ACCT 304 Final Exam 100% Correct Answers
ACTIVITY BASED COSTING
A. Decrease for fixed costs and remain unchanged for variable costs.
B. Remain unchanged for fixed costs and increase for variable costs.
C. Decrease for fixed costs and increase for variable costs.
D. Increase for fixed costs and increase for variable costs.
A. Unchanged C. Higher
B. Lower D. Indeterminate
A. is not a graphical method.
B. is a mathematical method.
C. ignores much of the available data by concentrating on only the extreme points.
D. does not provide reasonable estimates.
Production in units
Using these data and the high-low method, what is the reasonable estimate of the cost of manufacturing supplies that would be needed for July? (Assume that this activity is within the relevant range.)
A. P 805,284 C. P 755,196
B. P1,188,756 D. P 752,060
Direct Labor Hours
What is the fixed portion of Almond Company’s maintenance expense, rounded to the nearest pesos?
A. P28,330 C. P37,200
B. P32,677 D. P40,800
A. 150,000 pounds C. 120,000 pounds
B. 240,000 pounds D. 210,000 pounds
70 percent collected in month of sale
15 percent collected in the first month after sale
10 percent collected in the second month after sale
4 percent collected in the third month after sale
2 percent uncollectible
The sales on open account have been budgeted for the last six months of 2007 are shown below:
July P 60,000
The estimated total cash collections during the fourth calendar quarter from sales made on open account during the fourth calendar quarter would be
A. P172,500 C. P265,400
B. P230,000 D. P251,400
|Average units produced||
|Average units sold||
|Variable mfg cost per unit||
|Variable finishing cost per unit||
|Fixed divisional costs||
The Mining Division can sell all of its output outside the company for P4 per unit. The Builders Division can buy the black steel from other firms for P4. The Builders Division sells its product for P12.
What is the optimal transfer price in this case?
A. P2 per unit C. P7 per unit
B. P4 per unit D. P9 per unit
A. cost center, investment center, profit center
B. cost center, profit center, investment center
C. profit center, cost center, investment center
D. investment center, cost center, profit center
A. fixed and variable C. discretionary and committed
B. incremental and nonincremental D. controllable and noncontrollable
A. external market price. C. actual cost.
B. differential cost. D. standard cost.
A. variable or full costs C. market price or negotiated price
B. dual prices D. all of the above
A. company when the selling division is operating below capacity.
B. company when the selling division is operating at capacity.
C. buying division if it is operating at capacity.
D. buying division.
Assume that Steel Division has a product that can be sold either to outside customers on an intermediate market or to Fabrication Division of the same company for use in its production process. The managers of the division are evaluated based on their divisional profits.
Capacity in units 200,000
Number of units being sold on the intermediate market 200,000
Selling price per unit on the intermediate market P90
Variables costs per unit (including P3 of avoidable selling expense if sold internally) 70
Fixed costs per unit (based on capacity) 13
Number of units needed for production 40,000
Purchase price per unit now being paid to an outside supplier P86
The appropriate transfer price should be:
A. P90 C. P70
B. P87 D. P86
Use the following data to answer questions 11 through 13.
N & R Company transfers a product from division N to division R. Variable cost of this product is anticipated to be P40 a unit and total fixed costs amount to P8,000. A total of 100 units are anticipated to be produced. Actual cost, however, amounts to P50 for variable costs. Fixed costs were same as budget. However, actual output was twice as many.
A. P90 C. P115
B. P92 D. P120
A. P90 C. P115
B. P92 D. P120
A. P117 C. P150
B. P140 D. P156
SP = selling price per unit
FC = total fixed cost
VC = variable cost per unit
A. SP / (FC/VC) C. VC/(SP – FC)
B. FC/(VC/SP) D. FC/(SP – VC) Bobadilla
A. contribution margin percentage increases.
B. selling price increases.
C. break-even point in pesos increases.
D. fixed costs decrease. Bobadilla
C. remains constant.
D. increases in proportion to the change in volume. Bobadilla
Less variable expenses 1,400,000
Contribution margin 600,000
Less fixed expenses 360,000
Net income P 240,000
The company has no beginning or ending inventories. A total of 40,000 units were produced and sold last month. What is the company’s degree of operating leverage?
A. 0.12 C. 2.50
B. 0.40 D. 3.30 Bobadilla
A. P 50,000 C. P150,000
B. P200,000 D. P400,000 Bobadilla
Budgeted sales P1,000,000
Breakeven sales 700,000
Budgeted contribution margin 600,000
Cashflow breakeven 200,000
The margin of safety for the Hennin Corporation is:
A. P300,000 C. P500,000
B. P400,000 D. P800,000 Bobadilla
A. direct materials C. supervisor’s salary
B. depreciation on a factory building D. insurance on a building
A. P 60 C. P120
B. P 90 D. P180
A. P6,000overapplied C. P1,800 underapplied
B. P1,800overapplied D. P6,000 underapplied
A. P 45,000 C. P 75,000
B. P 55,000 D. P100,000
|Work in process, March 31,2003, 60% completed as to materials and conversion costs||
|Work in process, April 30, 2003, 30% completed as to materials and conversion costs||
|Equivalent units of production for April 2003||
|Units started and completed in April||
How many units were in the beginning work-in-process?
A. 6,800 C. 17,000
B. 11,333 D. 24,000
A. 74,200 C. 81,000
B. 57,200 D. 53,800
A. appraisal cost. C. internal failure cost.
B. external failure cost. D. prevention cost.
A. appraisal costs. C. internal failure costs.
B. external failure costs. D. prevention costs.
A. Linear programming.
B. Theory of constraints.
C. Decision-tree diagrams.
D. Payoff matrices.
E. Strategic path analysis (SPA).
|D.||Cost of Goods Sold||
|Cost of Goods Sold||
A. Price = cost + (markup percentage x cost).
B. Price = cost + markup percentage.
C. Price = markup percentage x cost.
D. Price = cost ÷ markup percentage.
E. Price = cost + (markup percentage + cost).
|d.||none of the above.|
Diller Corporation has three production departments A, B, and C. Diller Corporation also has two service departments, Administration and Personnel. Administration costs are allocated based on value of assets employed, and Personnel costs are allocated based on number of employees. Assume that Administration provides more service to the other departments than does the Personnel Department.
Grant Corporation distributes its service department overhead costs directly to producing departments without allocation to the other service departments. Information for January is presented here.
|Overhead costs incurred||
|Service provided to:|
|Producing Dept. A||
|Producing Dept. B||
|a.||M = $18,700 + .10U|
|b.||M = $9,000 + .20U|
|c.||M = $18,700 + .30U + .40A + .40B|
|d.||M = $27,700 + .40A + .40B|
|a.||its marketability will be enhanced.|
|b.||the incremental cost of further processing will be less than the incremental revenue of further processing.|
|c.||the joint cost assigned to it is not already greater than its prospective selling price.|
|d.||both a and b.|
|b.||incremental separate costs.|
|a.||are allocated in the same manner as the joint costs.|
|b.||are deducted from the relative sales value at split-off.|
|c.||are deducted from the sales value at the point of sale.|
|d.||do not affect the allocation of the joint costs.|
Gordon Company produces three products: A, B, and C from the same process. Joint costs for this production run are $2,100.
per lb. at
If the products are processed further, Gordon Company will incur the following disposal costs upon sale: A, $3.00; B, $2.00; and C, $1.00.
|a.||a sunk cost.|
|b.||a future cost.|
|c.||a variable cost.|
|d.||an incremental cost.|
|a.||the profit foregone by selecting one choice instead of another.|
|b.||the additional cost of producing or selling another product or service.|
|c.||a cost that continues to be incurred in the absence of activity.|
|d.||a cost common to all choices in question and not clearly or feasibly allocable to any of them.|
|a.||the total manufacturing cost of the component.|
|b.||the total variable cost of the component.|
|c.||the fixed manufacturing cost of the component.|
|a.||an irrelevant decision factor.|
|b.||relevant information if it can be quantified.|
|c.||an opportunity cost of continued production.|
|d.||a qualitative decision factor.|
Robertson Corporation sells a product for $18 per unit, and the standard cost card for the product shows the following costs:
|Overhead (80% fixed)||
The Chip Division of Computer Solutions, Inc. produces a high-quality computer chip. Unit production costs (based on capacity production of 100,000 units per year) follow:
|Overhead (20% variable)||
|SG&A costs (40% variable)||
|a.||increase total corporate profits by $4,000.|
|b.||increase total corporate profits by $20,000.|
|c.||decrease total corporate profits by $14,000.|
|d.||decrease total corporate profits by $24,000.|
A. appraisal costs C. internal failure costs
B. external failure costs D. prevention costs
A. external failure costs C. internal failure costs
B. appraisal costs D. prevention cost
|b.||centralized organizational structure.|
|d.||the product life cycle.|
|a.||external failure, internal failure, prevention, and carrying.|
|b.||external failure, internal failure, prevention, and appraisal.|
|c.||external failure, internal failure, training, and appraisal.|
|d.||warranty, product liability, training, and appraisal.|
|c.||pro forma income statement.|
|d.||pro forma balance sheet.|
|a.||cash payments for debt retirement|
|b.||cash payments for interest|
|d.||payment of accounts payable|
|Pro forma statements|
|b.||no no yes|
|d.||yes no yes|
Gibson Corporation has a policy of maintaining an inventory of finished goods equal to 40 percent of the next month’s budgeted sales. How many units has Gibson Corporation budgeted to produce in the first quarter of the year?
|distribution costs||outside processing costs||sales commissions|
|a.||yes no yes|
|b.||no yes yes|
|prime cost||product cost||direct cost||fixed cost|
|a.||no yes yesyes|
|b.||yes no yes no|
|c.||yes yes no yes|
|d.||yes yesyes no|
|a.||beginning Work in Process Inventory plus purchases of raw material minus ending Work in Process Inventory.|
|b.||beginning Work in Process Inventory plus direct labor plus direct material used plus overhead incurred minus ending Work in Process Inventory.|
|c.||direct material used plus direct labor plus overhead incurred.|
|d.||direct material used plus direct labor plus overhead incurred plus beginning Work in Process Inventory.|
|a.||they require some process of allocation.|
|b.||they can be easily traced to production.|
|c.||a predetermined overhead rate is not advantageous.|
|d.||they cannot be allocated.|
|Overhead is||Cost of Goods Sold will|
|a.||job order cost sheet.|
|b.||bill of lading.|
|b.||work in process control.|
|c.||manufacturing overhead applied.|
|d.||manufacturing overhead control.|
|a.||actual cost of overhead incurred.|
|b.||actual cost of overhead paid this period.|
|c.||amount of overhead applied to production.|
|d.||amount of indirect material and labor used during the period.|
|a.||all job order cost sheets.|
|b.||job order cost sheets for all uncompleted jobs.|
|c.||job order cost sheets for all completed jobs not yet sold.|
|d.||job order cost sheets for all ordered, uncompleted, and completed jobs.|
|a.||transfer of completed items to Finished Goods Inventory.|
|b.||costs of items sold.|
|c.||selling price of items sold.|
|d.||the cost of goods manufactured.|
Camden Company has two departments (Processing and Packaging) and uses a job order costing system. Baker applies overhead in Processing based on machine hours and on direct labor cost in Packaging. The following information is available for July:
|Direct labor cost||
|Cost of goods sold—unadjusted||
|Selling & administrative expenses||
|Manufacturing overhead control||
|Manufacturing overhead applied||
Pretax income for 20X4 is:
|d.||undeterminable from the information given.|
a. an opportunity cost.
b. a sunk cost.
c. an incremental cost.
d. a joint cost.
a. Nothing ventured, nothing gained.
b. Bygones are bygones.
c. A penny saved is a penny earned.
d. The love of money is the root of all evil.
a. Make-or-buy decision.
b. Special-order decision.
c. Drop-a-segment decision.
d. None of the above.
a. the contribution margin on lost sales.
b. the variable costs of the order.
c. additional fixed costs related to the increased output.
d. any of the above.
a. $60 decrease.
b. $80 decrease.
c. $160 increase.
d. $480 increase.
Demand CM on M1 on M2
A 100 $12 5 10
B 80 18 10 5
C 150 25 5 10
There are 2,400 minutes available on each machine during the week. How many units should be produced and sold to maximize the weekly contribution?
A B C
a. 100 80 150
b. 50 80 150
c. 90 0 150
d. 100 80 100
a. 22,000 units.
b. 52,000 units.
c. 55,000 units.
d. 74,000 units.
a. 32,000 units.
b. 31,400 units.
c. 18,400 units.
d. 19,600 units.
a. cash inflows from the collection of receivables.
b. cash outflows paid toward raw material purchases.
c. all sales revenues.
d. interest paid and received.
a. a qualitative factor.
b. a relevant cost.
c. a differential factor.
d. an opportunity cost.
a. direct material costs plus direct labor costs.
b. incremental costs plus opportunity costs.
c. differential costs plus fixed costs.
d. incremental costs plus differential costs.
a. internal business process perspective.
b. customer perspective.
c. learning and growth perspective.
d. financial perspective.
Riter’s strategy is
a. product differentiation.
d. cost leadership.
Maryland New York
Revenues $ 580,000 $ 596,000
Operating assets 4,800,000 9,000,000
Net operating income 2,016,000 4,860,000
What is the return on investment for the New York Division?
a. N – (K x I)
b. (K x I) – N
c. N/I – K
d. (K x I) – (N/I)
|a.||budgeted output at actual hours.|
|b.||budgeted output at standard hours.|
|c.||actual output at standard hours.|
|d.||actual output at actual hours.|
Cost of Goods Sold
|b.||no yes yes|
|c.||yes no no|
|a.||combined price-quantity variance.|
|a.||material is purchased.|
|b.||material is issued to production.|
|c.||material is used in production.|
|d.||production is completed.|
|a.||favorable variable overhead spending variance exists.|
|b.||favorable variable overhead efficiency variance exists.|
|c.||favorable volume variance exists.|
|d.||unfavorable volume variance exists.|
|a.||variable overhead spending variance.|
|b.||fixed overhead spending variance.|
|c.||variable overhead efficiency variance.|
|d.||fixed overhead volume variance.|
|d.||either favorable or unfavorable, depending on the budgeted overhead.|
McCoy Company has the following information available for October when 3,500 units were produced (round answers to the nearest dollar).
|Material||3.5 pounds per unit @ $4.50 per pound|
|Labor||5.0 hours per unit @ $10.25 per hour|
|Material purchased||12,300 pounds @ $4.25|
|Material used||11,750 pounds|
|17,300 direct labor hours @ $10.20 per hour|
|a.||asset turnover was very high.|
|b.||profitability was greater than that of other divisions in the company.|
|c.||performance was above expectations.|
|d.||actual return on investment exceeds the division’s target return.|
|Assets available for use||
|Target rate of return||
What was Cake Division’s return on investment?
A. the variable manufacturing cost per unit.
B. the fixed manufacturing cost per unit.
C. the semivariable cost per unit.
D. the total manufacturing cost per unit.
A. an increase in sales revenues.
B. a decrease in operating expenses.
C. a decrease in a company’s invested capital.
D. a decrease in the number of units sold.
E. an improvement in manufacturing efficiency.
|After-tax operating income||
If the company has a 10% weighted-average cost of capital, its economic value added would be:
E. some other amount.
A. beginning-of-year assets.
B. average assets.
C. end-of-year assets.
D. total assets.
E. only current assets.
A. arenot easily related to a segment’s activities.
B. areeasily related to a segment’s activities.
C. are charged to the operating segments of a company.
D. are not charged to the operating segments of a company.
E. are best described by characteristics ‘A’ and ‘D’ above.
A. External failure cost.
B. Internal failure cost.
C. Production inefficiency cost.
D. Prevention cost.
E. Appraisal cost.
END OF THE EXAMINATION!
[i] . Answer: D
b = (853.560 – 723,060) ÷ (540,000 – 450,000)
130,500 ÷ 90,000 P 1.45
a = 853,560 – (540,000 x 1.45) P 70,560
Y = 70,560 + 1.45b
= 70,560 + (470,000 x 1.45) P752,060
[ii] . Answer: B
Variable Rate =
Fixed : 61,000 – (34,000 x .8333)= 32,677
[iii]. Answer: D
Required pounds by production 180,000
Ending raw materials required 60,000
Beginning raw materials ( 30,000)
Budgeted purchases 210,000
[iv]. Answer: B
October 90,000 x .95 P 85,500
November 100,000 x .85 85,000
December 85,000 x .70 59,500
Fourth quarter sales collected in fourth quarter P230,000
[v]. Answer: B
The optimal transfer price is P4 per unit, which represents the value of using the black steel in the Builders Division because the black steel will cost P2 to manufacture and each unit used internally is a unit that cannot be sold to external buyers. If an intermediate market exists, the optimal transfer price is the market price.
[vi]. Answer: A
The actual cost is the sum of unit variable cost plus fixed cost divided by actual units produced.
50 + (8000 ÷ 200) = P90
[vii]. Answer: C
Variable cost P 50
Markup (P50 x 1.3) 65
Transfer price P115
[viii]. Answer: D
Budgeted full cost P40 + (P8,000 ÷ 100) P120
Markup (P120 x 0.3) 36
Transfer price P156
[ix] . Answer: C
The company’s degree of operating leverage is determined as follows:
Degree of operating leverage = Contribution margin ÷ Net income
Degree of operating leverage = P600,000 ÷ P240,000 = 2.50
[x] Answer: A
CMR = Fixed cost/Sales
= 100,000/800,000 = 12.50%
Profit = (1,200,000 – 800,000)0.125 P50,000
The amount of sales that provides profit should be the sales revenues above the break even sales.
Total contribution margin 1,200,000 x 0.125 P150,000
Fixed costs 100,000
Profit P 50,000
[xi] . Answer: A
Margin of safety in peso sales = Budgeted sales – Breakeven sales
Margin of safety = P1M – P.7M P300,000
[xii]. Answer: D
Total number of hours: (1,000 x 3) + (3,000 x 1) 6,000
Overhead cost per hour (P360,000 ÷ 6,000) P 60
Overhead charged per unit of product A: 3 hrs. x P60 P180
[xiii]. Answer: D
Applied overhead 38,000 x P2 P76,000
Actual overhead 82,000
Underapplied overhead P6,000
Overhead rate per direct labor hour (P800,000 ÷ 400,000) P2.00
[xiv]. Answer: B
Materials cost (2,500 x P10) P25,000
Conversion cost (2,500 x 0.4 x P30) 30,000
Total costs of Work in Process P55,000
[xv]. Answer: C
|Equivalent units for April||
|Less: EU – started and completed during:|
|(24,000 x 3)||
|Equivalent units – work-in-process end Mar 31||
|Number of units in process as of|
|March 31 6,800 ¸ 40||
[xvi]. Answer: A
Equivalent units – FIFO 64,000
Add equivalent units in March 31 (17,000 x .6) 10,200
Weighted Average EUP 74,200