Devry ACCT505 week 8 final exam set 3

AC505 week 8 Final Exam

1.Problem:

Sales

$31,800

Purchases
of direct materials

7,000

Direct
labor

5,000

Work in
process inventory, 1/1

800

Work in
process inventory, 12/31

3,000

Finished
goods inventory, 1/1

4,000

Finished
goods inventory, 12/31

5,300

Accounts
payable, 1/1

1,700

Accounts
payable, 12/31

1,500

Direct
materials inventory, 1/1

6,000

Direct
materials inventory, 12/31

1,000

Indirect
labor

600

Indirect
materials used

500

Utilities
expense, factory

1,900

Depreciation
on factory equipment

3,500

Gross
Margin _________________

2. The gross margin of Evans Retail Stores, Inc. for the
first quarter is:

A) $210,000.
B) $140,000.
C) $220,000.
D) $190,000.

3. The
contribution margin of Evans Retail Stores, Inc. for the first quarter is:

A) $300,000.
B) $140,000.
C) $210,000.
D) $190,000.

4. The
contribution margin of Evans Retail Stores, Inc. for the first quarter is:

A) $300,000.
B) $140,000.
C) $210,000.
D) $190,000.

5. The total
contribution margin decreases if sales volume remains the same and:

A) fixed expenses increase.
B) fixed expenses decrease.
C) variable expense per unit increases.
D) variable expense per unit decreases.

6. A company
has provided the following data:
Sales 3,000 units
Sales price $70 per unit
Variable cost $50 per unit
Fixed cost $25,000
If the sales volume decreases by 25%, the variable cost per
unit increases by 15%, and all other factors remain the same, net income will:
A) decrease by $31,875.
B) decrease by $15,000.
C) increase by $20,625.
D) decrease by $3,125.

7. Wallace,
Inc., prepared the following budgeted data based on a sales forecast of $6,000,000:
VariableFixed
Direct materials $1,600,000
Direct labor 1,400,000
Factory overhead 600,000 $ 900,000
Selling expenses 240,000 360,000
Administrative expenses60,000140,000
Total $3,900,000 $1,400,000
What would be the amount of sales dollars at the
break-even point?
A) $2,250,000
B) $3,500,000
C) $4,000,000
D) $5,300,000

8. The following information
pertains to Rica Company:
Sales
(50,000 units) $1,000,000
Manufacturing
costs:
Variable
340,000
Fixed
70,000
Selling
and admin. expenses:
Variable
10,000
Fixed
60,000
How
much is Rica’s break-even point in number of units?
A)
9,848
B)
10,000
C)
18,571
D)
26,000
9. The variable expense per
unit is:

A)
$31.20.
B) $24.00.
C)
$36.00.
D)
$28.80.

10. The break-even point in
sales dollars is:
A)
$48,000.
B)
$72,000.
C)
$28,800.
D)
$0.

11. An allocated portion of
fixed manufacturing overhead is included in product costs under:
Absorption Variable
Costingcosting

A) No
No
B) No
Yes
C)
Yes No
D)
Yes Yes

Use
the following to answer questions 13-16:
Farron
Company, which has only one product, has provided the following data concerning
its most recent month of operations:
Selling
price $92
Units
in beginning inventory 0
Units
produced 8,700
Units
sold 8,300
Units
in ending inventory 400
Variable
costs per unit:
Direct
materials $13
Direct
labor 55
Variable
manufacturing overhead 1
Variable
selling and administrative 5
Fixed
costs:
Fixed
manufacturing overhead $130,500
Fixed
selling and administrative 8,300

12. What is the unit product
cost for the month under variable costing?
A)
$69
B)
$84
C)
$89
D)
$74

13. What is the unit product
cost for the month under absorption costing?
A)
$74
B)
$89
C)
$69
D)
$84

14. What is the net income
for the month under variable costing?
A)
$10,600
B)
($17,000)
C)
$16,600
D)
$6,000

15. What is the net income
for the month under absorption costing?
A)
($17,000)
B)
$16,600
C)
$6,000
D)
$10,600
16. Orion Corporation is
preparing a cash budget for the six months beginning January 1. Shown below are
the company’s expected collection pattern and the budgeted sales for the
period.
Expected
collection pattern:
65%
collected in the month of sale
20%
collected in the month after sale
10%
collected in the second month after sale
4%
collected in the third month after sale
1%
uncollectible

Budgeted
sales:
January
$160,000
February
185,000
March
190,000
April
170,000
May
200,000
June
180,000

The
estimated total cash collections during April from sales and accounts
receivables would be:
A)
$155,900.
B)
$167,000.
C)
$171,666.
D)
$173,400.

17. Avril Company makes collections on sales
according to the following schedule:
30% in the month of sale
60%
in the month following sale
8%
in the second month following sale
The
following sales are expected:

Expected
Sales
January $100,000
February 120,000
March 110,000

Cash
collections in March should be budgeted to be:
A) $110,000.
B) $110,800.
C) $105,000.
D) $113,000.

18. A labor efficiency
variance resulting from the use of poor quality materials should be charged to:

A) the
production manager.
B) the
purchasing agent.
C) manufacturing
overhead.
D) the
engineering department.

19. An unfavorable
labor efficiency variance indicates that:
A) The
actual labor rate was higher than thBe standard labor rate.
B) The
labor rate variance must also be unfavorable.
C) Actual
labor hours worked exceeded standard labor hours for the production level
achieved.
D) Overtime
labor was used during the period.

20. A favorable labor rate
variance indicates that

A) actual
hours exceed standard hours.
B) standard
hours exceed actual hours.
C) the
actual rate exceeds the standard rate.
D) the
standard rate exceeds the actual rate.

Use the following to answer questions
22-25:
Cole laboratories makes and sells a
lawn fertilizer called Fastgro. The company has developed standard costs for
one bag of Fastgro as follows:

Standard
Standard
Quantity Cost per Bag

Direct
material 20
pounds $8.00
Direct
labor 0.1
hours 1.10
Variable
manuf.
overhead 0.1
hours .40

The company had no beginning
inventories of any kind on Jan. 1. Variable manufacturing overhead is applied
to production on the basis of direct labor hours. During January, the following
activity was recorded by the company:

Production of
Fastgro: 4,000
bags
Direct materials
purchased: 85,000
pounds at a cost of $32,300
Direct labor
worked: 390
hours at a cost of $4,875
Variable
manufacturing overhead
incurred: $1,475
Inventory of direct
materials on Jan. 31: 3,000 pounds

21. The
materials price variance for January is:
A) $1,640
F.
B) $1,640
U.
C) $1,700
F.
D) $1,300
U.
22. The materials quantity
variance for January is:

A) $800
U.
B) $300
U.
C) $300
F.
D) $750
F.
AQ
= 85,000 Purch – 3,000 EI, SQ = 20 lbs X 4000 bags produced

23. The
labor rate variance for January is:

A) $475
F.
B) $475
U.
C) $585
F.
D) $585
U.

24. The labor efficiency
variance for January is:

A) $475
F.
B) $350
U.
C) $130
U.
D) $110
F.

Use the following to answer questions
26-27:
The following selected data pertain to
Beck Co.’s Beam Division for last year:

Sales $400,000
Variable
expenses $100,000
Traceable fixed expenses $250,000
Average operating
assets $200,000
Minimum required rate of
return 20%

25. How
much is the residual income?

A) $40,000
B) $50,000
C) $10,000
D) $80,000
26. How much is the
return on the investment?

A) 25%
B) 20%
C) 12.5%
D) 40%

27. One of the dangers of
allocating common fixed costs to a product line is that such allocations can
make the line appear less profitable than it really is.

A) True
B) False

28. In responsibility
accounting, each segment in an organization should be charged with the costs
for which it is responsible and over which it has control plus its share of
common organizational costs.

A) True
B) False

29. Some managers believe
that residual income is superior to return on investment as a means of
measuring performance, since it encourages the manager to make investment
decisions that are more consistent with the interests of the company as a whole.

A) True
B) False

30. The
performance of the manager of Division A is measured by residual income. Which
of the following would increase the manager’s performance measure?

A) Increase
in average operating assets.
B) Decrease
in average operating assets.
C) Increase
in minimum required return.
D) Decrease
in net operating income.

31. A
segment of a business responsible for both revenues and expenses would be
called:

A) a
cost center.
B) an
investment center.
C) a
profit center.
D) residual
income.

32. The
Northern Division of the Smith Company had average operating assets totaling
$150,000 last year. If the minimum required rate of return is 12%, and if last
year’s net operating income at Northern was $20,000, then the residual income
for Northern last year was:

A) $20,000.
B) $l8,000.
C) $5,000.
D) $2,000.

Residual
Income 2,000
Use the following to answer questions 34 – 35:

The following information is available
on Company A:

Sales $900,000
Net operating income 36,000
Stockholders’
equity 100,000
Average operating
assets 180,000
Minimum required rate of
return 15%

33. Company
A’s residual income is:

A) $9,000.
B) $21,000.
C) $45,000.
D) $24,000.

Residual
Income 9,00035. Company A’s return on
investment (ROI) is:

A) 4%.
B) 15%.
C) 20%.
D) 36%.

33. Gata Co. plans to discontinue a department that has a
$48,000 contribution margin and $96,000 of fixed costs. Of these fixed costs,
$42,000 cannot be avoided. What would be the effect of this discontinuance on
Gata’s overall net operating income?

A) Increase
of $48,000
B) Decrease
of $48,000
C) Increase
of $6,000
D) Decrease
of $6,000

34. Pitkin
Company produces a part used in the manufacture of one of its products. The
unit product cost of the part is $33, computed as follows:

Direct
materials $12
Direct labor 8
Variable
manufacturing
overhead 3
Fixed
manufacturing
overhead . 10
Unit
product
cost $33

An
outside supplier has offered to provide the annual requirement of 10,000 of the
parts for only $27 each. The company estimates that 30% of the fixed
manufacturing overhead costs above will continue if the parts are purchased
from the outside supplier. Assume that direct labor is an avoidable cost in
this decision. Based on these data, the per unit dollar advantage or
disadvantage of purchasing the parts from the outside supplier would be:

A) $3
advantage.
B) $1
advantage.
C) $1
disadvantage.
D) $4
disadvantage.

35. Some investment projects
require that a company expand its working capital to service the greater volume
of business that will be generated. Under the net present value method, the
investment of working capital should be treated as:

A) an
initial cash outflow for which no discounting is necessary.
B) a
future cash inflow for which discounting is necessary.
C) both
an initial cash outflow for which no discounting is necessary and a future cash
inflow for which discounting is necessary.
D) irrelevant
to the net present value analysis.

36. Which
of the following capital budgeting techniques consider(s) cash flow over the
entire life of the project?

Internal
rate of return Payback

A) Yes Yes
B) Yes No
C) No Yes
D) No No

37. The
net present value of the project is closest to:
A) $171,000.
B) $136,400.
C) $141,500.
D) $560,000.

38. The
payback period for the investment would be:
A) 2.41
years.
B) 0.25
years.

C) 10 years.
D) 4
years.

39. The net present value of this investment would
be:
A) ($14,350).
B) $107,250.
C) $77,200.
D) $200,000.

40. The Tse Manufacturing Company uses a
job-order costing system and applies overhead to jobs using a predetermined
overhead rate. The company closes any balance in the Manufacturing Overhead
account to Cost of Goods Sold. During the year the company’s Finished Goods
inventory account was debited for $125,000 and credited for $110,000. The
ending balance in the Finished Goods inventory account was $28,000. At the end
of the year, manufacturing overhead was overapplied by $4,500. The balance in
the Finished Goods inventory account at the beginning of the year was:
A. $28,000
B. $13,000
C. $17,500
D. $8,500

41. Matthias Corporation has provided data
concerning the company’s Manufacturing Overhead account for the month of May.
Prior to the closing of the overapplied or underapplied balance to Cost of
Goods Sold, the total of the debits to the Manufacturing Overhead account was
$53,000 and the total of the credits to the account was $69,000. Which of the
following statements is true?
A. Manufacturing overhead applied
to Work in Process for the month was $69,000.
B. Manufacturing overhead for the month was underapplied by $16,000.
C. Manufacturing overhead transferred from Finished Goods to Cost of Goods
Sold during the month was $53,000.
D. Actual manufacturing overhead incurred during the month was $69,000.

45. Yoder Company uses the weighted-average method
in its process costing system. The following data pertain to operations in the
first processing department for a recent month:
What was the cost per equivalent
unit for materials during the month?
A. $0.30
B. $0.25
C. $0.20
D. $0.15