This is due Sunday at 12:00 noon

 

 

 

Directions: Answer all the questions. Please submit your work in Word format only. You can submit an Excel file to support calculations, but please “cut and paste” your solutions into the Word or PDF file. Be sure to show how you did your calculations.

Question #1 (16 points)

List and describe the four standards in the IMA’s Statement of Ethical Practice. As part of your answer, be sure to provide an example of an action that violates the standard.

 

Question #2 (14 points)

Consider the following information, prepared based on a monthly capacity of 50,000 units:

Category	Cost per Unit
Variable manufacturing costs	$12.00
Fixed manufacturing costs	$1.00
Variable marketing costs	$3.00
Fixed marketing costs	$2.00

 

Capacity cannot be added in the short run and the firm currently sells the product for $20 per unit.

 

Consider each of these scenarios independent of each other.

 

a) The company is currently producing 50,000 units per month. A potential customer has contacted the firm and offered to purchase 10,000 units this month only. The customer is willing to pay $18 per unit. Since the potential customer approached the firm, there will be no variable marketing costs incurred. Should the company accept the special order? Why or why not? Be specific.

 

b) The company is currently producing 40,000 units per month. A potential customer has contacted the firm and offered to purchase 10,000 units this month only. Since the potential customer approached the firm, there will be no variable marketing costs incurred. What is the minimum amount that the firm should be willing to accept for this order?

 

Question #3 (44 points)

Consider the following information:

	Q1	Q2	Q3
Beginning inventory (units)	0	J	1,100
Budgeted units to be produced	20,000	20,000	20,000
Actual units produced	19,000	20,600	Q
Units sold	A	20,600	R
Variable manufacturing costs per unit produced	$150	$150	$150
Variable marketing costs per unit sold	$20	$20	$20
Budgeted fixed manufacturing costs	$500,000	$500,000	$500,000
Fixed marketing costs	$200,000	$200,000	$200,000
Selling price per unit	$300	$300	$300
Variable costing operating income	B	$1,978,000	S
Absorption costing operating income	C	K	$1,859,000
Variable costing beginning inventory ($)	D	$165,000	T
Absorption costing beginning inventory ($)	E	L	U
Variable costing ending inventory ($)	F	M	$75,000
Absorption costing ending inventory ($)	G	N	$87,500
PVV	H	O	V
Allocated fixed manufacturing costs	I	P	$480,000

 

There are no price, efficiency, or spending variances, and any production-volume variance is directly written off to cost of goods in the quarter in which it occurs.

 

Complete the missing figures from the above Table. You need to show your work in order to be eligible for partial credit.

 

Q1	Q2	Q3
A	J	Q
B	K	R
C	L	S
D	M	T
E	N	U
F	O	V
G	P
H
I

 

 

 

 

 

 

Question #4 (12 points)

a) What is the goal of the EOQ model?

 

 

 

b) Why does a firm hold “safety stock?”

 

 

 

c) What costs are a firm trying to balance when it decides on how much safety stock to hold?

 

 

Question #5 (9 points)

What are some accounting changes that a firm should make if it decides to implement a JIT inventory management system? Why are those changes necessary? Be specific!

 

 

 

Question #6 (5 points)

What is the justification for using backflush costing? Be specific!