ACCT 6381 Ch 18 – 25 Final Examination



The costs for Clark Equipment to make a part in house are displayed below:

Per Unit

Direct Materials$ 3.00

Direct Labor 7.00

Allocated Overhead 10.00

Total Cost$20.00

Moving to an outside vendor will allow Clark Equipment to reduce their overhead costs by 70%. What is the maximum purchase price the company should consider to move to an outside vendor without respect to any other issue?

(present calculations for partial credit). Label your answer.



When considering a move to outsourcing a process, eliminating a department and all its employees, what issues should be considered? These issues should be financial as well as strategic. Your answer should be presented as a bulleted list.




What issues should be considered when deciding whether to eliminate a department in a retail store? Your answer should discuss the issues of profitability and include the concept of the contribution format income statement as well as the effect on sales for the store.




How might the use of a predetermined overhead rate compare to the actual results of the activities affected by the predetermined overhead rate? Your answer should begin by explaining how a predetermined overhead rate is calculated and conclude with why there would be variances from the original estimated values in the calculation (do not discuss any variables except those directly related to the predetermined overhead rate calculation).




What is the first budget and why is that important? How does it affect all remaining budgets?




Describe the specific items you would use to calculate how much of a product to produce or acquire for the period? Your answer should be based on the budget chapter as well as on the basic formula related to inventory, discussed at various points throughout our class.




Your company is building the budget for next year and asks your assistance. How might you use the high low method, including its calculation and the cost formula for total cost. Your answer, focusing on the high low method, should include how costs can be calculated, what purpose the method serves, and what issues may arise regarding the accuracy of the resulting conclusion regarding costs based on the high low method.