Golden Gate Accounting exam Part I and part II

Part I 

Part 1. ONLINE QUIZ (11 questions)

1)

Choose the correct term from the drop-down list to match each statement. Which one out of each 10 possible

Also referred to as manufacturing costs	Contribution margin ratio PeriodCosts Variable cost ratio 3. Committed fixed cost Ethical behavior Operating leverage Managerial accounting Overapplied Overhead Product Costs Breakeven point
Knowing right from wrong and conducting oneself accordingly.	Answer 2Choose...Contribution margin ratioPeriod CostsVariable cost ratio3. Committed fixed cost Ethical behavior Operating leverageManagerial accountingOverapplied OverheadProduct CostsBreakeven point
Fixed costs that cannot be changed over the short run	Answer 3Choose...Contribution margin ratioPeriod CostsVariable cost ratio3. Committed fixed cost Ethical behaviorOperating leverageManagerial accountingOverapplied OverheadProduct CostsBreakeven point
Sales revenue is exactly equal to total costs, and there is no profit or loss	Answer 4Choose...Contribution margin ratioPeriod CostsVariable cost ratio3. Committed fixed costEthical behaviorOperating leverageManagerial accountingOverapplied OverheadProduct Costs Breakeven point
The ratio of the contribution margin to sales	Answer 5Choose...Contribution margin ratio Period CostsVariable cost ratio3. Committed fixed costEthical behaviorOperating leverageManagerial accountingOverapplied OverheadProduct CostsBreakeven point
The generation of relevant information and analysis to support managers’ decision making activities.	Answer 6Choose...Contribution margin ratioPeriod CostsVariable cost ratio3. Committed fixed costEthical behaviorOperating leverage Managerial accounting Overapplied OverheadProduct CostsBreakeven point
Results in a credit balance in the Manufacturing Overhead Control account	Answer 7Choose...Contribution margin ratioPeriod CostsVariable cost ratio3. Committed fixed costEthical behaviorOperating leverageManagerial accounting Overapplied OverheadP roduct CostsBreakeven point
Associated with the selling of products and the administration of the business	Answer 8Choose...Contribution margin ratio Period Costs Variable cost ratio3. Committed fixed costEthical behaviorOperating leverageManagerial accountingOverapplied OverheadProduct CostsBreakeven point
One minus the contribution margin ratio.	Answer 9Choose...Contribution margin ratioPeriod Costs Variable cost ratio 3. Committed fixed costEthical behaviorOperating leverageManagerial accountingOverapplied OverheadProduct CostsBreakeven point
The change in operating income relative to a change in sales	Answer 10Choose...Contribution margin ratioPeriod CostsVariable cost ratio3. Committed fixed costEthical behavior Operating leverage Managerial accountingOverapplied OverheadProduct CostsBreakeven point

If activity level increases, what happens to the unit fixed cost?

2) Select one:

a. It decreases.

b. It increases.

c. It remains the same.

d. It depends on how much the activity level increases.

3)

Which of the following is not a duty of a management accountant under the IMA Statement of Ethical Professional Practice’s integrity standard?

Select one:

a. Mitigate actual conflict of interest.

b. Refrain from engaging in any conduct that would prejudice carrying out duties ethically.

c. Properly exercise authority.

d. Abstain from engaging in or supporting any activity that might discredit the profession.

4)

A traditional GAAP income statement does not help managers predict the financial results of their decisions because the format of the statement is based on cost function rather than cost behavior. Which of the following is not classified as a cost function?

Select one:

a. Product

b. Sales

c. Administration

d. Variable

5)

Janitorial supplies used in the factory restrooms is an example of:

Select one:

a.

Direct Material	Product Cost
Yes	No

b.

Direct Material	Product Cost
Yes	Yes

c.

Direct Material	Product Cost
No	Yes

d.

Direct Material	Product Cost
No	No

6)

Which of the following is not a type of unethical behavior employees might observe?

Select one:

a. Abusive or intimidating behavior

b. Lying to employees

c. Misreporting of hours worked

d. Having employees sign an acknowledgement that they understand and will adhere to the corporate code of conduct.

7)

There is an important relation between contribution margin and profit. Which of the following statements is not true?

Select one:

a. As the number of units sold rises, profit increases by the variable cost per unit.

b. As the number of units sold increases, total contribution margin increases, but fixed costs remain the same.

c. As the number of units sold rises, profit increases by the additional contribution margin per unit.

d. As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same.

8)

Which of the following is not a characteristic of managerial accounting reports?

Select one:

a. Managerial accounting reports are designed to provide the ultimate decision maker with the appropriate information.

b. Managerial accounting reports come in a variety of formats.

c. Managerial accounting reports are not distributed to the general public.

d. All of these answer choices are correct.

9)

Which of the following does not affect the price a company charges under cost-plus pricing?

Select one:

a. Desired gross margin percentage

b. The cost of the product

c. The historical price of the product or service

d. All of these answer choices affect the price a company charges under cost-plus pricing.

10)

The cost of storing finished goods inventory is an example of

Select one:

a.

Period Cost	Overhead
Yes	No

b.

Period Cost	Overhead
Yes	Yes

c.

Period Cost	Overhead
No	Yes

d.

Period Cost	Overhead
No	No

11)

Which of the following statements relating to just-in-time inventory is not correct?

Select one:

a. As soon as goods are completed, they are shipped directly to the customer.

b. Products are generally completed in small batches in response to customer requests.

c. Just-in-time is beneficial to all companies that will implement it.

d. No safety stock is kept in the event that some units are found to be defective.

part II

Instructions:

Problems – various points – Total (140 points)

1. (5 points)

Grassi Company produces high definition television sets. The following information is available for this product:

Fixed cost per unit $250

Variable cost per unit 750

Markup per unit 300

Grassi Company's markup percentage would be

a. 30%.

b. 40%.

c. 60%.

d. 120%.

2. (5 points)

In each of the following situations, identify whether the setting is primarily financial accounting or managerial accounting.

a. Abba Company purchased a new telephone system costing $132,000 for its sales division. The new phone system will be depreciated using the straight-line method over a period of five years and has an estimated salvage value of $5,000.

b. Bandex Company has had several customers who are experiencing the negative effects of the downturn in the economy. As a result, the company believes its allowance for doubtful accounts should be increased from 1% of credit sales to 1.5% of credit sales.

c. Cortez, Inc. has experienced a decline in net income over the past three years. The engineering department is considering redesigning a product to eliminate waste and inefficiency in the production process.

d. The sales manager of Decca Corporation believes one salesman is creating fictitious sales to inflate his commission. The sales manager has asked the controller for a detailed report of sales by salesman.

e. Essex, Inc. executives are meeting to analyze the company’s actual results compared to budgeted amounts.

3. (10 points)

Georgiana operates a nail salon. She is trying to plan her costs for the next month and is uncertain as to how to estimate those costs. Help her estimate next month’s costs given the following information she collected, based on number of customers per month.

	Number of Customers
	1,300	1,800	1,500	1,200
Nail supplies	$4,030	$5,580	4,650	3,720
Equipment Rental	2,200	2,200	2,200	2,200
Electricity	274	364	310	256
Total	$6,504	$8,144	$7,160	$6,176

Georgiana wants to know what her total costs would be if she estimates 1,450 customers next month.

a. $2,240

b. $6,832

c. $6,996

d. $4,756

4. (20 points)

Mega Bright Window Cleaners’ monthly income statement at several levels of activity is as follows:

Windows washed	2,000	4,000	6,000
Sales revenue	$3,000	$6,000	$9,000
Cost of goods sold	1,200	2,400	3,600
Gross profit	1,800	3,600	5,400
Operating expenses
?Advertising expense	500	500	500
?Salaries and wages expense	700	900	1,100
?Insurance expense	200	200	200
?Postage expense	500	1,000	1,500
Total operating expenses	1,900	2,600	3,300
Operating income	$ (100)	$1,000	$2,100

Required:

a. Identify each expense as fixed, variable, or mixed.

b. Prepare a contribution margin income statement based on a volume of 5,000 windows.

5. (30 points)

Mirada Manufacturing produces pumps for residential swimming pools. For the year, management estimated that total manufacturing overhead would be $1,488,000. Management decided to use direct labor hours to apply manufacturing overhead and budgeted 62,000 direct labor hours. The following information was compiled before an adjustment had been made to close Manufacturing Overhead Control:

Raw Materials Inventory $304,291 Work in Process Inventory $337,997 Finished Goods Inventory $756,362 Actual direct labor hours used 68,970 Actual overhead incurred $1,434,576

How much overhead did Mirada apply to jobs during the year (if necessary, round your answer to the nearest dollar)?

a. $1,434,576

b. $1,655,280

c. $1,487,683

d. $1,434,680

For the year, manufacturing overhead was

a. $220,704 underapplied

b. $220,704 overapplied

c. $144,976 overapplied

d. $144,976 underapplied

6. (30 points)

Herzig Industries sells two electrical components with the following characteristics. Fixed costs for the company are $200,000 per year.

	XL-709	CD-918
Sales price	$10.00	$25.00
Variable cost	6.00	17.00
Sales volume	40,000 units	60,000 units

Required:

a. How many units of each product must Herzig Industries sell in order to break even?

b. Herzig’s vice president of sales has determined that due to market changes, the sales price of component XL-709 can be increased to $14.00 with no impact on sales volume. What will be Herzig’s new breakeven point in units?

c. Returning to the original information, Herzig’s vice president of marketing believes that spending $80,000 on a new advertising campaign will increase sales of component CD-918 to 80,000 units, without affecting the sales of product XL-709. How many units of each product must Herzig sell to break even under this new scenario?

7. (40 points)

Windows of the World (WOW) produces decorative windows in several styles and finishes. The company uses a job order costing system to accumulate product costs. Because much of the production process is automated, WOW has selected machine hours as its overhead application base.

In May, WOW worked on three jobs. Job 69 was started in April and completed and delivered to customers in May. Job 70 was started and finished in May, and at the end of May, the windows from the job were in the warehouse. Job 71 was started but not completed at the end of May.

	69	70	71
Costs Added in April
Direct materials	$10,000
Direct labor	$ 1,000
Overhead	$ 450
Machine hours	10 MH
Costs Added in May
Direct materials	$ 5,000	$ 8,000	$ 4,000
Direct labor	$24,000	$12,000	$ 500
Machine hours	600 MH	500 MH	15 MH

Required

a. Calculate the total manufacturing cost for May.

b. Calculate the total cost of each of the three jobs as of the end of May.

c. Calculate the balance in the Work in Process Inventory account at the end of May.

d. Calculate the cost of goods manufactured for May.

e. Calculate the Cost of Goods Sold for May.

f. Calculate the Finished Goods Inventory balance at the end of May.