Kozloff Cheesy Wedding Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system: Problem Info Activity Cost Pools Activity Rate Size-related $1.16 per guest Complexity-related $33.47 per tier Order-related $65.95 per order The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake. The measure of complexity is the number of tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately. Data concerning two recent orders appear below: Problem Info   Winterhalter Wedding Manliguis Wedding Number of reception guests 45 183 Number of tiers on the cake 4 5 Cost of purchased decorations for cake $19.65 $61.84 Assuming that the company charges $613.98 for the Manliguis wedding cake, what would be the overall margin on the order?

Matt Company uses activity-based costing. The company has three products: A, B and C. The annual production and sales of Product A is 8,000 units, Product B is 6,000 units and Product C is 4,000 units. There are three activity cost pools, with total cost and total activity as follows: Problem Info       Total Activity   Activity Cost Pool Total Cost Product A Product B Product C Activity 1 $20,000 100 400 500 Activity 2 $37,000 800 200 1,000 Activity 3 $91,200 800 3,000 3,800 The activity-based costing cost per unit of Product A is

Which of the following segment performance measures will decrease if there is an increase in the interest expense for that segment?   Problem Info   Return on Investment Residual Income A) Yes Yes B) No Yes C) Yes No D) No No

The LaGrange Corporation had the following budgeted sales for the first half of the current year: Problem Info     Cash Sales   Credit Sales January $ 70,000 $ 340,000 February $ 50,000 $ 190,000 March $ 40,000 $ 135,000 April $ 35,000 $ 120,000 May $ 45,000 $ 160,000 June $ 40,000 $ 140,000   The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled: Collections on sales: 60% in month of sale 30% in month following sale 10% in second month following sale The accounts receivable balance on January 1 of the current year was $70,000, of which $50,000 represents uncollected December sales and $20,000 represents uncollected November sales. The total cash collected during January by LaGrange Corporation would be:

The Jabba Corporation manufactures the “Snack Buster” which consists of a wooden snack chip bowl with an attached porcelain dip bowl. Which of the following would be relevant in Jabba’s decision to make the dip bowls or buy them from an outside supplier?   Problem Info   Fixed overhead cost that can be eliminated if the bowls are purchased from the outside supplier The variable selling cost of the Snack Buster A) Yes Yes B) Yes No C) No Yes D) No No

The following information relates to last year’s operations at the Legumes Division of Gervani Corporation: Problem Info Item Minimum required rate of return   12 % Return on investment (ROI)   15 % Sales $ 900,000   Turnover (on operating assets)   3 times   What was the Legume Division’s net operating income last year?

Part N19 is used by Malouf Corporation to make one of its products. A total of 7,000 units of this part are produced and used every year. The company’s Accounting Department reports the following costs of producing the part at this level of activity:   Problem Info   Per Unit Direct materials $2.20 Direct labor $8.50 Variable manufacturing overhead $1.30 Supervisor’s salary $5.80 Depreciation of special equipment $7.20 Allocated general overhead $4.60   An outside supplier has offered to make the part and sell it to the company for $24.50 each. If this offer is accepted, the supervisor’s salary and all of the variable costs, including the direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. In addition, the space used to make part N19 could be used to make more of one of the company’s other products, generating an additional segment margin of $25,000 per year for that product. What would be the impact on the company’s overall net operating income of buying part N19 from the outside supplier?

Vanikoro Corporation currently has two divisions which had the following operating results for last year:   Problem Info   Cork Division Rubber Division Sales $600,000 $300,000 Variable costs $310,000 $200,000 Contribution margin $290,000 $100,000 Fixed costs for the division $110,000 $60,000 Segment margin $180,000 $40,000 Allocated corporate fixed costs $100,000 $50,000 Net operating income (loss) $80,000 ($10,000)   Since the Rubber Division sustained a loss, the president of Vanikoro is considering the elimination of this division. All of the fixed costs for the division could be eliminated if the division was dropped. If the Rubber Division was dropped at the beginning of last year, how much higher or lower would Vanikoro’s total net operating income have been for the year?

Which of the following statements regarding exclusions and/or deferrals is false?

This year, Fred and Wilma, married filing jointly, sold their home for $800,000. They original purchased the home for $200,000. All closing costs were paid by the buyer. Fred and Wilma owned and lived in their home for the last 20 years. What is Fred and Wilma’s recognized gain from the sale of their residence?