ACCT 346 MIDTERM EXAM

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Question : (TCO 1) Managerial accounting stresses accounting concepts and procedures that are

relevant to preparing reports for

Question : (TCO 1) Which of the following statements regarding fixed costs is true?

Question : (TCO 1) Which of the following costs does not change when the level of business activity

changes?

Question : (TCO 1) A retailer purchased some trendy clothes that have gone out of style and must be

marked down to 40% of the original selling price in order to be sold. Which of the following is a sunk

cost in this situation?

Question : (TCO 1) You own a car and are trying to decide whether or not to trade it in and buy a new

car. Which of the following costs is an opportunity cost in this situation?

Question : (TCO 1) Shula’s 347 Grill has budgeted the following costs for a month in which 1,600

steak dinners will be produced and sold: materials, $4,080; hourly labor (variable), $5,200; rent

(fixed), $1,700; depreciation, $800; and other fixed costs, $600. Each steak dinner sells for $14.00

each. How much is the budgeted variable cost per unit?

Question : (TCO 1) Which of the following costs is not part of manufacturing overhead?

Question : (TCO 1) Which of the following is an example of a manufacturing overhead cost?

Question : (TCO 1) Which of the following is a period cost?

Question : (TCO 1) At December 31, 2010, WDT Inc. has a balance in the Work in Process Inventory

account of $62,000. At January 1, 2010, the balance was $55,000. Current manufacturing costs for

the year are $292,000, and cost of goods sold is $284,000. How much is cost of goods

manufactured?

Question : (TCO 1) If the balance in the Finished Goods Inventory account increased by $30,000

during the period and the cost of goods manufactured was $220,000, how much is cost of goods

sold?

Question : (TCO 1) At December 31, 2010, WDT Inc. has a balance in the Work in Process Inventory

account of $62,000. At January 1, 2010, the balance was $55,000. Current manufacturing costs for

the year are $292,000, and cost of goods sold is $284,000. How much is cost of goods

manufactured?

Question : (TCO 2) BCS Company applies manufacturing overhead based on direct labor cost.

Information concerning manufacturing overhead and labor for August follows:

Estimated Actual

Overhead cost $174,000 $171,000

Direct labor hours 5,800 5,900

Direct labor cost $ 87,000 $ 89,975

How much is the predetermined overhead rate?

Question : (TCO 2) During 2011, Madison Company applied overhead using a job-order costing

system at a rate of $12 per direct labor hours. Estimated direct labor hours for the year were 150,000,

and estimated overhead for the year was $1,800,000. Actual direct labor hours for 2011 were 140,000

and actual overhead was $1,670,000.

What is the amount of under or over applied overhead for the year?

Question : (TCO 3) Companies in which of the following industries would not be likely to use process

costing?

Question : (TCO 3) Which of the following companies is most likely to use a process costing system?

Question : (TCO 3) The Blending Department began the period with 45,000 units. During the period

the department received another 30,000 units from the prior department and completed 60,000 units

during the period. The remaining units were 75% complete. How much are equivalent units in The

Blending Department’s work in process inventory at the end of the period?

Question : Direct material cost is a part of:

Question : (TCO 3) During March, the varnishing department incurred costs of $90,250 for direct

labor. The beginning inventory was 3,500 units and 10,000 units were transferred to the varnishing

department from the sanding department during June. The direct labor cost in the beginning inventory

was $27,270. The ending inventory consisted of 2,000 units, which were 25% complete with respect

to direct labor. What is the cost per equivalent unit for direct labor?

Question : (TCO 3) During March, the varnishing department incurred costs of $90,250 for direct

labor. The beginning inventory was 3,500 units and 10,000 units were transferred to the varnishing

department from the sanding department during June. The direct labor cost in the beginning inventory

was $27,270. The ending inventory consisted of 2,000 units, which were 25% complete with respect

to direct labor. What is the cost per equivalent unit for direct labor?

Question : (TCO 4) Clearance Depot has total monthly costs of $8,000 when 2,500 units are produced

and $12,400 when 5,000 units are produced. What is the estimated total monthly fixed cost?

Question : (TCO 4) The margin of safety is the difference between

Question : (TCO 4) Allen Company sells homework machines for $100 each. Variable costs per unit

are $75 and total fixed costs are $62,000. Allen is considering the purchase of new equipment that

would increase fixed costs to $84,000, but decrease the variable costs per unit to $60. At that level

Allen Company expects to sell 3,000 units next year. What is Allen’s break-even point in units if it

purchases the new equipment?

Question : (TCO 4) Paula Corporation sells a single product at a price of $275 per unit. Variable cost

per unit is $135 and fixed costs total $356,860. If sales are expected to be $825,000, what is Paula’s

margin of safety?

Question : (TCO 4) Circle K Furniture has a contribution margin ratio of 16%. If fixed costs are

$176,800, how many dollars of revenue must the company generate in order to reach the break-even

point?

Question : (TCO 4) Total costs were $75,800 when 30,000 units were produced and $95,800 when

40,000 units were produced. Use the high-low method to find the estimated total costs for a

production level of 32,000 units.

Question : (TCO 5) In variable costing, when does fixed manufacturing overhead become an

expense?

Question : (TCO 5) Variable costing income is a function of:

Question : (TCO 5) Which of the following items appears on a variable costing income statement but

not on a full costing income statement?

Question : (TCO 5) Peak Manufacturing produces snow blowers. The selling price per snow blower is

$100. Costs involved in production are:

Question : (TCO 6) Costs may be allocated to:

Question : (TCO 5) An allocation base

Question : (TCO 6) The building maintenance department for Jones Manufacturing Company budgets

annual costs of $4,200,000 based on the expected operating level for the coming year. The costs are

allocated to two production departments. The following data relate to the potential allocation bases:

Production Dept. 1 Production Dept. 2

Square footage 15,000 45,000

Direct labor hours 25,000 50,000

If Jones assigns costs to departments based on square footage, how much total costs will be

allocated to Production Department 1?

Question : (TCO 7) A company is trying to decide whether to sell partially completed goods in their

current state or incur additional costs to finish the goods and sell them as complete units. Which of the

following is not relevant to the decision?

Question : (TCO 7) BigByte Company has 12 obsolete computers that are carried in inventory at a

cost of $13,200. If these computers are upgraded at a cost of $7,500, they could be sold for $15,300.

Alternatively, the computers could be sold “as is” for $9,000. What is the net advantage or

disadvantage of reworking the computers?

Question : (TCO 7) Olde Store has 12,000 cans of crab meat just a week past the expiration date.

Each can cost $0.31. The cans could be sold as is for $0.20 each, or relabeled and sold as gourmet

cat food. The cost of relabeling the cans would be $0.04 per can and the cans would then sell for

$0.29 per can. What should be done with the cans and why?

Question : (TCO 7) YXZ Company’s market for the Model 55 has changed significantly, and YXZ has

had to drop the price per unit from $275 to $135. There are some units in the Work In Process

Inventory that have costs of $160 per unit associated with them. YXZ could sell these units in their

current state for $100 each. It will cost YXZ $10 per unit to complete these units so that they can be

sold for $135 each.Which of the following is the amount of sunk costs in this problem?

Question : (TCO 3) Describe a process costing system, including the types of companies that

commonly use this system. How can process costing information be used in incremental analysis?

Question : (TCO 3) Why is it necessary to use equivalent units in a process costing system?

Question : (TCO 4) The following monthly data are available for RedEx, which produces only one

product that it sells for $84 each. Its unit variable costs are $28 and its total fixed expenses are

$64,960. Sales during April totaled 1,600 units.

(a) How much is the breakeven point in sales dollars for RedEx?

(b) How many units must RedEx sell in order to earn a profit of $24,640?

(c) A new employee suggests that RedEx sponsor a company softball team as a form of advertising.

The cost to sponsor the team is $1,792. How many more units must be sold to cover this cost?

Question : (TCO 7) Computer Boutique sells computer equipment and home office furniture.

Currently, the furniture product line takes up approximately 50% of the company’s retail floor space.

The president of Computer Boutique is trying to decide whether the company should continue offering

furniture or just concentrate on computer equipment. If furniture is dropped, salaries and other direct

fixed costs can be avoided. In addition, sales of computer equipment can increase by 13%. Allocated

fixed costs are assigned based on relative sales.

Computer

Home Office

Equipment

Furniture

Total

Sales

$1,200,000

$800,000

$2,000,000

Less cost of goods sold

$700,000

$500,000

$1,200,000

Contribution margin

$500,000

$300,000

$800,000

Less direct fixed costs

Salaries

$175,000

$175,000

$350,000

Other

$60,000

$60,000

$120,000

Less allocated fixed costs

Rent

$14,118

$9,882

$24,000

Insurance

$3,529

$2,471

$6,000

Cleaning

$4,117

$2,883

$7,000

President’s salary

$76,470

$53,350

$130,000

Other

$7,058

$4,942

$12,000

Total costs

$340,292

$308,528

$649,000

Net Income

$159,708

($8,528)

$151,180