ACCT 505 Midterm Exam 100% Correct Answers

 

ACCT 505 Week 4 Midterm – New 2016

 

1. (TCO A)  Direct material cost is a part of (Points : 6)

Conversion Cost NO…. Prime Cost NO.
Conversion Cost YES…. Prime Cost NO.
Conversion Cost YES…. Prime Cost YES.
Conversion Cost NO…. Prime Cost YES.

 

Question 2.2. (TCO A)  Total fixed costs (Points : 6)

will increase with increases in activity.
will decrease with increases in activity.
are not affected by activity.
should be ignored in making decisions because they can never change.

 

Question 3.3. (TCO A) Property taxes on a company’s factory building would be classified as a(n) (Points : 6)

variable cost.
opportunity cost.
period cost.
product cost.

 

Question 4.4. (TCO C) When the activity level is expected to increase within the relevant range, what effects would be anticipated with respect to each of the following? (Points : 6)

Fixed costs per unit decrease and variable costs per unit do not change.
Fixed costs per unit increase and variable costs per unit do not change.
Fixed costs per unit do not change and variable costs per unit do not change.
Fixed costs per unit do not change and variable costs per unit increase.

 

Question 5.5. (TCO B) Which of the following statements is true?
I. Overhead application may be made slowly as a job is worked on.
II. Overhead application may be made in a single application at the time of completion of the job.
III. Overhead application should be made to any job not completed at year end in order to properly value the work in process inventory. (Points : 6)

Only statement I is true.
Only statement II is true.
Both statements I and II are true.
Statements I, II, and III are true.

 

Question 6.6. (TCO B) Under a job-order costing system, the product being manufactured (Points : 6)

is homogeneous.
passes from one manufacturing department to the next before being completed.
can be custom manufactured.
has a unit cost that is easy to calculate by dividing total production costs by the units produced.

 

Question 7.7. (TCO F)  Equivalent units for a process costing system using the FIFO method would be equal to (Points : 6)

units completed during the period, plus equivalent units in the ending work-in-process inventory.
units started and completed during the period, plus equivalent units in the ending work-in-process inventory.
units completed during the period and transferred out.
units started and completed during the period, plus equivalent units in the ending work-in-process inventory, plus work needed to complete units in the beginning work-in-process inventory.

 

Question 8.8. (TCO C) The contribution margin equals (Points : 6)

sales – expenses.
sales – variable costs.
sales – cost of goods sold.
sales – fixed costs.

 

Question 9.9. (TCO C)  Which of the following would not affect the break-even point? (Points : 6)

Variable expense per unit
Number of units sold
Total fixed expenses
Selling price per unit

 

Question 10.10. (TCO D) Under variable costing, (Points : 6)

inventory costs will be lower than under absorption costing.
inventory costs will be higher than under absorption costing.
net operating income will always be lower than under absorption costing.
net operating income will always be higher than under absorption costing.

 

  1. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larop Corporation for the just-completed year.
Sales $950
Purchases of raw materials $225
Direct labor $250
Manufacturing overhead $295
Administrative expenses $150
Selling expenses $140
Raw materials inventory, beginning $30
Raw materials inventory, ending $45
Work-in-process inventory, beginning $20
Work-in-process inventory, ending $55
Finished goods inventory, beginning $100
Finished goods inventory, ending $135

Prepare a Schedule of Cost of Goods Manufactured statement in the text box below. (Points : 15)

 

Question 2.2. (TCO B) The Nebraska Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below.

Percentage Completed
Units Materials Conversion
Work in process, June 1 140,000 65% 45%
Work in process, Jun 30 120,000 75% 65%

The department started 580,000 units into production during the month and transferred 600,000 completed units to the next department.

Required: Compute the equivalent units of production for the first department for June, assuming that the company uses the weighted-average method of accounting for units and costs.(Points : 20)

 

Question 3.3. (TCO C) A tile manufacturer has supplied the following data.

Boxes of tile produced and sold 625,000
Sales revenue $2,975,000
Variable manufacturing expense $1,720,000
Fixed manufacturing expense $790,000
Variable selling and admin expense $152,000
Fixed selling and admin expense $133,000
Net operating income $180,000

 
Required:
Calculate the company’s unit contribution margin.
Calculate the company’s contribution margin ratio.
If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company’s net operating income be? (Points : 25)

 

Question 4.4. (TCO D) The Hampton Company produces and sells a single product. The following data refer to the year just completed.

Selling price $450
Units in beginning inventory 0
Units produced 25,000
Units sold 22,000
Variable costs per unit:
Direct materials $150
Direct labor $75
Variable manufacturing overhead $25
Variable selling and admin $15
Fixed costs:
Fixed manufacturing overhead $275,000
Fixed selling and admin $200,000

 
Required:
Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.
Prepare an income statement for the year using absorption costing.
Prepare an income statement for the year using variable costing. (Points : 30)

 

(TCO A) Wages paid to an assembly line worker in a factory are a

 

(TCO A) A cost incurred in the past that is not relevant to any current decision is classified as a(n)

 

(TCO A) Depreciation of office buildings and office equipment is also known as

 

(TCO A) When the activity level is expected to increase within the relevant range, what effects would be anticipated with respect to each of the following?

 

(TCO F) Which of the following statements is true?

(TCO F) A job-order cost system is employed in those situations where

(TCO F) The FIFO method only provides a major advantage over the weighted-average method in that

(TCO B) The contribution margin ratio always decreases when the

(TCO B) Which of the following would not affect the break-even point?

(TCO E) In an income statement prepared using the variable costing method, variable selling and administrative expenses would

(TCO F) The Illinois Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below.

Percentage Completed
Units Materials Conversion
Work in process, June 1 150,000 75% 55%
Work in process, Jun 30 145,000 85% 75%

The department started 475,000 units into production during the month and transferred 480,000 completed units to the next department.

Required: Compute the equivalent units of production for the first department for June, assuming that the company uses the weighted-average method of accounting for units and costs.

(TCO B) A tile manufacturer has supplied the following data:

Boxes of tile produced and sold 625,000

Sales revenue $2,975,000

Variable manufacturing expense $1,720,000

Fixed manufacturing expense $790,000

Variable selling and admin expense $152,000

Fixed selling and admin expense $133,000

Net operating income $180,000

Required:

a. Calculate the company’s unit contribution margin.

b. Calculate the company’s unit contribution ratio.

c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company’s net operating income be?

(TCO E) Lehne Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price

$ 125

Units in beginning inventory

600

Units oroduced

3000

Units sold

3500

Units in ending inventory

100

Variable costs per unit:

Direct materials

$ 15

Direct labor

$ 50

Variable manufacturing overhead

$ 8

Variable selling and admin

$ 12

Fixed costs:

Fixed manufacturing overhead

$ 75,000

Fixed selling and admin

$ 20,000

The company produces the same number of units every month, although the sales in units vary from month to month. The company’s variable costs per unit and total fixed costs have been constant from month to month.

Required:

a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing?
c. Prepare an income statement for the month using the variable costing method.
d. Prepare an income statement for the month using the absorption costing method.