AC505 Managerial Accounting
Week 4: Midterm Exam

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QUESTION 1:


Wages paid to a timekeeper in a factory are a:
  • Prime Cost YES.....Conversion Cost NO
  • Prime Cost YES.....Conversion Cost YES
  • Prime Cost NO....Conversion Cost NO
  • Prime Cost NO.....Conversion Cost YES

ANSWER: $1.00

QUESTION 2:

A cost incurred in the past that is not relevant to any current decision is classified as a(n):
  • period cost.
  • opportunity cost.
  • sunk cost.
  • differential cost.

ANSWER: $2.00

QUESTION 3:

Inventoriable costs are also known as:
  • variable costs
  • conversion costs
  • product costs
  • fixed costs

ANSWER: $1.50

QUESTION 4:

When the activity level is expected to decline within the relevant range, what effects would be anticipated with respect to each of the following?
  • Fixed Costs per Unit Increase and Variable Costs per Unit Increase
  • Fixed Costs per Unit Increase and Variable Costs per Unit do not change
  • Fixed Costs per Unit do not change and Variable Costs per Unit do not change
  • Fixed Costs per Unit do not change and Variable Costs per Unit Increase

ANSWER: $2.00

QUESTION 5:

When manufacturing overhead is applied to production, it is added to:
  • the Cost of Goods Sold account
  • the Raw Materials account
  • the Work in Process account
  • the Finished Goods inventory account

ANSWER: $2.50

QUESTION 6:

Which of the following statements about process costing system is incorrect?
  • In a process costing system, each processing department has a work in process account
  • In a process costing system, equivalent units are separately computed for materials and for conversion costs
  • In a process costing system, overhead can be under- or overapplied just as in job-order costing
  • In a process costing system, materials costs are traced to units of products

ANSWER: $3.00

QUESTION 7:

The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method:
  • can be used under any cost flow assumption
  • does not require the use of predetermined overhead rates
  • keeps costs in the beginning inventory separate from current period costs
  • does not consider the degree of completion of units in the beginning work in process inventory when computing equivalent units of production

ANSWER: $2.50

QUESTION 8:

The contribution margin ratio always increases when the:
  • break-even point increases
  • break-even point decreases
  • variable expenses as a percentage of net sales decreases
  • variable expenses as a percentage of net sales increases

ANSWER: $2.00

QUESTION 9:

Which of the following would not affect the break-even point?
  • total variable expenses
  • selling price per unit
  • variable expenses per unit
  • total fixed expenses

ANSWER: $2.00

QUESTION 10:

Under variable costing:
  • net operating income will tend to move up and down in response to changes in levels of production
  • inventory costs will be lower than under absorption costing
  • net operating income will tend to vary inversely with production changes
  • net operating income will always be higher than under absorption costing

ANSWER: $1.50

QUESTION 11:

The following data (in thousands of dollars) have been taken from the accounting records of [COMPANY] for the just completed year. 

Sales $820 
Purchases of raw materials $180 
Direct labor $130
Manufacturing overhead $200 
Administrative expenses $180 
Selling expenses $140 
Raw materials inventory, beginning $60 
Raw materials inventory, ending $20 
Work in process inventory, beginning $50 
Work in process inventory, ending $20 
Finished goods inventory, beginning $110 
Finished goods inventory, ending $150 

Required: Prepare a Schedule of Cost of Goods Manufactured statement.

ANSWER: $5.00

QUESTION 12:

The [COMPANY] manufactures a product that goes through three processing departments.  Information relating to activity in the first department during June is given below:

                                                                             Percent completed
                                                 Units              Materials            Conversion
Work in process, June 1              40,000               65%                  45%
Work in process, Jun 30              35,000               75%                  65%

The department started 175,000 units into production during the month and transferred 180,000 completed units to the next department.

REQUIRED:  Compute the equivalent units of production for the first department for June, assuming that the company uses the weighted-average method of accounting for units and costs.

ANSWER: $6.00

QUESTION 13:

A tile manufacturer has supplied the following data:

Boxes of tile produced and sold                                      580,000
Sales revenue                                                               $2,842,000
Variable manufacturing expense                                    $1,653,000
Fixed manufacturing expense                                         $784,000
Variable selling and admin expense                                $145,000
Fixed selling and admin expense                                    $128,000
Net operating income                                                    $132,000

Required:
a. Calculate the company's unit contribution margin
b. Calculate the company's unit contribution ratio
c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be?
Calculate unit contribution margin, contribution ratio, unit sales increase of 5%

ANSWER: $7.00

QUESTION 14:

The [COMPANY] produces and sells a single product. The following data refer to the year just completed: 

Selling Price $350 
Units in beginning Inventory 0
Units Produced 20000
Units sold 19000
Variable Costs per unit:
Direct materials $190 
Direct labor $40 
Variable manufacturing overhead  $25 
Variable selling and admin $10 
Fixed Costs:
Fixed manufacturing overhead $250,000 
Fixed selling and admin $225,000 

Assume that direct labor is a variable cost.

Required:
a. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.
b. Prepare an income statement for the year using absorption costing.
c. Prepare an income statement for the year using variable costing.
Compute the cost of a single unit of product under both the absorption costing and variable costing approaches. Prepare income statement using absorption and variable costing.

ANSWER: $9.00