This document provides sample exam questions and problems for an ACCT 434 Midterm exam covering topics in managerial accounting. There are three questions/problems presented: 1) A purchases budget problem for Favata Company using sales forecasts, cost of goods sold rate, and desired inventory levels. 2) A cost estimation problem using the high-low method to determine the cost function based on machine hours for a Machining Department. 3) An make-or-buy analysis problem for wheel production at Collier Bicycles comparing the costs of internal production vs an external supplier offer, including a fixed overhead absorption issue.

1. ACCT 434 MidTerm - Spring
2016
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2. ACCT 434 MidTerm - Spring 2016
(TCO 1) For each of the following drivers identify an appropriate activity.
1. (TCO 2) Favata Company has the following information
Month Budgeted Sales
June $60,000
July 51,000
August 40,000
September 70,000
October 72,000
In addition, the cost of goods sold rate is 70% and the desired inventory level is
30% of next month's cost of sales.
Prepare a purchases budget for July through September.
2. (TCO 3) As part of his job as cost analyst, Max Thompson collected the following
information concerning the operations of the Machining Department:
Observation Machine-hours Total Operating Costs
January 4,000 $45,000
February 4,600 49,500
March 3,800 45,750
April 4,400 48,000
May 4,500 49,800
Use the high-low method to determine the estimating cost function with machine-hours
as the cost driver.
(TCO 5) Collier Bicycles has been manufacturing its own wheels for its bikes. The
company is operating at 100% capacity, and variable manufacturing overhead is charged
to production at the rate of 30% of direct labor cost. The direct materials and
direct labor cost per unit to make the wheels are $1.50 and $1.80, respectively.
Normal production is 200,000 wheels per year. A supplier offers to make the wheels at
a price of $4 each. If the bicycle company accepts this offer, all variable
manufacturing costs will be eliminated, but the $42,000 of fixed manufacturing
overhead being charged to the wheels will have to be absorbed by other products.
A. Prepare an incremental analysis for the decision to make or buy the wheels.
B. Should Collier Bicycles buy the wheels from the outside supplier? Justify
your answer.
3.