ACCT 505 Week 4 Midterm Exam

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………………………………………………………………………$910 Purchases of raw materials…………………………………………$225 Direct labor……………………………………………………………..$245 Manufacturing overhead…………………………………………….$265 Administrative expenses…………………………………………….$150 Selling expenses……………………………………………………….$140 Raw materials inventory, beginning……………………………….$15 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

Required:

 Prepare a Schedule of Cost of Goods Manufactured in the text box below.

(Points : 15)

            

 

2. (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     ConversionWork 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.

(Points : 20)

            

 

3. (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?

(Points : 25)

            

4. (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 600Units oroduced 3000Units sold 3500Units in ending inventory 100   Variable costs per unit:  Direct materials  $           15Direct labor  $           50Variable manufacturing overhead  $             8Variable selling and admin  $           12   Fixed costs:  Fixed manufacturing overhead  $      75,000Fixed selling and admin  $      20,000The 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.

(Points : 30)

 

Midterm page 1

 

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

      Conversion Cost YES…. Prime Cost NO

      Conversion Cost NO…. Prime Cost YES

      Conversion Cost YES…. Prime Cost YES

      Conversion Cost NO…. Prime Cost NO |

2. (TCO A)  A cost incurred in the past that is not relevant to any current decision is classified as a(n): (Points : 6)

      period cost.

      incremental cost.

      opportunity cost.

      none of the above. |

3. (TCO A) The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n): (Points : 6)

      period cost

      direct material cost

      indirect manufacturing cost

      direct labor cost

       none of the above |

     

4. (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?

Fixed Cost Per Unit            Variable Cost Per Unit(Points : 6)

      Increase                No Change

      Increase                 Increase

      decrease             No Change

      No Change             Increase |

5. (TCO F) Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company included in direct labor cost a portion of indirect labor. The effect of this misclassification will be to: (Points : 6)

      understate the predetermined overhead rate

      overstate the predetermined overhead rate

      have no effect on the predetermined overhead rate

      cannot be determined from the information given |

 

6. (TCO F) Which of the following statements about process costing system is incorrect?(Points : 6)

      In a process costing system, each processing department has a work in process account

      In a process costing system, equivalent units are separately computed for materials and for conversion costs

      In a process costing system, overhead can be under- or overapplied just as in job-order costing

      In a process costing system, materials costs are traced to units of products |

7. (TCO F) The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method: (Points : 6)

      can be used under any cost flow assumption

      does not require the use of predetermined overhead rates

      keepscosts in the beginning inventory separate from current period costs

      does not consider the degree of completion of units in the beginning work in process inventory when computing equivalent units of production |

 

8. (TCO B) The contribution margin ratio always increases when the:(Points : 6)

      break-even point increases

      break-even point decreases

      variable expenses as a percentage of net sales decreases

      variable expenses as a percentage of net sales increases |

9. (TCO B)  The unit sales needed to attain the target profit is found by: (Points : 6)

      dividing fixed costs by the contribution margin.

      adding variable expenses to fixed expenses and dividing the total by the contribution margin.

      adding target profit to the fixed expenses and then dividing the total by the unit contribution margin.

      adding target profit to the fixed expenses and then dividing the total by the contribution margin. |

10. (TCO E) In an income statement prepared using the variable costing method, variable selling and administrative expenses would: (Points : 6)

      be used in the computation of the contribution margin

      be used in the computation of net operating income but not in the computation of the contribution margin

      be treated differently from variable manufacturing expenses

      not be used |

     

      

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