4 SETS ACCT505 MIDTERM EXAM

4 SETS ACCT505 MIDTERM EXAM ALL AC505 Week 4 Midterm SET 1 QUESTION 1: Wages paid to a timekeeper in a factory are a: • Prime Cost YES.....Conversion Cost NO • Prime Cost YES.....Conversion Cost YES • Prime Cost NO....Conversion Cost NO • Prime Cost NO.....Conversion Cost YES QUESTION 2: A cost incurred in the past that is not relevant to any current decision is classified as a(n): • period cost. • opportunity cost. • sunk cost. • differential cost. QUESTION 3: Inventoriable costs are also known as: • variable costs • conversion costs • product costs • fixed costs QUESTION 4: When the activity level is expected to decline within the relevant range, what effects would be anticipated with respect to each of the following? • Fixed Costs per Unit Increase and Variable Costs per Unit Increase • Fixed Costs per Unit Increase and Variable Costs per Unit do not change • Fixed Costs per Unit do not change and Variable Costs per Unit do not change • Fixed Costs per Unit do not change and Variable Costs per Unit Increase QUESTION 5: When manufacturing overhead is applied to production, it is added to: • the Cost of Goods Sold account • the Raw Materials account • the Work in Process account • the Finished Goods inventory account QUESTION 6: Which of the following statements about process costing system is incorrect?• 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 QUESTION 7: The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method: • can be used under any cost flow assumption • does not require the use of predetermined overhead rates • keeps costs 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 QUESTION 8: The contribution margin ratio always increases when the: • 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 QUESTION 9: Which of the following would not affect the break-even point? • total variable expenses • selling price per unit • variable expenses per unit • total fixed expenses QUESTION 10: Under variable costing: • net operating income will tend to move up and down in response to changes in levels of production • inventory costs will be lower than under absorption costing • net operating income will tend to vary inversely with production changes • net operating income will always be higher than under absorption costing QUESTION 11: The following data (in thousands of dollars) have been taken from the accounting records of Larder Corporation for the just completed year. Sales ........................................................................... $950 Purchases of raw materials ........................................ $170 Direct labor ................................................................ $210 Manufacturing overhead ............................................ $200Administrative expenses ............................................ $180 Selling expenses ......................................................... $140 Raw materials inventory, beginning .......................... $70 Raw materials inventory, ending ............................... $80 Work in process inventory, beginning ....................... $30 Work in process inventory, ending ............................ $20 Finished goods inventory, beginning ......................... $100 Finished goods inventory, ending .............................. $70 Required: a. Prepare a Schedule of Cost of Goods Manufactured in good form. b. Compute the Cost of Goods Sold. c. Using data from your answers above as needed, prepare an Income Statement in good form Level: Medium LO: 1,3,4 Answer: a. Schedule of cost of goods manufactured Direct materials: Raw materials inventory, beginning ........................... $ 70 Add: Purchases of raw materials ................................ 170 Raw materials available for use ................................. 240 Deduct: Raw materials inventory, ending .................. 80 Raw materials used in production ................................. $160 Direct labor .................................................................... 210 Manufacturing overhead ................................................ 200 Total manufacturing cost ............................................... 570 Add: Work in process inventory, beginning. ................ 30 600 Deduct: Work in process inventory, ending .................. 20 Cost of goods manufactured .......................................... $580 b. Computation of cost of goods sold Finished goods inventory, beginning .............................. $100 Add: Cost of goods manufactured ................................... 580 Cost of goods available for sale ....................................... 680 Deduct: Finished goods inventory, ending ...................... 70 Cost of goods sold ........................................................... $610 c. Income statement Sales ................................................................................. $950 Less: Cost of goods sold .................................................. 610 Gross margin ................................................................... 340 Less: Administrative expenses ........................................ 180 Less: Selling expenses ..................................................... 140 Net operating income ...................................................... $ 20 Similar exercise with different dataThe following data (in thousands of dollars) have been taken from the accounting records of Larop Corporation for the just completed year. Sales ................................................................................ $870 Purchases of raw materials ............................................. $190 Direct labor ..................................................................... $200 Manufacturing overhead ................................................. $230 Administrative expenses ................................................. $150 Selling expenses .............................................................. $140 Raw materials inventory, beginning ............................... $10 Raw materials inventory, ending .................................... $40 Work in process inventory, beginning ............................ $20 Work in process inventory, ending ................................. $50 Finished goods inventory, beginning .............................. $90 Finished goods inventory, ending ................................... $130 Required: a. Prepare a Schedule of Cost of Goods Manufactured in good form. b. Compute the Cost of Goods Sold. c. Using data from your answers above as needed, prepare an Income Statement in good form Answer: a. Schedule of cost of goods manufactured Direct materials: Raw materials inventory, beginning ............................ $ 10 Add: Purchases of raw materials .................................. 190 Raw materials available for use ................................... 200 Deduct: Raw materials inventory, ending .................... 40 Raw materials used in production ................................... 160 Direct labor ...................................................................... 200 Manufacturing overhead ................................................. 230 Total manufacturing cost ................................................. 590 Add: Work in process inventory, beginning. .................. 20 610 Deduct: Work in process inventory, ending .................... 50 Cost of goods manufactured ............................................ $560 b. Computation of cost of goods sold Finished goods inventory, beginning .............................. $ 90 Add: Cost of goods manufactured ................................... 560 Goods available for sale .................................................. 650 Deduct: Finished goods inventory, ending ...................... 130 Cost of goods sold ........................................................... $520 c. Income statement Sales ................................................................................ $870 Less: Cost of goods sold ................................................. 520 Gross margin ................................................................... 350 Less: Administrative expenses ........................................ 150Less: Selling expenses ..................................................... 140 Net operating income ...................................................... $ 60 QUESTION 12: 2. Question : (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: Percent completed Units Materials Conversion Work 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. Instructor Explanation: Equivalent Units Materials Conversion Units transferred to the next department 480,000 480,000 Ending Work in process: Materials x 85% 123,250 Conversion x 75% 108,750 Equivalent units of production 603,250 588,750 Similar exercise with different data Wisconsin Company Percent Complete Units Materials Conversion Work in process, June 1 60,000 65% 45% The Wisconsin Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below: Percent completed Units Materials Conversion Work in process, June 1 60,000 65% 45% Work in process, Jun 30 55,000 75% 65% The department started 275,000 units into production during the month and transferred 280,000 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 costsUnits Started into Production during June 275,000 Units completed & Transferred to Next Department 280,000 Work in process, June 30 55,000 65% 45% Weighted Average Method; Materials Conversion Units Transferred to Next Department 280,000 280,000 Work in Process, June 30: 55,000 units × 65% 35,750 55,000 units × 45% 24,750 Equivalent Units of Production 315,750 304,750 QUESTION 13: A tile manufacturer has supplied the following data: Boxes of tile produced and sold 580,000 Sales revenue $2,842,000 Variable manufacturing expense $1,653,000 Fixed manufacturing expense $784,000 Variable selling and admin expense $145,000 Fixed selling and admin expense $128,000 Net operating income $132,000 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? Calculate unit contribution margin, contribution ratio, unit sales increase of 5% Answers a. Calculate the company's unit contribution margin Contribution margin = Sales - Variable expenses Contribution margin = $2,842,000 - ($1,653,000 + $145,000) Contribution margin = $1,044,000 Unit contribution margin = Contribution margin Boxes of tiles Unit contribution margin = $1,044,000 580,000 Unit contribution margin = $1.8 b. Calculate the company's unit contribution ratio Contribution margin ratio = Contribution margin Sales Contribution margin ratio = $1,044,000 $2,842,000 Contribution margin ratio = 36.74% (rounded) 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? Contribution margin = Sales - Variable expenses Contribution margin = $2,132,000 - ($650,000 + $260,000) Contribution margin = $1,222,000 Unit contribution margin = Contribution margin Boxes of tiles Unit contribution margin = $1,222,000 520,000 Unit contribution margin = $2.35 Increase in sales units = 580,000 x 5% = 29,000 units Increase in net operating income = Unit contribution margin x Increase in sales units = $1.8 x 29,000 = $52,200 New net operating income = Current net operating income + Increase = $132,000 + $52,200 = $184,200 QUESTION 14: (TCO E) The Dean Company produces and sells a single product. The following data refer to the year just completed: Selling Price $ 350 Units in beginning Inventory 0 Units Produced 20000 Units sold 19000 Variable Costs per unit: Direct materials $ 190 Direct labor $ 40 Variable manufacturing overhead $ 25 Variable selling and admin $ 10 Fixed Costs: Fixed manufacturing overhead $ 250,000 Fixed selling and admin $ 225,000 Assume that direct labor is a variable cost. Required: a. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches. b. Prepare an income statement for the year using absorption costing. c. Prepare an income statement for the year using variable costing. Answersa. Cost per unit under absorption costing: Direct materials................................................... $150.00 Direct labor......................................................... 75.00 Variable overhead............................................... 25.00 Fixed overhead ($275,000 / 25,000)................... 11.00 Total cost per unit ............................................... $261.00 Cost per unit under variable costing: Direct materials................................................... $150.00 Direct labor......................................................... 75.00 Variable overhead............................................... 25.00 Total cost per unit ............................................... $250.00 b. Absorption costing income statement: Sales................................................................................. $9,900,000 Cost of goods sold: Beginning inventory..................................................... $ 0 Add cost of goods manufactured (25,000 @ $261.00) 6,525,000 Cost of goods available ................................................ 6,525,000 Less ending inventory (3,000 @ $261.00)................... 783,000 9,117,000 Gross profit...................................................................... 1,567,500 Selling and administrative expenses expenses: [($10 × 19,000) + $225,000]........................................ 415,000 Net operating income ...................................................... $1,152,500 c. Variable costing income statement: Sales................................................................................ $9,900,000 Cost of goods sold: Beginning inventory .................................................... $ 0 Cost of goods manufactured (25,000 @ $261)............ 6,525,000 Cost of goods available................................................ 6,525,000 Less ending inventory (3,000 @ $261) ....................... 783,000 Variable cost of goods sold............................................. 5,742,000 Variable selling and administrative expenses: (22,000 @ $15)............................................................ 330,000 9,570,000 Contribution margin........................................................ 1,615,000 Less fixed expenses: Manufacturing overhead.............................................. 250,000 Selling and administrative ........................................... 225,000 475,000 Net operating income...................................................... $1,140,000 d. Net operating income under variable costing.................. $1,140,000 Add fixed manufacturing overhead costs deferred in inventory under absorption costing (1,000 @ $12.50) 12,500 Net operating income under absorption costing.............. $2,152,500Other similar exercise HJ Turner Corporation produces a single product. Data concerning the company's operations last year appear below: Units in beginning inventory .......................... 0 Units produced ............................................... 10,000 Units sold ........................................................ 9,000 Selling price per unit ...................................... $60 Variable costs per unit: Direct materials ........................................... $15 Direct labor .................................................. $5 Variable manufacturing overhead ............... $2 Variable selling and administrative ............. $4 Fixed costs in total: Fixed manufacturing overhead .................... $200,000 Fixed selling and administrative ................. $70,000 Assume direct labor is a variable cost. Required: a. Compute the unit product cost under both absorption and variable costing. b. Prepare an income statement for the year using absorption costing. c. Prepare an income statement for the year using variable costing. d. Prepare a report reconciling the difference in net operating income between absorption and variable costing for the year. Answer: a. Variable Absorption costing costing Direct materials ....................................... $15 $15 Direct labor .............................................. 5 5 Variable manufacturing overhead ........... 2 2 Fixed manufacturing overhead ($200,000 ÷ 10,000 units) .................... - 20 Unit product costs .................................... $22 $42 b. Sales .................................................................... $540,000 Cost of goods sold: Beginning inventory ......................................... $ 0 Add cost of goods manufactured @ $42 .......... 420,000 Goods available for sale ................................... 420,000 Less ending inventory @ $42 .......................... 42,000 378,000 Gross margin ....................................................... 162,000 Selling and administrative expenses* ................. 106,000 Net operating income .......................................... $ 56,000 * 9,000 units × $4 per unit variable plus $70,000 fixed. c. Sales ..................................................................... $540,000 Less variable expenses:Variable cost of goods sold: Beginning inventory ...................................... $ 0 Add variable manufacturing costs @ $22 ..... 220,000 Goods available for sale ................................ 220,000 Less ending inventory @ $22 ........................ 22,000 Variable cost of goods sold .............................. 198,000 Variable selling & admin. @ $4 ....................... 36,000 234,000 Contribution margin ............................................ 306,000 Less fixed expenses: Fixed manufacturing overhead ......................... 200,000 Fixed selling & admin. ..................................... 70,000 270,000 Net operating income .......................................... $ 36,000 d. Variable costing net operating income ................ $36,000 Add fixed factory overhead deferred in inventory under absorption costing (1,000 units × $20 per unit) ............................. 20,000 Absorption costing net operating income ........... $56,000SET 2 1. Question : (TCO A) Wages paid to an assembly line worker in a factory are a Prime Cost YES.....Conversion Cost NO. Prime Cost YES.....Conversion Cost YES. Prime Cost NO....Conversion Cost NO. Prime Cost NO.....Conversion Cost YES. 2. Question : (TCO A) A cost incurred in the past that is not relevant to any current decision is classified as a(n) period cost. incremental cost. opportunity cost. None of the above 3. Question : (TCO A) Depreciation of office buildings and office equipment is also known as variable costs. conversion costs. product costs. period costs. 4. Question : (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 costs per unit increase and variable costs per unit increase. Fixed costs per unit decrease and variable costs per unit do not change. Fixed costs per unit do not change and variable costs per unit do not change. Fixed costs per unit do not change and variable costs per unit increase. 5.Question :(TCO F) Which of the following statements is true? I. Overhead application may be made slowly as a job is worked on. II. Overhead application may be made in a single application at the time of completion of the job.III. Overhead application should be made to any job not completed at year end in order to properly value the work in process inventory. (Points: 6) Only statement I is true Only statement II is true Both statements I and II are true Statements I, II, and III are all true 6.Question : (TCO F) A job-order cost system is employed in those situations where - many different products, jobs, or batches of production are being produced each period – - manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis - the product moves…… Another similar 6’.Question : A process cost system is employed in those situations where: A) many different products, jobs, or batches of production are being produced each period. B) where manufacturing involves a single, homogeneous product that flows evenly through the production process on a continuous basis. C) a service is performed such as in a law firm or an accounting firm. D) full or absorption cost approach is not employed. 7.Question : (TCO F) The FIFO method only provides a major advantage over the weighted-average method in that the calculation of equivalent units is less complex under the FIFO method. the FIFO method treats units in the beginning inventory as if they were started and completed during the current period. the FIFO method provides measurements of work done during the current period. the weighted-average method ignores units in the beginning and ending work-in-process inventories. 8.Question : (TCO B) The contribution margin ratio always decreases when the break-even point increases. break-even point decreases. variable expenses as a percentage of net sales increase. variable expenses as a percentage of net sales decrease. 9.Question :(TCO B) Which of the following would not affect the break-even point? number of units sold variable expense per unittotal fixed expenses selling price per unit 10.Question : (TCO E) In an income statement prepared using the variable costing method, variable selling and administrative expenses would 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 The following long answer questions have the same solution above in SET1 1.Question : (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. 2.Question : (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. 3.Question : (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? 4.Question : (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 600 Units produced 3000 Units sold 3500 Units in ending inventory 100 Variable costs per unit: Direct materials $ 15Direct labor $ 50 Variable manufacturing overhead $ 8 Variable selling and admin $ 12 Fixed costs: Fixed manufacturing overhead $ 75,000 Fixed selling and admin $ 20,000 The 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.Set 3 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. opportunity cost. sunk cost. differential cost. 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 costs per unit increase and variable costs per unit increase. Fixed costs per unit decrease and variable costs per unit do not change. Fixed costs per unit do not change and variable costs per unit do not change. Fixed costs per unit do not change and variable costs per unit 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 keeps costs 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 g 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 Page 2 1. Question (TCO A). The following data (in thousands of dollars) have been taken from the accounting records of Larklin Corporation for the just completed year. | Sales | $820 | | Purchases of raw materials | $195 | | Direct labor | $170 | | Manufacturing overhead | $250 | | Administrative expenses | $180 | | Selling expenses | $140 | | Raw materials inventory, beginning | $80 | | Raw materials inventory, ending | $35 | | Work in process inventory, beginning | $65 | | Work in process inventory, ending | $30 | | Finished goods inventory, beginning | $130 | | Finished goods inventory, ending | $165 | Required: Prepare a Schedule of Cost of Goods Manufactured statement in the text box below.(Points : 15) 2. Question (TCO F) The Indiana Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below: Percent completed Units Materials Conversion Work in process, June 1 70,000 65% 45% Work in process, Jun 30 60,000 75% 65% The department started 290,000 units into production during the month and transferred 300,000 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. Question (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. Question: (TCO E) Maffei Company, which has only one product, has provided the following data concerning its most recent month of operations: Maffei Company, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 175 Units in beginning inventory 0 Units produced 9,500 Units sold 8,000 Units in ending Inventory 1,500 Variable costs per unit: Direct materials $ 55 Direct labor $ 38 Variable manufacturing overhead $ 2 Variable selling and admin $ 10 Fixed costs: Fixed manufacturing overhead $ 300,000 Fixed selling and admin $ 125,000 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) Page 2SET 4 1. Question: (TCO A) The variable portion of advertising costs is a Conversion YES... Period NO Conversion YES .... Period YES Conversion NO.... Period YES Conversion NO.... Period NO 2. Question: (TCO A) The costs of staffing and operating the accounting department at Central Hospital would be considered by the Department of Surgery to be direct costs. sunk costs. incremental costs. None of the above. 3. Question: (TCO A) The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n): period cost direct material cost indirect manufacturing cost direct labor cost none of the above | 4. Question: (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. Question: (TCO F) which of the following statements is true? I. Overhead application may be made slowly as a job is worked on. II. Overhead application may be made in a single application at the time of completion of the job. III. Overhead application should be made to any job not completed at year end in order to properly value the work in process inventory. (Points : 6) Only statement I is true Only statement II is true Both statements I and II are true Statements I, II, and III are all true 6. Question: (TCO F) Which of the following statements about the process-costing system is incorrect? 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. Question: (TCO F) Equivalent units for a process costing system using the FIFO method would be equal to: (Points : 6) units completed during the period, plus equivalent units in the ending work in process inventory units started and completed during the period, plus equivalent units in the ending work in process inventory units completed during the period and transferred out units started and completed during the period, plus equivalent units in the ending work in process inventory, plus work needed to complete units in the beginning work in process inventory 8. Question: (TCO B) The contribution margin equals Sales - expenses Sales- cost of goods sold Sales - variable costs Sales - fixed costs 9. Question: (TCO B) Which of the following would not affect the break-even point? number of units sold variable expense per unit total fixed expenses selling price per unit 10. Question: (TCO E) Under variable costing: (Points : 6) net operating income will tend to move up and down in response to changes in levels of production inventory costs will be lower than under absorption costing net operating income will tend to vary inversely with production changes net operating income will always be higher than under absorption costing 1. Question: (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larden Corporation for the just-completed year. The following data (in thousands of dollars) have been taken from the accounting records of Larden Corporation for the just completed year. Sales $950 Purchases of raw materials $170 Direct labor $210 Manufacturing overhead $200 Administrative expenses $180 Selling expenses $140 Raw materials inventory, beginning $70 Raw materials inventory, ending $80 Work in process inventory, beginning $30 Work in process inventory, ending $20 Finished goods inventory, beginning $100 Finished goods inventory, ending $70 Required: Prepare a Schedule of Cost of Goods Manufactured statement in the text box below. (Points: 15) 2. Question: (TCO F) The Wisconsin Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below: Percent completed Units Materials Conversion Work in process, June 1 60,000 65% 45% Work in process, Jun 30 55,000 75% 65% The department started 275,000 units into production during the month and transferred 280,000 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. 3. Question: (TCO B) Drake Company's income statement for the most recent year appears below: Sales (26,000 units) $650,000 Less: Variable expenses 442,000 Contribution margin 208,000 Less: Fixed expenses 234,000 Net operating loss $(26,000) Required: Required: a. calculate the unit contribution margin b. calculate the break-even point in dollars c. If the company desires a net operating income of $20,000, how many units must it sell? 3. (TCO B) Drake Company's income statement for the most recent year appears below: Sales (26,000 units) $650,000 Less: Variable expenses 442,000 Contribution margin 208,000 Less: Fixed expenses 234,000 Net operating loss $(26,000) Required: a. calculate the unit contribution margin Sales Price per Unit = $650,000 / 26,000 = $25 Variable Cost per Unit = $442,000 / 26,000 = $17 CM = $25 - $17 = $8 b. calculate the break-even point in dollars CM Ratio = $8 / $25 = 0.32 BEP in Dollars = $234,000 / 0.32 = $731,250 c. If the company desires a net operating income of $20,000, how many units must it sell? = (Fixed Costs + Target Operating Income) / Unit Contribution Margin= ($234,000 + $20,000) / $8 = 31,750 units 4. Question: (TCO E) Maffei Company, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 175 Units in beginning inventory 0 Units produced 9,500 Units sold 8,000 Units in ending Inventory 1,500 Variable costs per unit: Direct materials $ 55 Direct labor $ 38 Variable manufacturing overhead $ 2 Variable selling and admin $ 10 Fixed costs: Fixed manufacturing overhead $ 300,000 Fixed selling and admin $ 125,000 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