SOLUTIONS - Quiz #1 : TA #1

6A:002 Managerial Accounting Name: ___________________________________ Date: ____________________________________ Class time (circle one): 12:30 1:30 Quiz 1 1. AndyCo., a parachute manufacturer, is considering an upgrade to its computer system both in its offices and production facility. The upgrade includes the following costs: $50,000 for new software $17,000 in lost production during the switch to the new system $67,000 for new computers and mainframes As a result of the upgrade, AndyCo. expects to recognize the following benefits several benefits. These benefits have been estimated at the following values: $10,000 ? reduction in troubleshooting fees due to newer computers and software. $82,000 ? increased production capabilities $74,000 ? less re-work and corrections due to increased production quality There is a 70% chance that the upgrade is a success and a 30% chance that the upgrade fails. If the upgrade is successful, the benefits will be realized. However, if the upgrade fails, no benefits will be realized. A. Determine the value of the benefits if the project is successful. (2 pts) $10,000 ? reduction in troubleshooting fees due to newer computers and software. + $82,000 ? increased production capabilities + $74,000 ? less re-work and corrections due to increased production quality $166,000 B. Should AndyCo. go ahead with the renovation project? Why or why not? (requires a yes/no and a number supporting it) (3pts) Outcome Benefit Probability Expected benefit Success $166,000 x .7 = $116,200 Failure $0 x .3 = $0 $116,200 Total costs = $134,000 ? (50,000 + 67,000 + 17,000) Should not go through with the upgrade because the costs ($134,000) outweigh the expected benefits ($116,200) by $17,800 2. The following costs relate to AndyCo.?s parachute manufacturing business. Identify each cost as a Period, DM, DL, or MOH. (1/2pt each) A. Plant property taxes = _MOH_______________________________________ B. CEO?s bonus = ____Period_____________________________________ C. Utilities at corporate office = ____Period_______________________________ D. Grease used to lubricate factory machines= ______MOH______________________ 3. As the result of a fire, AndyCo. lost some of its files and now has incomplete records. The following are the records that AndyCo. has for the year ended 2008 (all amounts are in $, not units or measurements): Finished Goods (January 1, 2008): 7,500 Finished Goods (December 31, 2008): 3,000 Work in Process (January 1, 2008): 1,000 Work in Process (December 31, 2008): 4,000 DL used: 13,000 MOH used: 5,000 Raw Materials (January 1, 2008): 0 Raw Materials (December 31, 2008): 9,000 Cost of Goods Sold: 25,000 Use the incomplete records to determine the amount of raw materials that AndyCo. purchased during 2008. (3pts) Beginning finished goods + Cost of goods manufactured ? Cost of goods sold = Ending finished goods 7,500 + COGM ? 25,000 = 3,000 ? Cost of goods manufactured = 20,500 Beginning WIP + RM used + DL used + MOH used ? cost of goods manufactured = Ending WIP 1,000 + RM used + 13,000 + 5,000 ? 20,500 = 4,000 ? RM used = 5,500 Beginning RM + RM purchased - RM used = Ending RM 0 + RM purchased - 5,500 = 9,000 ? RM purchased = 14,500 University of Iowa 6A:002 Managerial Accounting