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ACCT 346 Midterm Exam

1. (TCO 1) Which of the following is not a difference between financial accounting and managerial accounting?

	Student Answer:		Financial accounting is primarily concerned with reporting the past, while managerial accounting is more concerned with the future.
			Managerial accounting uses more nonmonetary information than is used in financial accounting.
			Managerial accounting is primarily concerned with providing information for external users while financial accounting is concerned with internal users.
			Financial accounting must follow GAAP while managerial accounting is not required to follow GAAP.

Question :

TCO 1) Which of the following statements regarding fixed costs is true?

	Student Answer:		When production increases, fixed cost per unit increases.
			When production decreases, total fixed costs decrease.
			When production increases, fixed cost per unit decreases.
			When production decreases, total fixed costs increase.

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?

	Student Answer:		the trip to Cancun that you will not be able to take if you buy the car
			the cost of the car you are trading in
			the cost of your books for this term
			the cost of your car insurance last year

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?

	Student Answer:		$5.80
			$7.74
			$6.68
			$3.25

Question :

(TCO 1) Which of the following is an example of a manufacturing overhead cost?

	Student Answer:		security at the manufacturing plant
			fabric used to produce shirts
			cost of shipping product to customers
			the salary of the president of the company

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Question :

(TCO 1) Product costs

	Student Answer:		are also called manufacturing costs.
			are considered an asset until the finished goods are sold.
			become an expense when the goods are sold.
			All of the above answers are correct.

Question :

(TCO 1) At December 31, 2010, WDT Inc. has a balance in the Work in Process Inventory account of $62,000. At January 1, 2010, the balance was $55,000. Current manufacturing costs for the year are $292,000, and cost of goods sold is $284,000. How much is cost of goods manufactured?

	Student Answer:		$292,000
			$299,000
			$277,000
			$285,000

Question :

(TCO 2) BCS Company applies manufacturing overhead based on direct labor hours. 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 overhead should be applied in total during August?

	Student Answer:		177,000
			179,950
			171,100
			168,200

Question :

(TCO 2) Citrus Company incurred manufacturing overhead costs of $300,000. Total overhead applied to jobs was $306,000. What was the amount of overapplied or underapplied overhead?

	Student Answer:		$7,000 overapplied
			$6,000 overapplied
			$6,000 underapplied
			$13,000 underapplied

10.

Question :

(TCO 3) Companies in which of the following industries wouldnot be likely to use process costing?

	Student Answer:		cereals
			paints
			cosmetics
			auto body shop

11.

Question :

(TCO 3) The Blending Department began the period with 20,000 units. During the period the department received another 80,000 units from the prior department and at the end of the period 30,000 units remained, which were 40% complete. How much are equivalent units in The Blending Department’s work in process inventory at the end of the period?

	Student Answer:		12,000
			28,000
			40,000
			52,000

12.

Question :

(TCO 3) Ranger Glass Company manufactures glass for French doors. At the start of May, 2,000 units were in-process. During May, 11,000 units were completed and 3,000 units were in process at the end of May. These in-process units were 90% complete with respect to material and 50% complete with respect to conversion costs. Other information is as follows:

Work in process, May 1:
Direct material	$36,000
Conversion costs	$45,000
Costs incurred during May:
Direct material	$186,000
Conversion costs	$255,000

Calculate the cost per equivalent unit for conversion costs.

	Student Answer:		$24.00
			$4.09
			$21.43
			$20.40

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?

	Student Answer:		$4,400
			$6,580
			$3,600
			$8,800

(TCO 4) Which of the following will have no effect on the break-even point in units?

	Student Answer:		The selling price increases
			The variable cost per unit increases
			The sales volume increases
			Total fixed costs increase

Question :

(TCO 4) Circle K Furniture has a contribution margin ratio of 16%. If fixed costs are $176,800, how many dollars of revenue must the company generate in order to reach the break-even point?

	Student Answer:		$1,105,000
			$282,880
			$1,060,800
			$208,476

Question :

(TCO 4) Randy Company produces a single product that is sold for $85 per unit. If variable costs per unit are $26 and fixed costs total $47,500, how many units must Randy sell in order to earn a profit of $100,000?

	Student Answer:		1,735
			618
			890
			2,500

Question :

(TCO 5) In full costing, when does fixed manufacturing overhead become an expense?

	Student Answer:		In the period when other fixed costs are at the highest level
			In the period when the product is sold
			In the period when the expense is incurred
			When the controller decides that the expense should be recognized

Question :

(TCO 5) Variable costing income is a function of:

	Student Answer:		Units sold only.
			Units produced only
			Both units sold and units produced.
			Neither units sold nor units. produced

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 fixed manufacturing overhead is in ending inventory under full costing?

	Student Answer:		$0
			$49,500
			$148,500
			$99,000

Question :

(TCO 6) Which of the following is not a reason that companies allocate costs?

	Student Answer:		To calculate the full cost of products for financial reporting purposes
			To discourage managers from using external suppliers
			To reduce the frivolous use of company resources

Question :

(TCO 6) Which of the following statements about cost pools isnot
true?

	Student Answer:		The costs in each of the cost pools should be homogeneous or similar.
			Managers must make a cost-benefit decision when determining how many cost pools are appropriate.
			Only four different kinds of costs may be included in a single cost pool.
			More cost pools usually provide more accurate information, but are more expensive.

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?

	Student Answer:		$1,400,000
			$1,050,000
			$1,575,000
			$2,100,000

10.

Question :

(TCO 7) A company is currently making a necessary component in house (the company is producing the component for its own use). The company has received an offer to buy the component from an outside supplier. A machine is being rented to make the component. If the company were to buy the component, the machine would no longer be rented. The rent on the machine, in relation to the decision to make or buy the component, is:

	Student Answer:		sunk and therefore not relevant.
			avoidable and therefore not relevant.
			avoidable and therefore relevant.
			unavoidable and therefore relevant.

11.

Question :

(TCO 7) Ricket Company has 1,500 obsolete calculators that are carried in inventory at a cost of $13,200. If these calculators are upgraded at a cost of $9,500, they could be sold for $22,500. Alternatively, the calculators could be sold “as is” for $9,000. What is the net advantage or disadvantage of reworking the calculators?

	Student Answer:		$13,000 advantage
			$4,000 advantage
			$9,200 disadvantage
			$200 disadvantage

12.

Question :

(TCO 7) YXZ Company’s market for the Model 55 has changed significantly, and YXZ has had to drop the price per unit from $275 to $135. There are some units in the work in process inventory that have costs of $160 per unit associated with them. YXZ could sell these units in their current state for $100 each. It will cost YXZ $10 per unit to complete these units so that they can be sold for $135 each.

When the incremental revenues and expenses are analyzed, what is the financial impact?

	Student Answer:		$25 per unit profit if the units are completed
			$125 per unit if the units are completed
			$65 per unit loss if the units are completed
			$150 per unit loss if the units are completed

What are transferred-in costs? Which departments will never have transferred-in costs?

Computer Boutique sells computer equipment and home office furniture. Currently, the furniture product line takes up approximately 50% of the company’s retail floor space. The president of Computer Boutique is trying to decide whether the company should continue offering furniture or just concentrate on computer equipment. If furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of computer equipment can increase by 13%. Allocated fixed costs are assigned based on relative sales?

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?

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ACCT 346 Midterm Exam

ACCT 346 Midterm Exam

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