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ACCT 346 Midterm Exam 2

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DeVry <strong>ACCT</strong> <strong>346</strong> <strong>Midterm</strong> <strong>Exam</strong> 2<br />

Click on the link below for the solution:<br />

https://devryfinalexams.com/products/acct-<strong>346</strong>-midterm-exam-2/<br />

1. Question : (TCO 1) Managerial accounting stresses accounting concepts and procedures<br />

that are relevant to preparing reports for<br />

Student Answer:<br />

taxing authorities.<br />

internal users of accounting information.<br />

external users of accounting information.<br />

the Securities and Exchange Commission (SEC).<br />

2. Question : TCO 1) Which of the following statements regarding fixed costs is true?<br />

Student Answer:<br />

When production increases, fixed cost per unit increases.<br />

When production decreases, total fixed costs decrease.<br />

When production increases, fixed cost per unit decreases.<br />

When production decreases, total fixed costs increase.<br />

3. Question : (TCO 1) You own a car and are trying to decide whether or not to trade it in and<br />

buy a new car. Which of the following costs is an opportunity cost in this situation?<br />

Student Answer:<br />

the trip to Cancun that you will not be able to take if you buy the car<br />

the cost of the car you are trading in<br />

the cost of your books for this term<br />

the cost of your car insurance last year<br />

4. Question : (TCO 1) Shula’s 347 Grill has budgeted the following costs for a month in which<br />

1,600 steak dinners will be produced and sold: materials, $4,080; hourly labor (variable), $5,200; rent<br />

(fixed), $1,700; depreciation, $800; and other fixed costs, $600. Each steak dinner sells for $14.00 each.<br />

How much is the budgeted variable cost per unit?<br />

Student Answer: $5.80<br />

$7.74<br />

$6.68<br />

$3.25


5. Question : (TCO 1) Which of the following is an example of a manufacturing overhead cost?<br />

Student Answer:<br />

security at the manufacturing plant<br />

fabric used to produce shirts<br />

cost of shipping product to customers<br />

the salary of the president of the company<br />

6. Question : (TCO 1) Which of the following is a period cost?<br />

Student Answer:<br />

rent on a factory building<br />

depreciation on production equipment<br />

raw materials cost<br />

commissions paid on each unit sold<br />

7. Question : (TCO 1) If the balance in the Finished Goods Inventory account increased by<br />

$30,000 during the period and the cost of goods manufactured was $220,000, how much is cost of<br />

goods sold?<br />

Student Answer: $110,000<br />

$190,000<br />

$220,000<br />

$250,000<br />

8. Question : (TCO 2) BCS Company applies manufacturing overhead based on direct labor<br />

cost. Information concerning manufacturing overhead and labor for August follows:<br />

Estimated Actual<br />

Overhead cost $174,000 $171,000<br />

Direct labor hours 5,800 5,900<br />

Direct labor cost $87,000 $89,975<br />

How much is the predetermined overhead rate?<br />

Student Answer: 2.00<br />

1.90<br />

30.00<br />

1.93<br />

9. Question : (TCO 2) During 2011, Madison Company applied overhead using a job-order<br />

costing system at a rate of $12 per direct labor hours. Estimated direct labor hours for the year were<br />

150,000, and estimated overhead for the year was $1,800,000. Actual direct labor hours for 2011 were<br />

140,000 and actual overhead was $1,670,000.<br />

What is the amount of under or over applied overhead for the year?<br />

Student Answer:<br />

$10,000 overapplied<br />

$130,000 underapplied<br />

$130,000 overapplied<br />

$10,000 underapplied


10. Question : (TCO 3) Companies in which of the following industries wouldnot be likely to use<br />

process costing?<br />

Student Answer:<br />

cereals<br />

paints<br />

cosmetics<br />

auto body shop<br />

11. Question : (TCO 3) The Blending Department began the period with 45,000 units. During<br />

the period the department received another 30,000 units from the prior department and completed<br />

60,000 units during the period. The remaining units were 75% complete. How much are equivalent units<br />

in The Blending Department’s work in process inventory at the end of the period?<br />

Student Answer: 30,000<br />

22,500<br />

15,000<br />

11,250<br />

12. Question : (TCO 3) During March, the varnishing department incurred costs of $90,250 for<br />

direct labor. The beginning inventory was 3,500 units and 10,000 units were transferred to the<br />

varnishing department from the sanding department during June. The direct labor cost in the beginning<br />

inventory was $27,270. The ending inventory consisted of 2,000 units, which were 25% complete with<br />

respect to direct labor. What is the cost per equivalent unit for direct labor?<br />

Student Answer: $8.71<br />

$7.84<br />

$11.19<br />

$9.79<br />

13. Question : (TCO 4) Clearance Depot has total monthly costs of $8,000 when 2,500 units are<br />

produced and $12,400 when 5,000 units are produced. What is the estimated total monthly fixed cost?<br />

Student Answer: $4,400<br />

$6,580<br />

$3,600<br />

$8,800<br />

1. Question : (TCO 4) The margin of safety is the difference between<br />

Student Answer:<br />

total revenue and total fixed costs.<br />

expected level of sales and the break-even point.<br />

budgeted fixed costs and actual fixed costs.<br />

selling price and variable cost per unit.<br />

2. Question : (TCO 4) Allen Company sells homework machines for $100 each. Variable costs<br />

per unit are $75 and total fixed costs are $62,000. Allen is considering the purchase of new equipment<br />

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<br />

purchases the new equipment?<br />

Student Answer:<br />

2,480 units<br />

36,000 units<br />

2,100 units<br />

3,650 units<br />

3. Question : (TCO 4) Paula Corporation sells a single product at a price of $275 per unit.<br />

Variable cost per unit is $135 and fixed costs total $356,860. If sales are expected to be $825,000, what<br />

is Paula’s margin of safety?<br />

Student Answer: $468,140<br />

$124,025<br />

$700,975<br />

$405,000<br />

4. Question : (TCO 5) In variable costing, when does fixed manufacturing overhead become<br />

an expense?<br />

Student Answer:<br />

Never<br />

In the period when the product is sold<br />

In the period when the expense is incurred<br />

In the period when other expenses are at the lowest level<br />

5. Question : (TCO 5) Variable costing income is a function of:<br />

Student Answer:<br />

Units sold only.<br />

Units produced only<br />

Both units sold and units produced.<br />

Neither units sold nor units. produced<br />

6. Question : (TCO 5) Peak Manufacturing produces snow blowers. The selling price per snow<br />

blower is $100. Costs involved in production are:<br />

Direct Material per unit $20<br />

Direct Labor per unit 12<br />

Variable manufacturing overhead per unit 10<br />

Fixed manufacturing overhead per year $148,500<br />

In addition, the company has fixed selling and administrative costs of $150,000 per year. During the<br />

year, Peak produces 45,000 snow blowers and sells 30,000 snow blowers. How much is cost of goods<br />

sold using full costing?<br />

Student Answer: 1,359,000<br />

$1,260,000<br />

$2,038,500<br />

$1,408,500


7. Question : (TCO 6) Costs may be allocated to<br />

Student Answer:<br />

products.<br />

services.<br />

departments.<br />

any of the above.<br />

8. Question : (TCO 5) An allocation base<br />

Student Answer:<br />

is the minimum amount to be allocated to a cost object.<br />

coordinates the manufacturing overhead costs as they are incurred.<br />

will always be less than the variable costs for a product.<br />

relates the cost pool to the cost objectives.<br />

9. Question : (TCO 6) The building maintenance department for Jones Manufacturing<br />

Company budgets annual costs of $4,200,000 based on the expected operating level for the coming<br />

year. The costs are allocated to two production departments. The following data relate to the potential<br />

allocation bases:<br />

Production Dept. 1 Production Dept. 2<br />

Square footage 15,000 45,000<br />

Direct labor hours 25,000 50,000<br />

If Jones assigns costs to departments based on square footage, how much total costs will be allocated to<br />

Production Department 1?<br />

Student Answer: $1,400,000<br />

$1,050,000<br />

$1,575,000<br />

$2,100,000<br />

10. Question : (TCO 7) A company is trying to decide whether to sell partially completed goods<br />

in their current state or incur additional costs to finish the goods and sell them as complete units. Which<br />

of the following is not relevant to the decision?<br />

Student Answer:<br />

The selling price of the completed units.<br />

The costs incurred to process the units to this point.<br />

The selling price of the partially completed units.<br />

The costs that will be incurred to finish the units.<br />

11. Question : (TCO 7) BigByte Company has 12 obsolete computers that are carried in<br />

inventory at a cost of $13,200. If these computers are upgraded at a cost of $7,500, they could be sold<br />

for $15,300. Alternatively, the computers could be sold “as is” for $9,000. What is the net advantage or<br />

disadvantage of reworking the computers?<br />

Student Answer:<br />

$6,300 advantage<br />

$1,200 disadvantage


$5,400 disadvantage<br />

$3,000 advantage<br />

12. Question : (TCO 7) Olde Store has 12,000 cans of crab meat just a week past the expiration<br />

date. Each can cost $0.31. The cans could be sold as is for $0.20 each, or relabeled and sold as gourmet<br />

cat food. The cost of relabeling the cans would be $0.04 per can and the cans would then sell for $0.29<br />

per can. What should be done with the cans and why?<br />

Student Answer:<br />

The cans should be thrown away since there will be a loss with the<br />

other alternatives.<br />

The cans should be relabeled into cat food since the sales price increases $0.09 per can and the cost is<br />

only $0.04 per can.<br />

The cans should be put on clearance since there is no reason to put more money into something that is<br />

already selling below cost.<br />

It doesn’t matter what you do since all alternatives result in a loss.<br />

1. Question : (TCO 3) Describe a process costing system, including the types of companies<br />

that commonly use this system. How can process costing information be used in incremental analysis?<br />

2. Question : (TCO 7) Each year, ACE Engines surveys 7,600 former and prospective customers<br />

regarding satisfaction and brand awareness. For the current year, the company is considering<br />

outsourcing the survey to RBG Associates, who have offered to conduct the survey and summarize<br />

results for $50,000. Robert Ace, the president of ACE Engines, believes that RBG will do a higher-quality<br />

job than his company has been doing, but is unwilling to spend more than $12,000 above current costs.<br />

The head of bookkeeping for ACE has prepared the following summary of costs related to the survey in<br />

the prior year.<br />

Mailing $27,000<br />

Printing (done by Lester Print Shop) 9,000<br />

Salary of Pat Fisher, part-time employee who stuffedenvelopes and summarized data when surveys<br />

were returned (130 x $16) 2,080<br />

Share of depreciation of computer and software used to track survey responses and summarize results<br />

1,200<br />

Share of electricity/phone/etc. based on square feet of space occupied by Pat Fisher vs. entire company<br />

600<br />

Total $39,880<br />

Prepare an incremental analysis in good form to determine the impact on profit of going outside versus<br />

conducting the survey as in the past. Will ACE accept the RBG offer? Why or why not?<br />

3. Question : (TCO 4) The following monthly data are available for RedEx, which produces<br />

only one product that it sells for $84 each. Its unit variable costs are $28 and its total fixed expenses are<br />

$64,960. Sales during April totaled 1,600 units.<br />

(a) How much is the breakeven point in sales dollars for RedEx?<br />

(b) How many units must RedEx sell in order to earn a profit of $24,640?<br />

(c) A new employee suggests that RedEx sponsor a company softball team as a form of advertising. The<br />

cost to sponsor the team is $1,792. How many more units must be sold to cover this cost?


DeVry <strong>ACCT</strong> <strong>346</strong> <strong>Midterm</strong> <strong>Exam</strong> 2<br />

Click on the link below for the solution:<br />

https://devryfinalexams.com/products/acct-<strong>346</strong>-midterm-exam-2/

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