For inventoriable costs to become expenses under the matching principle

ACCT 221 – C802 – FINAL EXAM – ONLINE – SUMMER 2014

TRUE / FALSE

1. T F Unit contribution margin is the amount that each unit sold contributes towards the

recovery of fixed costs and to income.

2. T F Flexible budgeting relies on the assumption that unit variable costs will remain

constant within the relevant range of activity.

3. T F Managerial accounting information generally pertains to an entity as a

whole and is highly aggregated.

4. T F The direct materials budget must be completed before the production

budget because the quantity of materials available for production must be

known.

5. T F If the unit contribution margin is $1 and unit sales are 10,000 units above the break-

even volume, then net income will be $10,000.

6. T F In a job order cost system, each entry to the Work In Process Inventory

account should be accompanied by a posting to one or more job cost

sheets.

7. T F When equivalent units of production are different for materials and

conversion costs, unit costs are computed for materials, conversion, and

total manufacturing.

8. T F If a company has only a certain number of machine hours available for production, it is generally more profitable to produce and sell the product with the highest unit contribution margin.

MULTIPLE CHOICE

9. Anthony Roofing's budgeted manufacturing costs for 50,000 squares of shingles are:

Fixed manufacturing costs $30,000

Variable manufacturing costs $20.00 per square

Anthony produced 40,000 squares of shingles during March. How much are budgeted total manufacturing costs in March?

a. $800,000

b. $1,030,000

c. $1,000,000

d. $830,000

10. Myles Manufacturing Company's accounting records reflect the following inventories:

Dec. 31, 2014 Dec. 31, 2013

Raw materials inventory $620,000 $520,000

Work in process inventory 600,000 320,000

Finished goods inventory 380,000 300,000

During 2014, $900,000 of raw materials were purchased, direct labor costs amounted to $1,000,000, and manufacturing overhead incurred was $960,000.

Myles Manufacturing Company's total manufacturing costs incurred in 2014 amounted to

a. $2,860,000.

b. $2,680,000.

c. $2,480,000.

d. $2,760,000.

11. Maxfield Company has fixed costs of $300,000 and variable costs are 60% of sales. How much will Maxfield Company report as sales when its net income equals $30,000?

a. $825,000

b. $550,000

c. $780,000

d. $198,000

12. Robertson, Inc. has the following budgeted sales: July $200,000, August $300,000, and September $250,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. The total expected cash receipts during September are

a. $280,000.

b. $265,000.

c. $262,500.

d. $250,000.

13. The standard rate of pay is $20 per direct labor hour. If the actual direct labor payroll was $117,600 for 6,000 direct labor hours worked, the direct labor price (rate) variance is

a. $2,400 unfavorable.

b. $2,400 favorable.

c. $3,000 unfavorable.

d. $3,000 favorable.

14. The master budget of Handy Company shows that the planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:

Indirect labor $480,000

Machine supplies 120,000

Indirect materials 140,000

Depreciation on factory building 80,000

Total manufacturing overhead $820,000

A flexible budget for a level of activity of 120,000 machine hours would show total manufacturing overhead costs of

a. $940,000.

b. $820,000.

c. $984,000.

d. $968,000.

15. Given the following data for Harder Company, compute cost of goods manufactured:

Direct materials used $120,000 Beginning work in process $20,000

Direct labor 200,000 Ending work in process 10,000

Manufacturing overhead 150,000 Beginning finished goods 25,000

Operating expenses 175,000 Ending finished goods 15,000

a. $460,000

b. $470,000

c. $480,000

d. $490,000

16. Manor Manufacturing has recently tried to improve its analysis for its manufacturing process. Units started into production equaled 18,000 and ending work in process equaled 1,200 units. Mayer had no beginning work in process inventory. Conversion costs are applied equally throughout production, and materials are applied at the beginning of the process.

How much is the materials cost per unit if ending work in process was 25% complete and total materials costs equaled $90,000?

a. $5.00.

b. $5.27.

c. $20.00.

d. $4.69.

17. In a process cost system, units to be accounted for in a department are equal to the

a. number of units started or transferred into the department.

b. number of units transferred out of the department.

c. units in the beginning inventory plus the units started or transferred into the department.

d. ending inventory plus the units started or transferred into the department.

18. Gulick Company developed the following data for the current year:

Beginning work in process inventory $160,000

Direct materials used 96,000

Actual overhead 192,000

Overhead applied 144,000

Cost of goods manufactured 176,000

Total manufacturing costs 480,000

Gulick Company's direct labor cost for the year is

a. $48,000.

b. $240,000.

c. $144,000.

d. $192,000.

19. Casey Company has a materials price standard of $2.10 per pound. Six thousand pounds of materials were purchased at $2.20 a pound. The actual quantity of materials used was 6,000 pounds, although the standard quantity allowed for the output was 5,400 pounds.

Casey Company's total materials variance is

a. $1,860 U.

b. $1,860 F.

c. $1,920 U.

d. $1,920 F.

20. It costs Galatoire Company $46 per unit ($28 variable and $18 fixed) to produce its product, which normally sells for $58 per unit. A Brazilian wholesaler offers to purchase 5,000 units at $36 each. Galatoire would incur special shipping costs of $4 per unit if the order were accepted. Galatoire has sufficient unused capacity to produce the 5,000 units. If the special order is accepted, what will be the effect on net income?

a. $50,000 decrease

b. $20,000 increase

c. $15,000 increase

d. $40,000 increase

21. Chmelar Manufacturing Company developed the following data:

Beginning work in process inventory $ 80,000

Direct materials used 480,000

Actual overhead 560,000

Overhead applied 540,000

Cost of goods manufactured 1,280,000

Ending work in process 60,000

How much are total manufacturing costs for the period?

a. $1,580,000

b. $1,260,000

c. $1,100,000

d. $1,220,000

22. Use the following table,

Present value of an Annuity of 1

Period 8% 9% 10%

1 .926 .917 .909

2 1.783 1.759 1.736

3 2.577 2.531 2.487

A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $231,930 and is expected to generate cash inflows of $90,000 each year for three years. The approximate internal rate of return on this project is

a. 8%.

b. 9%.

c. 10%.

d. The IRR on this project cannot be approximated.

23. Harvey’s variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $33,000. If sales are expected to increase $60,000, by how much will the company's net income increase?

a. $27,000

b. $42,000

c. $18,000

d. $9,000

24. Athletics, Inc. completed Job No. C04 during 2014. The job cost sheet listed the following:

Direct materials $55,000

Direct labor $30,000

Manufacturing overhead applied $27,000

Units produced 4,000 units

Units sold 1,500 units

How much is the cost of the finished goods on hand from this job?

a. $112,000

b. $70,000

c. $42,000

d. $112,000

25. August Inc. is considering purchasing equipment costing $45,000 with a 6-year useful life. The equipment will provide cost savings of $10,950 and will be depreciated straight-line over its useful life with no salvage value. August Inc. requires a 10% rate of return.

Present Value of an Annuity of 1

Period 8% 9% 10% 11% 12% 15%

6 4.623 4.486 4.355 4.231 4.111 3.784

What is the approximate internal rate of return for this investment?

a. 9%

b. 10%

c. 11%

d. 12%

26. Allen Company manufactures kitchen utensils. Bowden Company has approached Allen with a proposal to sell the company spatulas at a price of $100,000 for 100,000 units. Alllen is currently making the spatulas in its own factory. The following costs are associated with this part of the process when 100,000 spatulas are produced:

Direct material $ 41,000

Direct labor 19,000

Manufacturing overhead 50,000

Total $110,000

The manufacturing overhead consists of $36,000 of costs that will be eliminated if the components are no longer produced by Allen. From Allen's point of view, how much is the incremental cost or savings if the spatulas are bought instead of made?

a. $10,000 incremental savings

b. $4,000 incremental cost

c. $4,000 incremental savings

d. $10,000 incremental cost

27. The Slicing Department production process shows:

Units

Beginning Work in Process 10,000

Ending Work in Process 50,000

Total units to be accounted for 160,000

How many units were started into production in Department 1?

a. 170,000.

b. 110,000.

c. 160,000.

d. 150,000.

28. For inventoriable costs to become expenses under the matching principle,

a. the product must be finished and in stock.

b. the product must be expensed based on its percentage-of-completion.

c. the product to which they attach must be sold.

d. all accounts payable must be settled.

29. ToolTime has a standard of 2 hours of labor per unit, at $18 per hour. In producing 2,000 units, ToolTime used 3,850 hours of labor at a total cost of $70,455. ToolTime's labor quantity variance is

a. $1,155 U.

b. $1,545 F.

c. $2,700 F.

d. $2,895 F.

30. Stetson Parts has a current return on investment of 10% and the company has established an 8% minimum rate of return for the division. The division manager has two investment projects available, for which the following estimates have been made:

Project A - Annual controllable margin = $48,000, operating assets = $800,000

Project B - Annual controllable margin = $120,000, operating assets = $1,100,000

Which project should be funded?

a. Both projects

b. Project A

c. Project B

d. Neither project

31. How much sales are required to earn a target net income of $160,000 if total fixed costs are $300,000 and the contribution margin ratio is 40%?

a. $766,667

b. $750,000

c. $1,150,000

d. $500,000

32. Fixed costs are $2,400,000 and the contribution margin per unit is $150. What is the break-even point?

a. $6,000,000

b. $16,000,000

c. 6,000 units

d. 16,000 units

33. If manufacturing overhead has been overapplied during the year, the adjusting entry at the end of the year will show a

a. debit to Manufacturing Overhead.

b. credit to Finished Goods Inventory

c. debit to Cost of Goods Sold.

d. credit to Work in Process Inventory.

34. Westover Industries reported the following information for 2012:

October November December

Budgeted purchases $240,000 $256,000 $288,000

· Operating expenses are: Salaries, $100,000; Depreciation, $40,000; Rent, $20,000; Utilities, $28,000

· Operating expenses are paid during the month incurred.

· Accounts payable is used only for inventory acquisitions.

How much is the budgeted amount of cash to be paid for operating expenses in November?

a. $404,000

b. $148,000

c. $188,000

d. $444,000

35. Cocoa Industries recorded operating data for its chocolate division for the year.

Sales $1,000,000

Contribution margin 180,000

Total fixed costs 120,000

Average total operating assets 400,000

How much is ROI for the year if management is able to identify a way to improve the contribution margin by $40,000, assuming fixed costs are held constant?

a. 25%

b. 18%

c. 45%

d. 12%

36. Using the following information, compute the direct materials used.

Raw materials inventory, January 1 $ 20,000

Raw materials inventory, December 31 40,000

Work in process, January 1 18,000

Work in process, December 31 12,000

Finished goods, January 1 40,000

Finished goods, December 31 32,000

Raw materials purchases 1,200,000

Direct labor 560,000

Factory utilities 150,000

Indirect labor 50,000

Factory depreciation 400,000

Operating expenses 420,000

a. $1,260,000.

b. $1,220,000.

c. $1,200,000.

d. $1,180,000.

37. The total variance is $35,000. The total materials variance is $14,000. The total labor variance is twice the total overhead variance. What is the total overhead variance?

a. $3,500

b. $7,000

c. $10,500

d. $14,000

38. Physical units are 40,000. Total conversion costs are $237,000. There are 1,000 units in ending inventory which are 50% complete as to conversion costs. How much are conversion costs per unit?

a. $6.00.

b. $5.92.

c. $11.86.

d. $5.78.

39. Hackett Industries is preparing its direct labor budget for May. Projections for the month are that 33,400 units are to be produced and that direct labor time is three hours per unit. If the labor cost per hour is $12, what is the total budgeted direct labor cost for May?

a. $1,159,200.

b. $1,180,800.

c. $1,202,400.

d. $1,296,000.

40. Maddux Manufacturing estimates its sales at 200,000 units in the first quarter and that sales will increase by 20,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $35. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.

Cash collections for the third quarter are budgeted at

a. $4,746,000.

b. $6,888,000.

c. $8,274,000.

d. $9,576,000.