shipped. Leslie will seek to sell the pocketbooks to retail merchants for $ 20. Assume there are no other costs and benefits.


a. What is the break-even point if transportation is through the postal system? Ans: Interrupt Even Point = Total Fixed Costs / ( Unit Price – Unit Variable Costs ) BEP = $ 3000 / ( $ 20 – $ 12 ) = 375 pocketbooks

B. How many units must be sold if Leslie uses the cargo company and she wants to hold a net income of $ 1000? Autonomic nervous system: Entire Revenue – Total Costs= Net income

TR-TC=1000: $ 20x- ( $ 3000+ $ 1000+ $ 10x ) = $ 1000

$ 10x= $ 5000 ; x=500 pocketbooks.

c. At what end product degree would the two transportation methods yield the same net income? Ans: ?=TR-TC ; Freight: ?= $ 10x- $ 4000 ; Postal: ?= $ 8x- $ 3000 ( Two
equations same unknown. set equal: 10x-4000=8x-3000 ( 2x=1000 ( x=500 pocketbooks

d. Suppose a big price reduction shop asks to purchase an extra 1000 handbags beyond normal gross revenues. Which transporting method should be used and what is the minimal gross revenues monetary value Leslie should see in selling those 1000 pocketbooks? Autonomic nervous system: At a 1000 pocketbook. cargo transportation should be used because the UVC to transport a bag would be $ 1 as opposed to $ 2 through postal. The minimal monetary value of the bag should cover Leslies VC merely to interrupt even. VC=10 ( 1000 ) +1000= $ 11. 000/1000bags = $ 11. 00. 3Asset Replacement

The Baltic Company is sing the purchase of a new machine tool to replace an disused one. The machine being used for the operation has a tax-basis book value of $ 80. 000. with an one-year depreciation disbursal of $ 8. 000. It has a resale value today of $ 40. 000. is in good working order. and will last. physically. for at least 10 more old ages. The proposed machine will execute the operation so much more expeditiously and Baltic applied scientists estimate that labour. stuff. and other direct costs of the operation will be reduced $ 60. 000 a twelvemonth if it is installed. The proposed machine costs $ 240. 000 delivered and installed. and its economic life is estimated at 10 old ages. with zero salvage value. The company expects to gain 14 per centum on its investing after revenue enhancements ( 14 per centum is the firm’s cost of capital ) . The revenue enhancement rate is 40 per centum. and the steadfast uses straight-line depreciation. Any addition or loss on the sale of the machine at retirement is capable to revenue enhancement at 40 per centum.

Should Baltic purchase the new machine?

4Transfer Monetary values

The Alpha Division of the Carlson Company manufactures merchandise Ten at a variable cost of $ 40 per unit. Alpha Division’s fixed costs. which are sunk. are $ 20 per unit. The market monetary value of X is $ 70 per unit. Beta Division of Carlson Company uses merchandise Ten to do Y. The variable costs to change over X to Y are $ 20 per unit and the fixed costs. which are sunk. are $ 10 per unit. The merchandise Y sells for $ 80 per unit.


a. What reassign monetary value of X causes divisional directors to do decentralised determinations that maximize Carlson Company’s net income if each division is treated as a net income centre? Autonomic nervous system: The minimal monetary value Alpha can accept is $ 40+ $ 20** = $ 40. The maximal Beta can pay is $ 80- $ 20- $ 10** or $ 60.

**To have “sunken fixed costs” a house would hold to be runing in the short-run. the deep-set fixed costs are irrecoverable and are already paid. these costs shouldn’t be considered when finding whether or non to close down.

The transportation monetary value must be set in such a manner as to bring on the two parties to do the transportation. In kernel. the transportation monetary value must give inducements to the Alpha Division to desire to do the transportation and give inducements to the Beta Division to purchase ( b/c they’re both net income centres. decentralized determination shapers ) . In other words. the undermentioned two restraints must be satisfied:

Alpha: TP & gt ; $ 40 ( variable cost )
Beta DivisionTP & lt ; $ 60 ( selling monetary value ( $ 80 ) – variable costs to finish ( $ 20 ) ) where: TP = transportation monetary value ( $ 40