# Answers_Practice_Exam1_Fall11 - Practice Exam Exam 1 1....

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Practice Exam Exam 1

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1. During its first year of operations, Beta Company paid \$15,000 for direct material , \$16,000 in wages for production workers , and \$20,000 wages for administrative and sales personnel. Lease payments and utilities on the administrative building and production facilities amounted to \$5,000 and \$7,000 , respectively. General, selling, and administrative expenses were \$6,000. The company owns a delivery car and manufacturing equipment . The annual depreciation on the car is \$ 1,000. The original cost of the equipment is \$10,000 and has a salvage value of \$2,000 after 4 years. The company produced 5,000 units and sold 4,000 units at a price of \$15.00 a unit. The average cost to produce one unit is which of the following amounts? A. \$8.00 B. \$10.00 C. \$9.20 D. \$11.50 Depreciation on Equipment= (10,000 – 2,000) / 4 = 2,000 Product cost = 15,000 + 16,000 + 7000 + 2,000 = \$ 40,000 Average product cost = \$40,000 / 5,000 units = \$ 8 COGS = \$8 x 4,000 units = \$ 32,000 End Inv = \$8 x 1,000 units = \$ 8,000
Chapter 1 2. During 2010, Eddy Co. paid \$16,000 for direct material, \$ 17,000 in wages for production workers, and \$24,000 in wages for sales personnel. Lease payments and utilities on the production facilities amounted to \$7,000 . General, selling, and administrative expenses were \$6,000. The company owns a manufacturing equipment. The original cost of the equipment is \$30,000 and has a salvage value of \$5,000 after 5 years. Depreciation on sales car equals \$6,000. The company produced 5,000 units and sold 3,000 units at a price of \$10.00 a unit. The cost of goods sold is which of the following amounts? A. \$64,000 B. \$32,000 C. \$27,000 D. \$45,000 Equipment Depreciation = (30,000 – 5,000) / 5 = 5,000 Product cost = 16,000 + 17,000 + 7000 + 5000 = \$ 45,000 Average product cost = \$45,000 / 5,000 units = \$ 9 COGS = 3000 units x \$9 = 27,000

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Relevant Information for Special Decisions 3. What is the effect on the financial statements of recording a \$10,000 payment for sales personnel in cash? Assets = Liab. + Equity Rev. - Exp. = Net Inc. A) +- / n/a n/a n/a + - B) - n/a - n/a + - C) - n/a - n/a n/a n/a D) + / - n/a n/a n/a n/a n/a Chapter 1 Period Cost: Expense Immediately on IS IS + Expenses & - NI BS - Cash & - Equity (RE)
4. What is the effect on the financial statements of recording a \$100 purchase of raw materials?

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## This note was uploaded on 02/22/2012 for the course BUAD 2050 taught by Professor Nicholasw.schroeder during the Spring '09 term at Toledo.

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Answers_Practice_Exam1_Fall11 - Practice Exam Exam 1 1....

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