Accounting Midterm Exam
Be sure to show your work clearly for partial
credit.
The point breakdown is as follows:
Multiple choice (30 @ 2 points) 60.0 points
Problem 1 15.0 points
Problem 2 10.0 points
Problem 3 15.0 points
Total 100.0 points
The point breakdown is as follows:
Multiple choice (30 @ 2 points) 60.0 points
Problem 1 15.0 points
Problem 2 10.0 points
Problem 3 15.0 points
Total 100.0 points
Name:_____________________________
I have
complied with the University’s honor code, which requires that I do my own work
and not give or receive assistance on this examination. Revealing
information to (or soliciting from) students is a violation of the honor code.
Signed:
_____________________________
MULTIPLE CHOICE
Select the best answer to each question by circling your answer.
Select the best answer to each question by circling your answer.
1. Midwest
Motors manufactures automobiles. Which of the following would not be
considered direct materials by the company?
A) Sheet metal used in automobile’s
body.
B) Tires.
C) Interior leather.
D) CD Player.
E) Wheel lubricant.
B) Tires.
C) Interior leather.
D) CD Player.
E) Wheel lubricant.
2. Which of
the following is a product cost?
A) Glass in an automobile
B) Advertising
C) The salary of the vice president
D) Insurance for factory building.
B) Advertising
C) The salary of the vice president
D) Insurance for factory building.
3. The
corporate controller's salary would be considered a(n):
A) manufacturing cost.
B) product cost.
C) administrative cost.
D) selling expense.
B) product cost.
C) administrative cost.
D) selling expense.
4.
Manufacturing overhead:
A) can be either a variable cost or a fixed cost.
B) includes the costs of advertising.
C) includes all factory labor costs.
D) includes all fixed costs.
B) includes the costs of advertising.
C) includes all factory labor costs.
D) includes all fixed costs.
5. Which one
of the following costs should NOT be considered an indirect cost of serving a
particular customer at a Dairy Queen fast food outlet?
A) the cost of the hamburger patty in the burger
they ordered.
B) the wages of the employee who takes the customer's order.
C) the cost of heating and lighting the kitchen.
D) the salary of the outlet's manager.
B) the wages of the employee who takes the customer's order.
C) the cost of heating and lighting the kitchen.
D) the salary of the outlet's manager.
6. Which
of the following statements represents a similarity between financial and
managerial accounting?
A) Both are
useful in providing information for external users.
B) Both are governed by GAAP.
C) Both draw upon an organization’s accounting system.
D) Both rely heavily on published financial statements.
C) Both draw upon an organization’s accounting system.
D) Both rely heavily on published financial statements.
7. The
accounting records of Hill Corporation revealed the following selected costs:
Sales commissions, $40,000; plant supervision, $94,000; and administrative
expenses, $185,000. Hill's period costs total:
A) $40,000.
B) $94,000.
C) $185,000.
D) $225,000.
E) $319,000.
8. An employee accidentally overstated the year's advertising expense by $50,000. Which of the following correctly depicts the effect of this error?
A) Cost of goods manufactured will be overstated by $50,000.
B) Cost of goods sold will be overstated by $50,000.
C) Both cost of goods manufactured and cost of goods sold will be overstated by $50,000.
D) None of the above.
B) $94,000.
C) $185,000.
D) $225,000.
E) $319,000.
8. An employee accidentally overstated the year's advertising expense by $50,000. Which of the following correctly depicts the effect of this error?
A) Cost of goods manufactured will be overstated by $50,000.
B) Cost of goods sold will be overstated by $50,000.
C) Both cost of goods manufactured and cost of goods sold will be overstated by $50,000.
D) None of the above.
9. If there
is a change in the level of the number of units produced:
A) fixed costs per unit will be the same and
variable costs per unit will change.
B) fixed and variable costs per unit will change.
C) fixed and variable costs per unit will remain the same.
D) fixed costs per unit will change and variable costs per unit will be the same.
B) fixed and variable costs per unit will change.
C) fixed and variable costs per unit will remain the same.
D) fixed costs per unit will change and variable costs per unit will be the same.
10. Which of
the following will decrease a company’s breakeven point?
A) Decreasing the contribution margin per unit.
B) Increasing the variable cost per unit.
C) Increasing the total fixed costs.
D) Increasing the selling price per unit.
B) Increasing the variable cost per unit.
C) Increasing the total fixed costs.
D) Increasing the selling price per unit.
11. When
10,000 units are produced, variable costs are $18 per unit. Therefore, when
30,000 units are produced variable costs will:
A) will total $540,000.
B) decrease to $12 per unit.
C) decrease to $6 per unit.
D) increase to $54 per unit
Use the following graph for the following question (question 12):
12. In the graph (above) the line C represents:
fixed cost line
variable cost line
total revenue line
total cost line
profit line
At a break-even point of 400 units sold, variable expenses were $4,000 and fixed expenses were $2,000. What will the 401st unit sold contribute to profit?
A) $0
B) $5
C) $10
D) $15
B) decrease to $12 per unit.
C) decrease to $6 per unit.
D) increase to $54 per unit
Use the following graph for the following question (question 12):
12. In the graph (above) the line C represents:
fixed cost line
variable cost line
total revenue line
total cost line
profit line
At a break-even point of 400 units sold, variable expenses were $4,000 and fixed expenses were $2,000. What will the 401st unit sold contribute to profit?
A) $0
B) $5
C) $10
D) $15
14. North
Company sells a single product. The product has a selling price of $30 per unit
and variable expenses of 70% of sales. If the company's fixed expenses total
$60,000 per year, then it will have a break-even of:
A) $60,000
B) $85,714
C) $42,000
D) $200,000
A) $60,000
B) $85,714
C) $42,000
D) $200,000
15. Which
of the following formulas is used to calculate the contribution margin ratio?
A) (Sales - Fixed expenses) ¸ Sales
A) (Sales - Fixed expenses) ¸ Sales
B) (Sales - Cost of goods sold) ¸ Sales
C) (Sales - Variable expenses) ¸ Sales
D) (Sales - Total expenses) ¸ Sales
C) (Sales - Variable expenses) ¸ Sales
D) (Sales - Total expenses) ¸ Sales
16.
Fenestre Corporation's contribution margin ratio is 25%. The company's
break-even is 80,000 units and the selling price of its only product is $4.00 a
unit. What are the company's fixed expenses?
A) $80,000
A) $80,000
B) $320,000
C) $20,000
D) $120,000
17. Which of the following is an equation of a total cost function for a product with variable and fixed costs? A) Y = a + bx
B) Y = a
C) Y = bx
D) Y = abx
C) $20,000
D) $120,000
17. Which of the following is an equation of a total cost function for a product with variable and fixed costs? A) Y = a + bx
B) Y = a
C) Y = bx
D) Y = abx
18.
Management accounting is:
A) Fun.
B) Fun.
C) Fun.
D) Fun.
19. Consider a decision facing a company of either accepting or rejecting a special offer for one of its products. A cost that is not relevant is:
A) direct materials.
B) variable overhead.
C) fixed overhead that will be avoided if the special offer is accepted.
D) common fixed overhead that will continue if the special offer is not accepted.
B) Fun.
C) Fun.
D) Fun.
19. Consider a decision facing a company of either accepting or rejecting a special offer for one of its products. A cost that is not relevant is:
A) direct materials.
B) variable overhead.
C) fixed overhead that will be avoided if the special offer is accepted.
D) common fixed overhead that will continue if the special offer is not accepted.
20. In
generating cost information for determining whether or not to delete a product
line, the most important distinction to identify is:
A) direct versus indirect costs
B) fixed versus variable costs
C) manufacturing versus non-manufacturing costs
D) avoidable versus unavoidable costs
B) fixed versus variable costs
C) manufacturing versus non-manufacturing costs
D) avoidable versus unavoidable costs
21. When
there is a production constraint, a company should emphasize the products with:
A) the highest unit contribution margins.
A) the highest unit contribution margins.
B) the highest contribution margin ratios.
C) the highest contribution margin per unit of the constrained resource.
D) the highest contribution margins and contribution margin ratios.
C) the highest contribution margin per unit of the constrained resource.
D) the highest contribution margins and contribution margin ratios.
22. Which of
the following are valid reasons for eliminating a product line?
I. The product line's contribution margin is
negative.
II. The product line's traceable fixed costs plus its allocated common corporate costs are less than its contribution margin.
A) Only I
B) Only II
C) Both I and II
D) Neither I nor II
II. The product line's traceable fixed costs plus its allocated common corporate costs are less than its contribution margin.
A) Only I
B) Only II
C) Both I and II
D) Neither I nor II
23. Vanikoro
Corporation currently has two divisions which had the following operating
results for last year:
Cork division Rubber division
Sales $600,000 $300,000
Variable costs 310,000 200,000
Contribution margin 290,000 100,000
Fixed costs for the division 110,000 60,000
Segment margin 180,000 40,000
Allocate corporate fixed costs 100,000 50,000
Net operating income(loss) $80,000 $(10,000)
Since the Rubber Division sustained a loss, the
president of Vanikoro is considering the elimination of this division. All of
the fixed costs for the division could be eliminated if the division was
dropped – except of the allocated corporate fixed costs. If the Rubber Division
was dropped at the beginning of last year, how much higher or lower would
Vanikoro's total net operating income have been for the year?
A) $10,000 higher
B) $40,000 lower
C) $50,000 higher
D) $100,000 lower
A) $10,000 higher
B) $40,000 lower
C) $50,000 higher
D) $100,000 lower
24. Division A makes a part that it sells to
customers outside of the company. Data concerning this part appear below:
Selling price to outside customers $40
Variable cost per unit $30
Total fixed costs $10,000
Capacity in units 20,000
Division B of the same company would like to
use the part manufactured by Division A in one of its products. Division B
currently purchases a similar part made by an outside company for $38 per unit
and would substitute the part made by Division A. Division B requires 5,000
units of the part each period. Division A has ample capacity to produce the
units for Division B without any increase in fixed costs and without cutting
into sales to outside customers. If Division A sells to Division B rather than
to outside customers, the variable cost be unit would be $1 lower. What should
be the lowest acceptable transfer price from the perspective of Division
A?
A) $40
B) $38
C) $30
D) $29
A) $40
B) $38
C) $30
D) $29
25. Division X makes a part with the following
characteristics:
Production capacity 25,000 units
Selling price to outside customers $18
Variable cost per unit @11
Fixed cost, total $100,000
Division Y of the same company would like to
purchase 10,000 units each period from Division X. Division Y now purchases the
part from an outside supplier at a price of $17 each.
Suppose
Division X has ample excess capacity to handle all of Division Y's needs
without any increase in fixed costs and without cutting into sales to outside
customers. If Division X refuses to accept the $17 price internally and
Division Y continues to buy from the outside supplier, the company as a whole
will be:
A) worse off by $70,000 each period.
A) worse off by $70,000 each period.
B) better off by $10,000 each period.
C) worse off by $60,000 each period.
D) worse off by $20,000 each period.
C) worse off by $60,000 each period.
D) worse off by $20,000 each period.
26. Media,
Inc., an advertising agency, applies overhead to jobs based on direct
professional labor hours. Overhead was estimated to be $150,000,
direct professional labor hours were estimated to be 15,000, and direct
professional labor cost was projected to be $225,000. During the
year, Media incurred actual overhead costs of $146,000, actual direct
professional labor hours of 14,500, and actual direct labor cost of
$222,000. By year-end, the firm’s overhead was:
A) $1,000 underapplied
B) $1,000 overapplied
C) $4,000 underapplied
D) $4,000 overapplied
E) $5,000 underapplied
B) $1,000 overapplied
C) $4,000 underapplied
D) $4,000 overapplied
E) $5,000 underapplied
27. Which of
the following is the proper sequence in an activity-based costing system?
A) Identification of cost drivers, identification
of cost pools, calculation of cost application rates, assignment of cost to
products.
B) Identification of cost pools, identification of cost drivers, calculation of cost application rates, assignment of cost to products.
C) Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of cost application rates,.
D) Calculation of cost application rates, identification of cost drivers, identification of cost pools, assignment of cost to products.
B) Identification of cost pools, identification of cost drivers, calculation of cost application rates, assignment of cost to products.
C) Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of cost application rates,.
D) Calculation of cost application rates, identification of cost drivers, identification of cost pools, assignment of cost to products.
28. Which of
the following statements is true?
A) A traditional volume-based system based on
direct labor generally undercosts high volume product lines.
B) In a traditional volume-based costing system based on direct labor, low volume products generally subsidize high volume products.
C) An activity-based costing system generally undercosts low-volume, complex product lines.
D) A traditional volume-based costing system based on direct labor generally undercosts low-volume, complex product lines.
B) In a traditional volume-based costing system based on direct labor, low volume products generally subsidize high volume products.
C) An activity-based costing system generally undercosts low-volume, complex product lines.
D) A traditional volume-based costing system based on direct labor generally undercosts low-volume, complex product lines.
29. Hamilton
Company applies overhead based on direct labor hours. At the
beginning of 2005, the company estimated that manufacturing overhead would be
$700,000, and direct labor hours would be 10,000. Actual overhead by the
conclusion of 2005 amounted to $800,000 and actual direct labor hours were
14,000. On the basis of this information, Horton's 2005 predetermined overhead
rate is:
A) $50.00
B) $70.00
C) $80.00
D) $57.14
Sunshine Company currently uses traditional costing procedures, applying $400,000 of overhead to products X and Y on the basis of direct labor hours. The firm is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow. "
B) $70.00
C) $80.00
D) $57.14
Sunshine Company currently uses traditional costing procedures, applying $400,000 of overhead to products X and Y on the basis of direct labor hours. The firm is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow. "
Product Pool No. 1 (Driver: DLH) Pool No. 2 (Driver: SU) Pool No.
3 (Driver: PC)
X 400 25 1,300
Y 600 75 700
Pool Cost $160,000 $140,000 $100,000
The overhead cost allocated to product Y by using traditional costing procedures would be:
$ 36,000.
$160,000.
$240,000
$266,000.
$300,000"
You MUST show your work to receive credit for your answers and to receive partial credit. Please try to be as neat and organized as possible.
Problem 1 The Koski Company has established standards as follows:
Direct material 3 pounds@$4/pound = $12 per unit
Direct labor 2 hours@ $8/hour = $16 per hour
Variable overhead 2 hours @ $5/per hour = $10per unit
Actual
production figures for the past year were as follows:
Units produced 500
Direct material used 1,600 pounds
Direct material purchased(1,600 pounds) $6560
Direct labor cost(950 hours) $7,790
Variable overhead cost incurred $4,655
Required:
A. What is the materials price variance (amount and favorable or unfavorable)?
A. What is the materials price variance (amount and favorable or unfavorable)?
B. What is materials quantity variance (amount
and favorable or unfavorable)?
C. What is the labor rate variance (amount and favorable or unfavorable)?
D. What is the labor efficiency variance (amount and favorable or unfavorable)?
C. What is the labor rate variance (amount and favorable or unfavorable)?
D. What is the labor efficiency variance (amount and favorable or unfavorable)?
Problem 2 The constraint at Bulman Corporation is time on a particular machine.
The company makes three products hat use this machine. Data
concerning those products appear below:
YO EG SS
Selling price per unit $342.57 $276.46 $116.28
Variable cost per unit $273.03 $219.88 $87.97
Minutes on the constraint 5.70 4.60 1.90
Assume that
sufficient time is available on the constrained machine to satisfy demand for
all but the least profitable product.
Required
What is the contribution margin per constrained resource for each product?
In what order should the company produce the three products in case of a machine breakdown that limits the available processing time on the machine?
Problem 3 Ryland, Inc., manufactures two products, Regular and Deluxe. Ryland
uses a traditional costing system and applies overhead on the basis of direct
labor hours (cost driver). Anticipated overhead and direct labor
time for the upcoming accounting period are $1,600,000 and 25,000 hours,
respectively. Information about the company's products
follows.
REGULAR DELUXE
Estimated total production
volume 3,000 units 4,000
unitsDirect materials cost
(per unit) $28 $42
Direct labor cost (per
unit) $45 (3 hrs @ $15/hr) $60 (4 hrs @ $15/hr)
Recently, the controller of Ryland, Inc. began to
wonder whether the company was accurately costing its products, so she decided
to try-out activity based costing (ABC).
The
controller identified three major activities: order processing, machine
processing, and product inspection. These activities are driven by
number of orders processed, machine hours worked, and inspection hours,
respectively. Ryland’s budgeted total overhead of $1,600,000 is
subdivided as follows: order processing, $250,000; machine processing,
$1,200,000; and product inspection, $150,000.
Data relevant
to these activities follow.
Orders Processed Machine
Hours Worked InspectionHours Regular
320 16,000 4,000
Deluxe 180 24,000 6,000
Total 500 40,000 10,000
Required:
A. What is the unit cost of REGULAR under both the current costing system and ABC costing system?
B. Is the DELUXE product line under or over costed by the traditional costing system? Explain.
TUTORIAL PREVIEW
A. What is the unit cost of REGULAR under both the current costing system and ABC costing system?
B. Is the DELUXE product line under or over costed by the traditional costing system? Explain.
TUTORIAL PREVIEW
Unit cost of Regular and Deluxe under current
costing system:
|
|
Regular
3,000 units
|
Deluxe
4,000 units
|
|
Direct Material (3,000 units x $28); (4,000 units
x $28)
|
$84,000
|
$112,000
|
|
Direct Labor (3,000 units x $45); (4,000 x $45)
|
$135,000
|
$180,000
|
|
Overhead cost (3,000 units x 3 hours per unit x
$64);
(4,000 x 4 hours per unit x $64)
|
$576,000
|
$1,024,000
|
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