PART I:
MULTIPLE CHOICE QUESTIONS [ 15 questions; 8 points each ]
1.
C
2.
A
3.
B
4.
A
Since incurred MOH is 80,000 and MOH is underapplied for 2,000, we know that applied
MOH is 78,000.
POHR x Actual cost basis = applied MOH
Thus, POHR = 78,000/10,000 =7.8
5.
A
6.
E
7.
C
8.
B
Break-even sales = current sales – margin of safety = 120,000 – 24000 = 96,000
CM ratio = (120,000 – 80,000)/120,000 = 0.3333
Thus, the fixed expense = Break-even sales x CM Ratio = 32,000
9.
D
Under absorption costing, part of fixed overhead, that is 210,000 x (15000 –
12000)/15000 = 42,000
is deferred into inventory,
But under variable costing, 100% of fixed overhead, that is 210,000 directly expensed.
10. D
11. C
Under ABC costing system, cost for job 100 = 15 x 8 + 3 x 20 = 180
Under traditional costing system, cost for job 100 = (520000/50000) x 15 = 156
Thus, compared to ABC costing, job 100 is undercosted under traditional costing system
by $24.
12. A
Under absorption costing, the product cost = 10,
Under variable costing, the product cost = 8 – 2 = 6
Thus, the per unit product cost difference is $4.
We know that under absorption costing the net income was $2,000 lower than under
variable costing. In other words, there is $2,000 fixed MOH deferred into inventory under
absorption costing.
Thus, the difference between production and sales = 2,000/4 = 500 units.
Since the company sold 8,000 units, it produced 7,500 units.
13. A
14. D
Operating leverage = Contribution margin / net income.
10 = [300,000 x /(1—70%)/net income]
Thus, net income when sales equals to 300,000 is 9000.
Thus, the fixed expense = 300,000 – 300 ,000 x 70% -- 9,000 = 81,000
When sales become 360,000, the contribution margin is 360,000 x 30% = 108,000
The net income = 108,000 – 81,000 = 27,000
Thus, operating leverage = 108,000 / 27,000 = 4
15. D
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