ACCT 505 Midterm

Keller Graduate School of Management
ACCT 505 Midterm

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.

Instructor Explanation: Chapter 2

Points Received: 0 of 6

Comments:

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

Instructor Explanation: Chapter 2

Points Received: 6 of 6

Comments:

3. Question : (TCO A) Depreciation of office buildings and office equipment is also known as

variable costs.

conversion costs.

product costs.

period costs.

Instructor Explanation: Chapter 2

Points Received: 6 of 6

Comments:

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.

Instructor Explanation: Chapter 5

Points Received: 6 of 6

Comments:

5. Question : (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

understate the predetermined overhead rate.

overstate the predetermined overhead rate.

have no effect on the predetermined overhead rate.

This cannot be determined from the information given.

Instructor Explanation: Chapter 3

Points Received: 6 of 6

Comments:

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.

Instructor Explanation: Chapter 4

Points Received: 6 of 6

Comments:

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.

Instructor Explanation: Chapter 4

Points Received: 6 of 6

Comments:

8. Question : (TCO B) The contribution margin equals

sales - expenses.

sales - cost of goods sold.

sales - variable costs.

sales - fixed costs.

Instructor Explanation: Chapter 6

Points Received: 6 of 6

Comments:

9. Question : (TCO B) To obtain the break-even point in terms of dollar sales, total fixed expenses are divided by which of the following?

Variable expense per unit

Variable expense per unit/Selling price per unit

Fixed expense per unit

(Selling price per unit - Variable expense per unit) /Selling price per unit.

Instructor Explanation: Chapter 6

Points Received: 6 of 6

Comments:

10. Question : (TCO E) In an income statement prepared using the variable costing method, fixed manufacturing overhead would

not be used.

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 the same as variable manufacturing overhead.

Instructor Explanation: Chapter 7

Points Received: 6 of 6

Comments:

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.

Sales $950

Purchases of raw materials $170

Direct labor $210

Manufacturing overhead $220

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.

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 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.

3. Question : (TCO B) A cement manufacturer has supplied the following data:

Tons of cement produced and sold 220,000

Sales revenue $924,000

Variable manufacturing expense $297,000

Fixed manufacturing expense $280,000

Variable selling and admin expense $165,000

Fixed selling and admin expense $82,000

Net operating income $100,000

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) The Dean Company produces and sells a single product. The following data refer to the year just completed:

Selling price $450

Units in beginning Inventory 0

Units produced 25,000

Units sold 22,000

Variable costs per unit:

Direct materials $ 200

Direct labor $ 50

Variable manufacturing overhead $ 30

Variable selling and admin $ 15

Fixed Costs:

Fixed manufacturing overhead $ 275,000

Fixed selling and admin $ 230,000

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.