ACCT 349 Ethics Case and Assignments

ACCT 349 Week 1 Assignment Ethics Case BYP
1-6
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Ethics Case BYP 1-6
(a) Who are the stakeholders in this situation?
b) What are the ethical issues involved in this situation?
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ACCT 349 Week 1 Homework 8-4, 8-6, 8-8, 8-9,
8-13, 8-22
ACCT 349 Week 1 Homework 8-4, 8-6, 8-8, 8-9, 8-13, 8-22

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ACCT 349 Week 1 Quiz
1. (TCO 10) Which of the following statements is true about overhead
cost variance analysis using activity-based costing?
2. (TCO 10) Sebastian Company, which manufactures electrical
switches, uses a standard cost system and carries all inventories at
standard. The standard manufacturing overhead costs per switch are
based on direct labor hours and are shown below:
Variable overhead (5 hours at $12 per direct manufacturing labor hour)
$ 60
Fixed overhead (5 hours at $15 per direct manufacturing labor hour,
based on capacity of 200,000 direct manufacturing labor hours per
month)
75
Total overhead per switch
$ 135
The following information is available for the month of December:
46,000 switches were produced, although 40,000 switches were
scheduled to be produced.
225,000 direct manufacturing labor hours were worked at a total cost of
$5,625,000.

Variable manufacturing overhead costs were $2,750,000.
Fixed manufacturing overhead costs were $3,050,000.
The total variable manufacturing overhead variance was
3. (TCO 10) Sebastian Company, which manufactures electrical
switches, uses a standard cost system and carries all inventories at
standard. The standard manufacturing overhead costs per switch are
based on direct labor hours and are shown below:
Variable overhead (5 hours at $12 per direct manufacturing labor hour)
$ 60
Fixed overhead (5 hours at $15 per direct manufacturing labor hour,
based on capacity of 200,000 direct manufacturing labor hours per
month)
75
Total overhead per switch
$ 135
The following information is available for the month of December:
46,000 switches were produced, although 40,000 switches were
scheduled to be produced.
225,000 direct manufacturing labor hours were worked at a total cost of
$5,625,000.
Variable manufacturing overhead costs were $2,750,000.
Fixed manufacturing overhead costs were $3,050,000.
The fixed manufacturing overhead spending variance for December was
4. (TCO 10) The following information is for Pappillon Corporation’s
variable manufacturing overhead costs last month: favorable flexible-
budget variance of $3,000, unfavorable efficiency variance of $2,500.
The spending variance is
5. (TCO 10) Budgeted overhead costs rates can be expressed as an
amount per unit of output or per unit of input
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ACCT 349 Week 2 Assignment Chapter 14

Complete the Statement
1.In a ______ cost pool, all of the costs in the cost pool have the same or
a similar cause-and-effect or benefits-received relationship with the cost-
allocation base.
2.The reduction in selling price below list selling price in order to
encourage customers to purchase more is called a __________
3.A ______________categorizes costs related to customers into
different cost pools on the basis of different types of cost drivers (or
cost-allocation bases) or different degrees of difficulty in determining
cause- and-effect or benefits-received relationships.
4.A _________ unit is a hypothetical unit with weights based on the mix
of individual units.
5.The sales-volume variance subdivides into which two
variances?_______________
6.The direct materials (DM) efficiency variance subdivides into which
two variances?_________________
True / False
1. One of the four purposes of cost allocation is to measure income and
assets for reporting to external parties.
2. The fairness criterion is superior to other criteria used for guiding
cost- allocation decisions when the purpose of the allocation is either to
provide information for economic decisions or to motivate managers and
other employees.
3. When the degree of homogeneity is greater among costs, more cost
pools are required to explain accurately the differences in how products
use the resources of a company.

4. Customer-profitability analysis often shows that a small percentage of
customers accounts for a large percentage of the company’s operating
income.
5. In the customer cost hierarchy, delivery cost for a customer order is a
customer-sustaining cost.
6. An unfavorable sales-mix variance arises for an individual product
when its actual sales-mix percentage is less than its budgeted sales-mix
percentage.
7. When multiple inputs of direct materials can be combined in varying
proportions within specified limits, they are called substitutable inputs.
8. An unfavorable direct materials mix variance for an individual type of
direct material arises when its actual mix percentage is less than its
budgeted mix percentage.
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1. (TCO 6) Homogeneity is used to
2. (TCO 6) Information about price discounting can be useful in
analyzing revenues of customers if
3. (TCO 5) Natural Nutrients Bakery of Southfield produces three
flavors of cat morsels that have budgeted and actual sales data for a bag
of a dozen of its cat morsels as follows for December 20XX.

Budgeted Data
Actual Data
Tuna
ChikBits
ChezNips
Tuna
ChikBits
ChezNips
Bags
7,200
4,800
4,000
10,800
3,600
7,200
CM per bag
$2.50
$4.00
$5.00
$2.00
$3.00
$7.50
Cont. Margin
$18,000
$19,200
$20,000
$21,600
$10,800
$54,000
Total Contribution Margin
$57,200

$86,400
According to company forecasts, it was budgeting to earn a 25% market
share in total units (bags) of specialty prepared cat treats sold in
December 20XX in Southfield. Reliable industry sources indicate that
the total number of bags of cat treats sold for December 20XX in
Southfield was 72,000.
The sales-quantity variance for December 20XX for Natural Nutrients
Bakery is
4. (TCO 6) Natural Nutrients Bakery of Southfield produces three
flavors of cat morsels that have budgeted and actual sales data for a bag
of a dozen of its cat morsels as follows for December 20XX.
Budgeted Data
Actual Data
Tuna
ChikBits
ChezNips
Tuna
ChikBits
ChezNips
Bags
7,200
4,800
4,000
10,800
3,600
7,200
CM per bag
$2.50
$4.00
$5.00

$2.00
$3.00
$7.50
Cont. Margin
$18,000
$19,200
$20,000
$21,600
$10,800
$54,000
Total Contribution Margin
$57,200
$86,400
According to company forecasts, it was budgeting to earn a 25% market
share in total units (bags) of specialty prepared cat treats sold in
December 20XX in Southfield. Reliable industry sources indicate that
the total number of bags of cat treats sold for December 200X in
Southfield was 72,000.
The market-share variance for December 20XX for Natural Nutrients
Bakery is
5. (TCO 6) Fulbrite Fashions sells a line of women’s dresses. Fulbrite’s
performance report for November is shown below. The company uses a
flexible budget to analyze its performance and to measure the effect on
operating income of the various factors affecting the difference between
budgeted and actual operating income.
Actual
Budget
Dresses sold

5,000
6,000
Sales
$235,000
$300,000
Variable costs
(145,000)
(180,000)
Contribution margin
$ 90,000
$120,000
Fixed costs
(84,000)
(80,000)
Operating income
$ 6,000
$ 40,000
The effect of the sales quantity variance on Fulbrite’s contribution
margin for November is
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1. (TCO 1) A mixed cost function has a constant component of $20,000.
If the total cost is $60,000 and the independent variable has the value
200, what is the slope coefficient?
2. (TCO 1) Companies that take advantage of quantity discounts in
purchasing their materials have
3. (TCO 3) The best opportunity for cost reduction is
4. (TCO 3) Each month, Haddock Company has $275,000 total
manufacturing costs (20% fixed) and $125,000 distribution and
marketing costs (36% fixed). Haddock’s monthly sales are $500,000.
The markup percentage on variable costs to arrive at the existing (target)
selling price is
5. (TCO 3) Which of these do antitrust laws on pricing not cover?
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ACCT 349 Week 7 Assignment Chapter 22 and 23
Chapter 22: Management Control Systems, Transfer Pricing, and
Multinational Considerations
Review Questions and Exercises
1.A means of gathering and using information to aid and coordinate the
planning and control decisions throughout the organization and to guide
the behavior of its managers and other employees is called a _________
2._________ exists when individuals and groups work toward achieving
the organization’s goals—that is, managers working in their own

perceived best interest take actions that align with the overall goals of
top management.
3.The desire to attain a selected goal combined with the resulting pursuit
of that goal is called _______
4.___________ isthe freedom for managers at lower levels of an
organization to make decisions.
5.____________refers to the degree of freedom to make decisions.
6.____________________ arises when the benefit of a decision to a
subunit is more than offset by the costs or loss of benefit to the
organization as a whole.
7.Products transferred between subunits of a company are
called________________
8.What four criteria help in choosing a transfer
price?___________________
9.In many situations, a general guideline formula has proven to be a
helpful first step in setting a minimum transfer price. This minimum
transfer price is equal to the sum of which two per-unit costs?
___________________________
Multiple Choice
1.(CMA adapted) Which of the following is decentralization least likely
to accomplish?
a.Provide a pool of management talent
b.Shorten decision time
c.Heighten goal congruence
d.Increase motivation of subunit managers
2.(CPA) Brent Co. has intracompany service transfers from Division
Core, a cost center, to Division Pro, a profit center. Under stable
economic conditions, which of the following transfer prices is likely to
be most conducive to evaluating whether both divisions have met their
responsibilities?
a.Actual cost
b.Standard variable cost
c.Actual cost plus a markup
d.Negotiated price

3.Designing the transfer-pricing system is most difficult in organizations
that are:
a.Highly decentralized with many interdependencies among subunits
b.Highly centralized with many interdependencies among subunits
c.Highly decentralized with few interdependencies among subunits
d.Highly centralized with few interdependencies among subunits
4.(CMA) Parkside Inc. has several divisions that operate as
decentralized profit centers. Parkside’s Entertainment Division
manufactures video arcade equipment using the products of two of
Parkside’s other divisions. The Plastics Division manufactures plastic
components; one type is made exclusively for the Entertainment
Division, while other less complex components are sold to external
markets. The products of the Video Cards Division are sold in a
competitive market, but one video card model is also used by the
Entertainment Division. The actual manufacturing cost per unit of the
Entertainment Division is as follows:
Plastics Components
Video Cards
Direct materials used
$1.25
$2.40
Direct manufacturing labor
2.35
3.00
Variable overhead
1.00
1.50
Fixed overhead
0.40
2.25
Total cost per unit
$5.00
$9.15

The Plastics Division sells its commercial products at full cost plus a
25% markup based on cost and believes the proprietary plastic
component made for the Entertainment Division would sell for $6.25 per
unit on the open market. The market price of the video card used by the
Entertainment Division is $10.98 per unit.
Assuming the Video Cards Division has no unused capacity, a transfer
price to the Entertainment Division of $9.15 per unit will:
a.Allow evaluation of both divisions on a competitive basis
b.Satisfy the Video Cards Division`s profit desire by allowing recovery
of opportunity costs
c.Not motivate the Entertainment Division and will cause mediocre
performance.
d.Provide no incentive for the Video Cards Division to control or reduce
costs
e.Encourage the Entertainment Division to purchase video cards from an
external source.
5.Use the information in question 4 but assume the Entertainment
Division is able to purchase a large quantity of video cards from an
external supplier at $8.70 per unit. The Video Cards Division, having
unused capacity, agrees to lower the transfer price to $8.70 per unit. This
action will:
a.Optimize the profit goals of the Entertainment Division while
subverting the profit goals of Parkside Inc.
b.Provide no profit incentive for the Video Cards Division.
c.Subvert the profit goals of the Video Cards Division while optimizing
the profit goals of the Entertainment Division.
d.cause mediocre performance in the Video Cards Division because
opportunity costs increase
e.Optimize the overall profit goals of Parkside Inc.
6.Use the information in question 4 and assume the Plastics Division has
unused capacity and negotiates a transfer price of $5.60 per plastic
component with the Entertainment Division. This price will:
a.Cause the Plastics Division to reduce the number of commercial plastic
components it manufactures.
b.Motivate both divisions

c.Encourage the Entertainment Division to seek an external supplier for
plastic components
d.Not motivate the Plastics Division, causing mediocre performance.
e.satisfy the Plastics Division’s profit desire by allowing recovery of
opportunity costs
7.(CPA adapted) Mar Company has two decentralized divisions, X and
Y. Division X has been purchasing certain component parts from
Division Y at $75 per unit. Because Division Y plans to raise the price to
$100 per unit, Division X desires to purchase these parts from external
suppliers for $75 per unit. The following information is available:
Y`s variable cost per unit
$70
Y`s annual fixed costs
$15,000
Y`s annual production of these parts for X
1,000 units
If Division X buys from an external supplier, the facilities Division Y
uses to manufacture these parts will be idle. Assuming g Division Y’s
fixed costs cannot be avoided, what is the result if Mar requires Division
X to buy from Division Y at a transfer price of $100 per unit?
Chapter 23: Performance Measurement, Compensation, and
Multinational Considerations.
Review Questions and Exercises
1.Designing accounting-based performance measure for an organization
subunit requires three steps. Step 1 is to choose performance measures
that _____________ financial goals.
2.In the formula to calculate residual income, the required rate of return
multiplied by investment is called the ________ cost of the investment.
3.__________costis the cost of purchasing an asset today identical to
the one currently held, or the cost of purchasing an asset that provides
services like the one currently held if an identical asset cannot be
purchased.
4.An important consideration in designing compensation arrangements
is the trade-off between creating incentives to get the manager to work
hard and imposing ______ on the manager.

5. _________ describes situations in which an employee prefers to exert
less effort (or report distorted information) compared to the effort (or
accurate information) desired by the owner, because the employee’s
effort (or validity of the reported information) cannot be accurately
monitored and enforced.
6.Name the four levers of control _________________
Multiple Choice
1.Roma Bottling Co. has an investment of $3,000,000,an income-to-
revenues ratio of 4%, and an ROI of 12%. Its revenues are:
Income = 12% × $3,000,000 = $360,000
Revenues = $360,000 ÷ 0.04 = $9,000,000
a.$360,000
b.$9,000,000
c.$1,440,000
d.$12,000,000
2.Using the information in question 1, the revenues-to-investment ratio
is:
$9,000,000 ÷ $3,000,000 = 3 times
a.5 times
b.4 times
c.3 times
d.2 times
3.(CMA adapted) A company`s ROI increases if:
To answer this question, use assumed amounts. Suppose the present ROI
is 20% as follows:
Income x Revenues = ROI
Revenues Investment
$100,000 - $90,000 x $100,000 = 20%
$100,000 $50,000
a.Revenues increase by the same dollar amount that costs and total
assets increase
b.Revenues remain the same, and costs are reduced by the same dollar
amount that total assets increase

c.Revenues and costs increase by the same dollar amount that costs
increase
d.Revenues and costs increase by the same percentage that total assets
increase
e.None of the above
4.For the fiscal year just ended, Fletcher Inc. has an RI of $180,000 and
operating income of $500,000. If the required rate of return is 16%, the
amount of investment is:
Imputed interest cost = $500,000 − $180,000 = $320,000
Investment = $320,000 ÷ 0.16 = $2,000,000
a.$320,000
b.$3,125,000
c.$8,000,000
d.$2,000,000
e.None of the above
5.Using the information in question 4, ROI is:
$500,000 ÷ $2,000,000 = 25%
a.5%
b.10%
c.15%
d.20%
e.None of the above
6.(CPA) Marsh Inc. has an incentive compensation plan under which its
president is paid a bonus equal to 10% of Marsh’s income after
deducting the bonus but before deducting income taxes. For the year
ended December 2010, Marsh’s income was $110,000 before deducting
the bonus and income taxes. Marsh had income taxes of $40,000 in
2010. How much bonus should Marsh pay its president for 2010?
Let B = Bonus
B = ($110,000 – B) x 0.10
B = $11,000 - 0.10B
1.10B = $11,000
B = $11,000/1.10 = $10,000

The income taxes of $40,000 should not be used in computing the
bonus.
a.$0
b.$7,000
c.$10,000
d.$11,000
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ACCT 349 Ethics Case and Assignments

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