AC 201 & 202 FE_CH14-24: Final Exam 2020/2021: Chapters 14-24. Answers At the end of the Paper Park University -
Final Exam: Chapters 14-24	Name
Kimmel Accounting, 5e	Instructor
Section # 	Date
Points	54	18	19	14	105
PART I — MULTIPLE CHOICE (54 points)
Instructions: Designate the best answer for each of the following questions.
1. Which of the following is a responsibility center that incurs expenses, generates revenues, and is responsible for generating a return on assets?
a.	Cost center
b.	Revenue center
c.	Profit center
d.	Investment center
2. Which one of the following is the most useful measure for evaluating a manager's performance in controlling revenues and costs in a profit center?
a.	Contribution margin
b.	Contribution net income
c.	Contribution gross profit
d.	Controllable margin
3. Hanover Corporation desires to earn target net income of $42,000. The selling price per unit is $18, unit variable cost is $5.60, and total fixed costs are $123,912. How many units must the company sell to earn its target net income?
4. Remark Enterprises uses a process cost accounting system.
Beginning Work in Process	3,000 units (50% complete) Ending Work in Process	2,000 units (30% complete)
Started into Production	56,000 units
How many units were completed and transferred out during the current period? a. 56,000
FE- 2	Test Bank for Kimmel Accounting, Vol. 2, Fifth Edition
5. Ralston Gifts applies overhead on the basis of machine hours. The following data were provided by Ralston:
Estimated annual overhead cost	$516,600
Actual annual overhead cost	$537,500
Estimated machine hours	126,000
Actual machine hours	125,000
How much overhead was applied? a. $512,500
6. The following data has been collected for use in analyzing Marshall’s behavior of maintenance costs:
Month	Maintenance Costs	Machine Hours January		$20,000		1,600
February	25,000	2,100
March	27,200	2,600
April	19,600	1,700
May	21,400	2,400
June	28,400	2,500
July	23,600	2,300
Using the high-low method to separate the maintenance costs into their variable and fixed cost components, these components are
a.	$7.20 per hour plus $7,200
b.	$11.00 per hour plus $8,800
c.	$7.20 per hour plus $8,480
d.	$11.00 per hour plus $900
7. Given the following information for Janaro Products, compute the company's ROI: Sales — $800,000; Controllable Margin — $120,000; Average Operating Assets —
$400,000. a. 30%
d.	Some other answer.
8. Given the following data for Harvard Publishing, determine the amount of cost of goods manufactured.
Direct materials used	$65,000	Beginning work in process	$12,000
Direct labor	41,000	Ending work in process	8,000
Manufacturing overhead	63,000	Beginning finished goods	14,000
Operating expenses	88,000	Ending finished goods	12,000
9. Select the correct order of the following components of the production cost report
(1)	costs accounted for
(2)	unit costs
(3)	costs charged to a department a. (1), (2), (3)
b. (1), (3), (2)
c. (2), (1), (3)
d. (2), (3), (1)
10. Which is the starting point of a master budget?
a.	Cash budget
b.	Sales budget
c.	Production budget
d.	Budgeted balance sheet
11. The most useful measure for evaluating the performance of the manager of an investment center is
a.	contribution margin.
b.	controllable margin.
c.	return on investment.
d.	income from operations.
12. Which of the following capital budgeting techniques takes the time value of money into consideration?
a.	Annual rate of return
b.	Internal rate of return
c.	Net present value
d.	Both (b) and (c) above
13. The cost classification scheme most relevant to responsibility accounting is
a.	controllable vs. uncontrollable.
b.	fixed vs. variable.
c.	semivariable vs. mixed.
d.	direct vs. indirect.
14. Kona Manufacturing incurred fixed overhead costs of $24,000 and variable overhead costs of $13,800 to produce 3,000 gallons of liquid cholorine. It takes 2 hours of direct labor to produce 1 gallon of chlorine. The standard hours allowed to produce 1,000 gallons of chlorine is 2,000 hours. Predetermined overhead rate is $5/direct labor hour. What is the total overhead variance?
15. A flexible budget
a.	is also called a static budget.
b.	can be considered a series of related static budgets.
c.	can be prepared for sales or production budgets, but not for an operating expense budget.
d.	typically uses an activity index different from that used in developing the predetermined overhead rate.
Use the following information for questions 16 and 17.
DyanChrome estimates its sales at 12,000 units in the first quarter with an increase by 600 units each quarter over the year. It desires an ending inventory of finished goods equal to 20% of the next quarter’s sales. Each unit sells for $30. Forty percent of sales are on account, with the remainder being cash sales. Credit customers pay 90% during the quarter the sale was made and the balance during the following quarter.
16. How much are budgeted cash collections for the third quarter? a. $395,280
17. Production in units for the third quarter should be budgeted at a. 13,080
18. Shari Company incurs the following costs in producing 5,000 units of product:
Direct materials	$30,000
Direct labor	22,000
Variable manufacturing overhead	17,000
Fixed manufacturing overhead	12,000
An outside supplier has offered to supply the 5,000 units at $14.00 each. Of the fixed costs, $4,000 of the fixed costs would be eliminated if the offer is accepted.
Acceptance will result in a
a.	savings of $3,000.
b.	loss of $11,000.
c.	savings of $7,000.
d.	loss of $1,000.
19. Vandergrass Company has a production process where two products result from a joint processing procedure; both can be sold immediately or processed further. Which of the products should be processed further?
Selling Price	Additional
Processing Cost	New
A	$70	$80	$12	$95
B	40	56	8	62
20. A company’s planned activity level for next year is expected to be 8,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs:
Indirect materials	$16,000	Depreciation	$7,000
Indirect labor	8,000	Taxes	2,000
Factory supplies	4,000	Supervision	9,000
A flexible budget prepared at the 9,200 machine hours level of activity would allow total manufacturing overhead costs of
d. Some other answer
21. Wrangler Inc. sells towels with a contribution margin rate of 35% and a unit contribution margin of $7 per unit. Which statement is true?
a.	Each dollar of sales revenue generates 35 cents to go towards covering operating costs and towards profit.
b.	Each towel sold generates 35 cents to go towards covering fixed costs and towards profit.
c.	Each towel sold generates $7 to go towards covering operating expenses and towards profit.
d.	Each dollar of sales revenue generates 35 cents to go towards covering fixed costs and towards profit.
22. Which one of the following would most likely be allocated to products using ABC by McDonald’s?
a.	Cost of employees who chop lettuce
b.	Cost of tomatoes added to burgers
c.	Cost of plastic gloves worn by the burger cooks
d.	Costs of the paper in which an Egg McMuffin is wrapped
23. Company 3M and Company 4P have similar levels of production and sales. Company 4P has a larger proportion of fixed costs than those that are variable costs. Company 3M has a larger proportion of variable costs, than those that are fixed costs. Sales are expected to increase by 30% for both companies during 2014. During 2014, Company 4P will experience
a.	a smaller increase in income than Company 3M.
b.	a larger decrease in per unit variable costs than Company 3M.
c.	a larger proportional fluctuation in income than Company 3M.
d.	less operating leverage than Company 3M.
Use the following information for questions 24 and 25.
Outdoor Play manufactures two products: Swing Along and Ride Away. The company’s overhead costs consist of setting up machines, $24,000; machining, $36,000; and inspecting, $18,000. During the year, 5,000 Swing Alongs were produced and 20,000 Ride Aways. Additional information on the two products is:
Swing Along	Ride Away
Direct labor hours	8,000	12,000
Machine setups	20	40
Machine hours	2,000	6,000
Inspections	20	30
24. How much overhead will be applied to Swing Along using traditional costing using direct labor hours as the basis for allocation?
25. How much overhead was applied to Swing Along using activity-based costing? a. $764.50
26. An appropriate cost driver for an assembling cost pool is the number of
a.	purchase orders.
d.	direct labor hours.
27. Which of the following is included in cost of goods manufactured under absorption costing but not under variable costing?
a.	Direct materials
b.	Variable factory overhead
c.	Fixed factory overhead
d.	Direct labor
PART II — MATCHING (18 points)
Instructions: Designate the terminology that best represents the definition or statement given below by placing the identifying letter(s) in the space provided. No term should be used more than once.
A.	Activity-based costing	N.	Job cost sheet
B.	Annual rate of return	O.	Noncontrollable costs
C.	Budgetary control	P.	Non-value-added activity
D.	Contribution margin	Q.	Operating budgets
E.	Contribution margin ratio	*R.	Overhead controllable variance
F.	Controllable costs	*S.	Overhead volume variance
G.	Absorption costing	T.	Physical units
H.	Cost accounting	U.	Process cost systems
I.	Cost centers	V.	Product costs
J.	Cost of capital	W.	Profit center
K.	Equivalent units of production	X.	Value-added activity
L.	Fixed costs	Y.	Variable costs
M.	Free cash flow	Z.	Variances
1. Costs that a manager has the authority to incur within a given period of time.
2. A form used to record the costs chargeable to a job.
3. A responsibility center that incurs costs and also generates revenues.
4. The difference between overhead budgeted for standard hours allowed and overhead incurred.
5. The amount of revenue remaining after deducting variable costs.
6. Used to apply costs to similar products that are mass produced in a continuous fashion.
7. Costs that vary in total directly and proportionately with changes in the activity level.
8. The differences between actual costs and standard costs.
9. Determines profitability of a capital expenditure by dividing expected net income by the average investment.
10. The rate a company must pay to obtain funds from creditors and stockholders.
11. Costs that are an integral part of producing the finished product.
12. Allocates overhead to multiple cost pools and assigns the cost pools to products by means of cost drivers.
13. Involves the measuring, recording, and reporting of product costs.
14. A measure of the work done during the period, expressed in fully completed units.
15. A costing approach in which all manufacturing costs are charged to the product.
16. Increases the worth of a product or service to customers.
17. (Sales – Variable expenses)/Sales.
18. Individual budgets that culminate in a budgeted income statement.
PART III — VARIANCE ANALYSIS (19 points)
Medex Pharmaceutical developed the following standard costs for its product in 2014:
Standard Cost Card		Unit Standard Cost
Direct materials	1.2 pounds @ $2 per pound	$ 2.40
Direct labor	0.25 hour @ $12 per hour	3.00
Variable	0.4 hours @ $3 per hour	1.20
Fixed	0.5 hours @ $4 per hour	 2.00
The company planned to work 2,725 direct labor hours and planned to produce 10,900 units of product in 2014. Actual results for 2014 are as follows:
•	11,000 units of product were produced.
•	Actual direct materials purchased and used during the year amounted to 13,750 pounds at a cost of $28,875.
•	Actual direct labor costs were $33,320 for 2,800 direct labor hours worked.
•	Total actual manufacturing overhead incurred amounted to $35,740.
Calculate the following variances showing all computations supporting your answers. Indicate if the variances are favorable (F) or unfavorable (U).
(a)	Direct materials price and direct materials quantity variances.
(b)	Direct labor price and direct labor quantity variances.
(c)	Total overhead variance
PART IV — MISCELLANEOUS MANAGERIAL MINI-PROBLEMS (14 points)
Handley Documents manufactures paper shredding equipment. You are requested to "audit" a sampling of computations made by Handley’s internal accountants via your independent recalculation of the information.
Instructions: Compute the requested information for each of the following independent situations (present supporting calculations).
(a)	Handley uses a process costing system. 900 units were in process at the beginning of the period, 60% complete. 16,400 units were started into production during the period; 700 were in process at the end of the period, 30% complete. Compute equivalent units for conversion costs.
(b)	Handley sells each unit for $45. Variable costs per unit equal $20. Total fixed costs equal
$230,000. Handley is currently selling 12,000 units per period and would like to earn net income of $40,000. Compute: (1) break-even point in dollars; (2) sales units necessary to attain desired income; and (3) margin of safety ratio for current operations.
(1)	Break-even point = $
(2)	Desired sales = 	units
(3)	Margin of safety = 	%