Devry ACCT346 Midterm Exam 1 ANSWERS

ACCT 346
Midterm Exam 1 ANSWERS
Question :
(TCO 1) Managerial accounting stresses accounting concepts and
procedures that are relevant to preparing reports for
Points Received:
4 of 4
2.
Question :
TCO 1) Which of the following statements regarding fixed costs is
true?
Points Received:
4 of 4
3.
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?
Points Received:
4 of 4
4.
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?
Points Received:
4 of 4
5.
Question :
(TCO 1) Which of the following is an example of a manufacturing
overhead cost?
Points Received:
4 of 4
6.
Question :
(TCO 1) Which of the following is a period cost?
Points Received:
4 of 4
7.
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?
Points Received:
4 of 4
8.
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?
Points Received:
4 of 4
9.
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?
Points Received:
4 of 4
10.
Question :
(TCO 3) Companies in which of the following industries would notbe
likely to use process costing?
Points Received:
4 of 4
11.
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?
Points Received:
4 of 4
12.
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?
Points Received:
4 of 4
13.
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?
Points Received:
4 of 4
Page:
Page:
1.
Question :
(TCO 4) The margin of safety is the difference between
Points Received:
4 of 4
2.
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?
Points Received:
4 of 4
3.
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?
Points Received:
4 of 4
4.
Question :
(TCO 5) In variable costing, when does fixed manufacturing
overhead become an expense?
Points Received:
4 of 4
5.
Question :
(TCO 5) Variable costing income is a function of:
Points Received:
4 of 4
6.
Question :
(TCO 5) Peak Manufacturing produces snow blowers. The selling
price per snow blower is $100. Costs involved in production are:
Direct Material per unit
$20
Direct Labor per unit
12
Variable manufacturing overhead per unit
10
Fixed manufacturing overhead per year
$148,500
In addition, the company has fixed selling and administrative
costs of $150,000 per year. During the year, Peak produces 45,000 snow blowers
and sells 30,000 snow blowers. How much is cost of goods sold using full
costing?
Points Received:
4 of 4
7.
Question :
(TCO 6) Costs may be allocated to
Points Received:
4 of 4
8.
Question :
(TCO 5) An allocation base
Points Received:
4 of 4
9.
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?
Points Received:
4 of 4
10.
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?
Points Received:
4 of 4
11.
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?
Points Received:
4 of 4
12.
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?
Points Received:
4 of 4
Page:
Page:
1 2 3
1.
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?
Points Received:
20 of 20
2.
Question :
(TCO 7) Each year, ACE Engines surveys 7,600 former and
prospective customers regarding satisfaction and brand awareness. For the
current year, the company is considering outsourcing the survey to RBG
Associates, who have offered to conduct the survey and summarize results for
$50,000. Robert Ace, the president of ACE Engines, believes that RBG will do a
higher-quality job than his company has been doing, but is unwilling to spend
more than $12,000 above current costs. The head of bookkeeping for ACE has
prepared the following summary of costs related to the survey in the prior
year.
Mailing
$27,000
Printing (done by Lester Print Shop)
9,000
Salary of Pat Fisher, part-time employee who stuffedenvelopes and
summarized data when surveys were returned (130 x $16)
2,080
Share of depreciation of computer and software used to track
survey responses and summarize results
1,200
Share of electricity/phone/etc. based on square feet of space
occupied by Pat Fisher vs. entire company
600
Total
$39,880
Prepare an incremental analysis in good form to determine the
impact on profit of going outside versus conducting the survey as in the past.
Will ACE accept the RBG offer? Why or why not?
Points Received:
25 of 25
3.
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?
Points Received:
25 of 25