PRACTICE EXAMS

Managerial Accounting: Creating Value in a Dynamic Business Environment

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Unformatted text preview: Fundamentals of Managerial Accounting ACC 312 Spring 2008 Exam I Test Form A Name Instructor Section DO NOT OPEN until given instructions to do so. Instructions 1. Confirm that you have 14 numbered pages (not including this page). 2. Answers to Multiple-Choice questions should be recorded on the Scantron. A. On your Scantron answer sheet, write and bubble in your name, UTEID, and the “Test Form” letter noted above. B. Use a #2 pencil only to mark your responses on your Scantron answer sheet. Mark clearly and erase completely as needed. Only multiple choice answers marked on your Scantron answer sheet will be graded. 3. Answers to Problems should be recorded on the exam and your answer should be circled for all calculations. 4. Cell phones, PDAs and calculators capable of storing text are NOT allowed at your desk during the exam. 5. Bring your entire exam, Scantron answer sheet, and student ID to the front of the room when you have finished. 6. You are reminded of the University’s honor policy which requires you do your own work and not give or receive assistance on this exam. ACC 312 – Midterm #1 Test Form A - Page 1 Spring 2008 SECTION I - MULTIPLE CHOICE (50 points – 20 questions, 2.5 points each) - Please choose the ONE BEST answer for each question and record your answer on the Scantron answer sheet. 1. Airstream builds recreational motor homes. All of the following activities add value to the finished product except: A. B. C. D. E. 2. Which one of the following is an indirect cost? A. B. C. D. E. 3. $93,000 $70,000 $163,000 $180,500 $153,600 FC = $144,400 – $74,400 = $70,000 VC/unit = $74,400 / 12,000 = $6.20 TC @ 15,000 units = $70,000 + ($6.20 x 15,000) = $163,000 Activity-based costing systems: A. B. C. D. E. 5. The cost of denim in a jeans factory. The cost of mixing labor in a factory that makes over-the counter pain relievers. The cost of repairing the parking lot at a perfume factory. The cost of bottles in a shampoo factory. All of the above. Total costs are $144,400 when 12,000 units are produced; of this amount, variable costs are $74,400. What are the total costs when 15,000 units are produced? A. B. C. D. E. 4. installation of carpet. assembly of the frame to the chassis. storage of the vehicle in the sales area. addition of exterior lights. final painting and polishing. use a single, volume-based cost driver. assign overhead to products based on the products' relative usage of direct labor. often reveal products that were under- or overcosted by traditional costing systems. typically use fewer cost drivers than more traditional costing systems. have a tendency to distort product costs. Carson Company applies manufacturing overhead at the rate of $60 per machine hour. Budgeted machine hours for the current period were anticipated to be 80,000; however, a lengthy strike resulted in actual machine hours being worked of only 65,000. Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively. On the basis of this information, the company’s yearend overhead was: A. B. C. D. E. Overapplied by $280,000 Underapplied by $280,000 Overapplied by $620,000 Underapplied by $620,000 Underapplied by $900,000 Actual MOH (debit to MOH acct) = $4,180,000 Applied MOH (credit to MOH acct) = $60 x 65,000 MH = $3,900,000 So not enough overhead was applied, and MOH Underapplied = $4,180,000 - $3,900,000 $280,000 Test Form A - Page 2 ACC 312 – Midterm #1 Spring 2008 Use the following information for the next three questions. Rossiter, Inc., designs and builds projects for individual customers. On August 1, there were two jobs in process: Job #614 with a beginning balance of $10,200; and Job #615 with a beginning balance of $9,670. Rossiter applies overhead at the rate of 60 percent of direct labor cost. During August, Jobs #616 and #617 were started. Data on August costs for all jobs are as follows: Direct Material $4,200 $9,500 $1,000 $3,150 Job #614 Job #615 Job #616 Job #617 Direct Labor $1,800 $4,000 $150 $800 Jobs #615 & 616 were completed and Job #615 was sold at cost plus 40 percent. All other jobs remained in process. 6. What is the cost of the jobs completed during August? A. B. C. D. E. 7. $5,670 $11,510 $17,140 $20,150 $21,710 Job 614: $10,200 Beginning WIP + $4,200 DM + $1,800 DL + ($1,800 x 60%) MOH = $17,280 Job 617: $3,150 DM + $800 DL + ($800 x 60%) MOH = $4,430 $17,280 + $4,430 = $21,710 What is the Cost of Goods Sold for the month? A. B. C. D. E. 9. Job 615: $9,670 Beginning WIP + $9,500 DM + $4,000 DL + ($4,000 x 60%) MOH = $25,570 Job 616: $1000 DM + $150 DL + ($150 x 60%) MOH = $1,240 $25,570 + $1,240 = $26,810 What is the balance in Work in Process at the end of August? A. B. C. D. E. 8. $15,900 $17,140 $24,320 $25,570 $26,810 $17,280 $21,710 $25,570 $26,810 $35,798 Job 615 sold: cost is $25,570, from Q6 Which one of the following statements about managerial accounting is true? A. Managerial accounting relies heavily on published financial statements. B. Managerial accounting is primarily concerned with providing information for external users. C. Managerial accounting generally focuses on reporting information about the enterprise in its entirety rather than by subunits. D. Managerial accounting is intended to provide useful information for internal users. E. Managerial accounting is governed by GAAP. Test Form A - Page 3 ACC 312 – Midterm #1 10. Spring 2008 Terry Linens, Inc., which uses a process-costing accounting system, began operations on March 1 of the current year. The company, which incurs conversion cost evenly throughout manufacturing, had no beginning work-in-process inventory (WIP) and started work on 5,000 units during the period. These units were 80% of the way through manufacturing at the end of the period. With respect to conversion costs, it would be correct to say that the company has: A. B. C. D. E. 1,000 equivalent units in ending WIP 4,000 completed units 4,000 physical units in ending WIP 5,000 equivalent units in ending WIP 5,000 physical units in ending WIP Use the following information for the next three questions. Bisby Company manufactures fishing rods. At the beginning of July, the following information was supplied by its accountant: Raw materials inventory Work-in process inventory Finished goods inventory $40,000 $21,000 $23,200 During July, the direct labor cost was $43,500 and raw materials purchases were $64,000. Manufacturing overhead costs are applied at a rate of 250% of direct labor cost. The inventories at the end of July for raw materials and work-in-process were $19,800 and $32,500, respectively. The company reported a gross margin of $123,950 and sales revenue of $350,000 at the end of the month. 11. What is the cost of goods manufactured for July? A. B. C. D. E. 12. Cost of goods manufactured = Cost of everything transferred from WIP to FGI. Working forwards from RM… DM = $40,000 BegRM + $64,000 Added to RM - $19,800 EndRM = $84,200 Added to WIP = $43,500 DL + $84,200 DM + (250% x $43,500) MOH = $236,450 CGM = $21,000 BegWIP + 236,450 Added to WIP - $32,500 EndWIP = $224,950 What is the cost of the finished goods inventory at the end of July? A. B. C. D. E. 13. $204,750 $224,950 $236,450 $247,950 $289,950 $20,100 $22,100 $87,100 $226,050 $248,150 $23,200 BegFGI + $224,950 CGM – ($350,000 – 123,950) COGS = $22,100 What is the conversion cost for the month of July? A. B. C. D. E. $108,750 $127,700 $132,250 $152,250 $236,450 Conversion Cost = DL + MOH = $43,500 + (250% x $43,500) = $152,250 ACC 312 – Midterm #1 14. Test Form A - Page 4 Spring 2008 Velman Company, which uses a process-costing system, adds all direct materials at the beginning of production and incurs conversion cost evenly throughout manufacturing. The information that follows relates to the period just ended: Units started and completed: 90,000 Units in ending work-in-process inventory: 10,000, 70% complete Which of the following choices correctly expresses the total equivalent units of production with respect to material and conversion cost? A. B. C. D. E. Material 100,000 100,000 63,000 90,000 97,000 Conversion 97,000 100,000 97,000 7,000 97,000 Material = (90,000 x 100%) + (10,000 x 100%) = 100,000 Conversion = (90,000 x 100%) + (10,000 x 70%) = 97,000 Use the following information for the next two questions. Century, Inc., currently uses traditional costing procedures, applying $400,000 of overhead to products X and Y on the basis of direct labor hours. The firm is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH) and production setups (SU) as cost drivers. Data on the cost pools and respective driver volumes follow. 15. The overhead cost allocated to product X by using traditional costing procedures would be: A. B. C. D. E. 16. $78,000 $120,000 $184,500 $260,000 $400,000 MOH = $260,000 + $140,000 = $400,000 Cost Driver (DLH) = 1200 + 2800 = 4000 Predetermined OH Rate = $400,000 / 4000 = $100/DLH MOH Allocated to X = $100/DLH x 1200 DLH = $120,000 The overhead cost allocated to product Y by using activity-based costing procedures would be: A. B. C. D. E. $120,000 $182,000 $215,500 $273,000 $400,000 Pool 1 Rate = $260,000 / (1200 + 2800) = $65/DLH Pool 2 Rate = $140,000 / (35 + 65) = $1400/SU MOH Allocated to Y = ($65 x 2800) + ($1400 x 65) = $273,000 ACC 312 – Midterm #1 17. Indirect production materials Factory utilities Product development costs Indirect labor Property taxes on the manufacturing plant. In a job-order cost system using normal costing, debits to work-in-process inventory can originate from all of the following except: A. B. C. D. E. 20. units completed and ending work in process. beginning work in process and units completed. units sold and ending work in process. cost of goods manufactured and beginning work in process. cost of goods manufactured and cost of goods sold. Which of the following costs is not a component of manufacturing overhead? A. B. C. D. E. 19. Spring 2008 Equivalent-unit calculations are necessary to allocate manufacturing costs between: A. B. C. D. E. 18. Test Form A - Page 5 Applying manufacturing overhead using the predetermined overhead rate Assigning actual direct labor from a timekeeping system Assigning actual manufacturing overhead costs to jobs Assigning actual direct materials from production requisitions Proration of over- or underapplied manufacturing overhead WestCo makes two products: X, produced in batches of 10 units, and Y, produced in batches of 100 units. Its ABC system has eight activity cost pools. One of those pools is Shipping, and the cost driver for Shipping is Production Batches. Which one of the following statements about the cost of X and Y is true? A. B. C. D. E. Each unit of X is assigned the same Shipping cost as each unit of Y Each unit of X is assigned more Shipping cost than each unit of Y Each unit of Y is assigned more Shipping cost than each unit of X We cannot know in advance how much Shipping cost will be assigned to each product We can know in advance how much Shipping cost will be assigned to each product, but the amount assigned to X and Y will depend on the other seven cost pools and cost drivers ACC 312 – Midterm #1 Test Form A - Page 6 Spring 2008 SECTION II (50 points) You MUST show your work to receive any partial credit. Please try to be as neat and organized as possible. Use the backs of pages, if needed, but tell us where to find your calculations. Problem 1 (16 points) In early March, the controller for Austin Electronics, Inc. is compiling production and cost data for the month of February. She reports the following: LABOR Direct-labor hours: Job 77 .......................................................................................................................... 3,500 Job 78 .......................................................................................................................... 3,000 Job 79 .......................................................................................................................... 2,000 Labor Costs: Direct-labor wages ................................................................................................ $204,000 Indirect-labor wages ............................................................................................... $15,000 Supervisors’ salaries ................................................................................................. $6,000 MATERIAL Inventories, February 1: Raw material and supplies ...................................................................................... $10,500 Work in process (Job 77 only) ................................................................................ $54,000 Finished goods ...................................................................................................... $112,500 Purchases of raw materials and supplies during February: Raw materials ....................................................................................................... $135,000 Supplies (indirect material) .................................................................................... $15,000 Direct materials and supplies requisitioned for production: Job 77 ...................................................................................................................... $45,000 Job 78 ...................................................................................................................... $37,500 Job 79 ...................................................................................................................... $25,500 Supplies (indirect materials) ................................................................................... $12,000 OTHER COSTS Building occupancy costs (utilities, depreciation, etc.): Factory facilities ....................................................................................................... Sales offices .............................................................................................................. Research and development labs ............................................................................... Production equipment costs: Power ........................................................................................................................ Repairs and maintenance .......................................................................................... Depreciation .............................................................................................................. Other .......................................................................................................................... $6,400 $1,600 $1,000 $4,100 $1,500 $1,500 $1,000 During February, Job 77 and Job 78 were completed, however Job 79 was still in process at the end of the month. The firm’s job-order costing system uses direct-labor hours as the cost driver for overhead application. In December of the preceding year, the controller estimated the year’s manufacturing overhead costs at $606,000 (of which $216,000 are fixed costs) and that planned production would require 265,000 machine hours and 120,000 direct-labor hours. ACC 312 – Midterm #1 A. Test Form A - Page 7 Spring 2008 Calculate the firm’s predetermined overhead rate for the year. (2 points) Budgeted manufacturing overhead $606,000* Budgeted direct-labor hours 120,000 $5.05 per direct-labor hour *Budgeted manufacturing overhead = variable overhead + fixed overhead $606,000 = $390,000 + $216,000 B. Calculate the total cost of Job 77. (4 points) Cost of job 77: Cost in beginning work-in-process inventory .................................... Direct material ........................................................................................ Direct labor (3,500 hours $24.00 per hour)* ..................................... Applied manufacturing overhead (3,500 hours $5.05 per hour)........................................................ Total cost ................................................................................................ *Direct-labor rate C. $ 54,000 45,000 84,000 17,675 $200,675 direct-labor wages $204,000 $24.00 per hour direct-labor hours 8,500 What was the total amount of manufacturing overhead applied during February? (2 points) Total direct-labor hours predetermined overhead rate 8,500 hours $5.05 $42,925 ACC 312 – Midterm #1 D. Test Form A - Page 8 Spring 2008 Compute the actual manufacturing overhead incurred in February. (4 points) Actual manufacturing overhead incurred during February: Indirect material (supplies) ......................................................................... Indirect-labor wages .................................................................................... Supervisory salaries .................................................................................... Building occupancy costs, factory facilities ............................................. Production equipment costs ...................................................................... Total ............................................................................................................... E. $12,000 15,000 6,000 6,400 8,100 $47,500 Calculate the overapplied or underapplied overhead for February, specifying whether it is overapplied or underapplied. (2 points) Underapplied overhead for February: Actual manufacturing overhead – applied manufacturing overhead $47,500 – $42,925 $4,575 underapplied F. If Austin Electronics, Inc., wants to adjust for the February overapplied or underapplied overhead in the simplest possible way, describe what they would do. Be specific, including the direction and amount of the adjustment. (2 points) The simplest approach is to include the total underapplied or overapplied manufacturing overhead entirely in Cost of Goods Sold. In this case, COGS would be increased (debited) by $4,575. Test Form A - Page 9 ACC 312 – Midterm #1 Spring 2008 Problem 2 (18 points) The Norwich Pharmaceuticals division of Procter and Gamble makes branded and generic drug products. Because of the risk and cleanout/changeover costs involved in using processing equipment for more than a single drug product, several of their products (especially the toxic and/or high-volume ones) are produced in a single processing department dedicated to that product. Inventory costs of these special products are tracked using a process costing system. The department dedicated to producing acetominophen (high-volume generic Tylenol) has the following information available for July 2007: Physical Units Direct Materials Costs (DM) Conversion Costs (CC) WIP - July 1 20,000 $ 120,000 $ 140,000 Started during July 30,000 Transferred out during July 34,000 The department-cost record for July reports the following: DM CC $211,200 $302,540 End-of-month production reports for the month of June showed that batches started but not yet completed were 80% complete with respect to DM and 70% complete with respect to CC. Similar reports filed at the end of July showed that batches started but not yet completed were 75% complete with respect to DM and 60% complete with respect to CC A. Why does Norwich Pharmaceuticals use a process costing system? (2 points) Unless there is a need to distinguish between the cost of different units (or batches of units), process costing is a less costly approach to inventory costing. In a continuous production process, as is often found in pharmaceutical manufacturing, one unit of product is pretty much like every other. B. Compute the total cost of units completed and transferred out and units in ending WIP inventory, assuming the acetominophen production department uses weighted average process costing. (7 points – record your answers here and show work on the next page.) Completed and Transferred Out: $589,900 Ending WIP: $183,840 ACC 312 – Midterm #1 Test Form A - Page 10 (Record your answer above. Show your work here.) Spring 2008 ACC 312 – Midterm #1 C. Test Form A - Page 11 Spring 2008 What is the percentage change in the weighted-average cost per equivalent unit between June and July? (4 points) DM: 4% decrease CC: 1.5% increase July weighted-average Cost/EU , from solution to part B: DM = $7.20 CC = $10.15 June weighted-average Cost/EU, from Beginning WIP cost and % complete info: DM = $120,000 / (20,000 x 80%) = $7.50 CC = $140,000 / (20,000 x 70%) = $10.00 % change: DM = ($7.50 - $7.20) / $7.50 = 4% decrease CC = ($10.00 - $10.15) / $10.00 = 1.5% increase D. In its Designer Drugs department, Norwich Pharmaceuticals uses operation costing. Why? (2 points) Operation Costing is used when the products produced in a department vary significantly with respect to DM, suggesting the need for a job order costing system, but conversion costs are homogeneous with respect to the products produced suggesting that effort and cost could be saved by using process costing. Operation costing combines these methods, so it is likely the Designer Drugs department is producing several products, and that they are similar in their production process but the cost of direct materials is very different. ACC 312 – Midterm #1 E. Test Form A - Page 12 Spring 2008 In July, Norwich Pharmaceuticals began a two-month, 6000-unit, production run of a new toothwhitening product called Dazzle, to be marketed to dentists. Dazzle is produced entirely in one department, called Specialty Medicals. During July, 5200 units of the order entered production (leaving 800 additional units to be started in August). Of these, 4000 units of Dazzle were completed and sent to finished goods inventory and 1200 additional units were 60% complete at the end of the month. 1600 of the units sent to finished goods inventory remained unsold at the end of July. The Specialty Medicals department produced five different products in July, and Dazzle represented 40% of the month’s production effort. Total July conversion costs for the department (all products) were $167,560 and Dazzle’s finished goods inventory was valued at its cost of $25,680 at the end of July. What is the total cost of direct materials assigned to Dazzle by the process costing system during July? Assume that all direct materials required in the production of Dazzle are added at the beginning of the conversion process. (3 points) 0 Beginning WIP + 5200 Started = 5200 To acct for 4000 Completed and transferred out + 1200 Ending WIP = 5200 Accounted for The ending WIP units are 60% complete – so 60% x 1200 = 720 EU for conversion and 100% x 1200 = 1200 EU for DM because it is given that DM is added at beginning of conversion. EU of Dazzle produced for conversion costs = 4,000 + (60% x 1,200) = 4,720 EU 40% x Total Production = 4,720 EU so Total Production = 11,800 EU CC/EU = $167,560 / 11,800 = $14.20/EU Total Cost/EU of the Ending FG units = $25,680 / 1,600 = $16.05/EU so DM$/EU = $16.05 - $14.20 = $1.85/EU. Since DM is added at the beginning of production, total DM assigned = [4,000 + (1,200 x 100%)] x $1.85 = $9,620 ACC 312 – Midterm #1 Test Form A - Page 13 Spring 2008 Problem 3 (16 points) The controller for West Texas Fertilizers, Inc. (WTF) has established the following activity cost pools and cost drivers. An order for 1,000 bags of TexasTuff Growmaster(TTG) fertilizer has the following production requirements. A. Compute the total overhead that should be assigned to the TTG order under the activity-based costing system. (7 points) ACC 312 – Midterm #1 Test Form A - Page 14 Spring 2008 B. What is the manufacturing overhead cost per bag of TTG fertilizer under the ABC system? (2 points) C. Suppose WTF were to use a single predetermined overhead rate based on machine hours. 1. 2. D. How much overhead would be assigned to the TTG order in total? (3 points) How much overhead would be assigned to the TTG order per bag of fertilizer? (2 points) Explain why these two product-costing systems result in such widely differing costs. Which system do you recommend, and why? (2 points) ...
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This document was uploaded on 06/22/2010.

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