Golden Gate Midterm Summer Accounting 1B

Midterm

Summer Accounting 1B: Cost Accounting

Instructions:

• This is an open note, book exam.
• Total points = 200.
• You will have six days – Monday– Saturday night June 22 - June 27 (11:55pm).
• The exam is in two parts: this problem set to be submitted in the Midterm Exam Dropbox, and an online quiz.
• Please solve the problems on Excel and/or a Word document. Excel is preferred for solutions to the problems, your work is neater and it is easier to check errors. No handwritten responses will be accepted.
• Save the document with your first and last name as part of the name of the document and add Summer Accounting 1B Midterm –Robinson. For example: “John Smith Summer Accounting 1B Midterm-Robinson”.
• Submit into the Midterm drop box by the deadline.
• NO LATE EXAMS WILL BE ACCEPTED, NO EXCEPTIONS
• Use your own words; do not copy definitions from the text.
• An answer that appears to be a repeat of an answer guide will be graded zero.
• You must show your work to receive full credit on all problems.
• Exams will be graded within two weeks of the deadline.
• The answer key will not be made available, contact me for additional assistance on problems after the exam has been graded.

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.

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:

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:

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.

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.

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.