ACCT 505 Week 4 Midterm Examination

ACCT 505 Week 4 Midterm Examination
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ACCT 505 Week 4 Midterm Examination
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-inprocess
inventory.
units completed during the period and transferred out.
units started and completed during the period, plus equivalent units in the ending work-inprocess
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
140,000 65% 45%
1
Work in process, Jun
120,000 75% 65%
30
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)